On Jan. 7, New York State Senator Alessandra Biaggi (D) and Assemblywoman Anna R. Kelles (D) introduced the Fashion Sustainability Act in the New York State Legislature. If passed and signed into law, the law will create significant reporting requirements related to environmental sustainability, social development (particularly workers’ rights), and ethical business standards (ESG) for retailers and manufacturers. Overall, the legislation would include enforcement “teeth” in the form of monetary and reputational penalties for industry non-compliance.
The Fashion Sustainability Act sponsors hope to bring the legislation to a final vote in late spring 2022.
A coalition of state officials and civil society organizations have declared their support for the law, including prominent corporate ESG compliance advocates such as the Natural Resources Defense Council and the New York City Environmental Justice Alliance. Fashion and sustainability nonprofits such as the New Standard Institute have declared their support for the bill. The measure currently has nine co-sponsors in the Assembly and four co-sponsors in the Senate.
The law applies to all fashion companies operating in New York State with at least $100 million in gross annual revenue, meaning it would cover nearly all major multinational fashion brands doing business in New York. The companies targeted by the measure would be subject to reporting obligations concerning:
- Supply Chain Mapping
- Disclosure and Supply Chain Liability Reduction Objectives
- Sustainability reports
Supply Chain Mapping
Companies would have twelve months to map at least 50% of their supply chain by volume. Mapping exercises should incorporate all levels of production, including farming and agricultural inputs, raw material production, factory manufacturing and shipping.
Disclosure and Supply Chain Liability Reduction Objectives
Companies should conduct and disclose an assessment detailing key human rights and environmental impacts in their supply chains with respect to worker wages, energy consumption, greenhouse gas emissions greenhouse and water and chemical management. The assessment should also contain specific reduction targets and estimated timelines for reducing negative impacts.
Within eighteen months of the passing of the law, companies would be required to produce a sustainability report including the following:
- An independently verified quantitative benchmark of the company’s greenhouse gas emissions, water and chemical use, and reduction targets
- Independently verifiable annual volumes of total materials produced and amount of production replaced with recycled materials
- Median salaries of priority supplier workers and comparison with local minimum wage and living wages
- The company’s strategy to encourage better supplier performance with respect to workers’ rights.
- Companies would be required to make all plans, reports, disclosures and figures required by law publicly available on their websites.
The New York Attorney General would be responsible for enforcing the law. Each year, the Attorney General publishes a list of companies that do not comply with the law. Additionally, the Attorney General can impose a fine of up to 2% of annual revenues of $450 million or more on companies found to be non-compliant. Revenue collected from fines would be directed to a community benefit fund created for environmentally beneficial projects. Finally, the bill empowers New York State citizens to bring civil action for non-compliance.
Reactions to legislation
Since its introduction, most brands have yet to comment on the measure and its potential implications for their ESG due diligence efforts. In a recent joint statement, the Council of Fashion Designers of America (CDFA) and the American Apparel & Footwear Associate (AAFA) reaffirmed their commitment to sustainability efforts and the achievement of the Accord’s 2030 and 2050 climate goals. from Paris. The organizations added that “as industry organisations, we were not involved in the drafting of the bill and we are not aware of any companies consulted. We are currently taking the time to understand the bill and look forward to speaking with its authors to provide input and share our views.
Despite the brand’s silence, the bill received the endorsement of several industry insiders. Prominent fashion designers Stella McCartney and Mara Hoffman have publicly endorsed the law. Catarina Midby, head of Stockholm Fashion Week, said Forbes“Transparency is key to lasting change for our industry, but it shouldn’t be a voluntary action like it is now, which is why I strongly support the Fashion Act in New York.”
Others have suggested that the bill’s focus on transparency is not enough. Céline Semaan, founder of the Slow Factory Foundation, expressed concern that the bill will not be implemented. Seman said vogue, “Vendor mapping does not necessarily bring us closer to stopping the destruction.” The current wording of the legislation is not entirely clear on what constitutes “non-compliance” – primarily, whether or not a company must meet its stated reduction targets in order to be in compliance with the law.
Meanwhile, Maxine Bédat, founder of the New Standard Institute and one of the architects of the Fashion Sustainability Act, argued that the bill goes beyond enforcing transparency: “It it’s not just about reporting. It’s about setting and achieving those goals. Bédat acknowledged that the bill is not clear on this in some sections. She added that the bill’s sponsors “are considering amendments to further clarify that [elsewhere in the bill].”
The implications of the law on ESG compliance
The law is part of a growing international trend to mandate corporate ESG due diligence and disclosure.
In the US, this includes legislation passed by the US House of Representatives last year that would establish minimum thresholds for such due diligence and the type of information companies should include in their disclosure reports. While this particular measure is unlikely to pass changes in the absence of the Senate that would reduce requirements, it does signal that lawmakers are serious about setting standards in law.
Other measures have made it into law and will have major ramifications for companies’ human rights mitigation plans. In particular, President Biden signed into law the Uyghur Forced Labor Prevention Act in December. The new law aims to end forced labor abuses in China’s Xinjiang region by presuming that all goods imported with inputs from Xinjiang are made with forced labor and should therefore be denied entry into the United States. . A wide range of companies will have to do due diligence on their supply chains to determine whether their imported goods are materially linked to Xinjiang – although the law will also lead to detailed advice from agencies to help companies perform specialized due diligence and better understand their potential. risks.
Additionally, the U.S. Securities and Exchange Commission has expressed its intent to develop a binding ESG disclosure reporting framework that could eventually be adopted by other federal agencies – that aligns with key ESG priorities announced by the administration. Biden.
In Europe, the Netherlands has implemented regulations requiring due diligence to ensure companies’ supply chains prevent child labour, while the European Commission will this year begin implementing landmark regulations imposing a comprehensive standard of ESG due diligence and disclosure that will become the primary government framework for responsible business. practices.
Civil society groups — especially labor rights and environmental sustainability organizations — and apparel companies will be watching the New York State Assembly closely to track the progress of the Fashion Sustainability Act in course of the next few months. Given New York’s immense business activity and outsized political influence, new legislation in that state governing ESG standards could have a significant influence on efforts to establish a federal ESG standard.