A factory that makes jeans for Gap and Levi Strauss is illegally dumping chemical waste in a river and two unsecured tips where it poses a hazard to children.

The scandal was uncovered by a Sunday Times investigation into pollution caused by a plant in Lesotho, southern Africa, which supplies denim to the two companies. Dark blue effluent from the factory of Nien Hsing, a Taiwanese firm, was pouring into a river from which people draw water for cooking and bathing.

The firm was also dumping needles, razors and harmful chemicals such as caustic soda at municipal dumps that have attracted child rag-pickers as young as five in search of cloth fragments to sell for fuel.

Many of the children, who work for up to 10 hours a day in the landfills, complain of breathing difficulties, weeping eyes and rashes.

Yesterday Gap and Levi Strauss said they had ordered immediate investigations. Gap, which has a public image of environmental awareness, put the factory “on notice” to improve. Levi Strauss said it was “disturbed” to see that water was being polluted.

Gap has said it will conduct a thorough environmental qssessment in Lesotho in partnership withan independent environmental organisation and work with factory management to improve training and knowledge around waste handling and disposal. It will also convene a meeting of suppliers in Lesotho to update policies, procedures and expectations.

"While we're very proud of the progress we've made to date, we also understand that conditions are not perfect and that there is still a great deal more to be done to improve both environmental and factory working conditions in developing regions like Lesotho," said Glenn Murphy, chairman and chief executive of Gap Inc.

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