On January 7, New York State Senators Alessandra Biagi (D) and Assemblyman Anna R. Keles (D) introduced the Fashion Sustainability Act in the New York State Legislature. If passed and signed into law, the law would create important reporting requirements regarding environmental sustainability, social development (especially workers’ rights), and ethical business (ESG) standards for retailers and manufacturers. After all, the law would include “teeth” applied in the form of financial and reputable penalties for industry non-compliance.
Sponsors of the Fashion Sustainability Act are expected to bring the law to a final vote in late spring 2022.
A coalition of state representatives and civil society organizations has expressed support for the law, including prominent advocates for corporate ESG compliance, such as the Natural Resources Defense Council and the New York City Environmental Justice Alliance. Fashion and sustainable non-profit organizations such as the New Standard Institute have expressed 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 a total annual receipt of at least $ 100 million, which means it will cover almost all major multinational fashion brands doing business in New York. Companies covered by the measure will be subject to their respective reporting requirements:
- Supply chain mapping
- Supply Chain Liability Disclosure and Reduction Targets
- Sustainable reporting
Supply chain mapping
Companies will have twelve months to map out at least 50% of their supply chain by volume. The mapping practice must include all levels of production, including agriculture and agricultural inputs, raw material production, factory production, and shipping.
Supply Chain Liability Disclosure and Reduction Target
Companies need to conduct and publish an assessment detailing the greatest human rights and environmental impacts in their supply chain as it relates to workers’ wages, energy use, greenhouse gas emissions, and water and chemical management. The assessment must have specific reduction targets and approximate timelines for minimizing adverse effects.
Within eighteen months of the law being passed, companies are required to prepare a sustainability report, including the following:
- An independently verified quantitative baseline of the company’s greenhouse gas emissions, water and chemical use and reduction targets.
- Displaced production volume with independently verifiable annual volume of total manufactured material and recycled materials
- The average wage of workers from preferred suppliers and how it compares to the local minimum wage and living wage
- The company’s strategy is to encourage better provider performance on employee rights.
- Companies are required to make public on their website all plans, reports, disclosures and statistics required by law.
The Attorney General of New York will be responsible for enforcing this law. Each year, the Attorney General publishes a list of companies that fail to comply with this law. In addition, the attorney general can impose fines of up to 2% of annual revenue of $ 450 million or more on companies found without consent. The revenue collected from the fines will be directed to a community benefit fund established for environmental benefit projects. Ultimately, the bill gives New York State citizens the power to bring a civic action against non-compliance.
Response to the law
Since its launch, most brands have not yet commented on the ESG measurement and its potential impact for their due diligence efforts. In a recent joint statement, the American Council of Fashion Designers (CDFA) and the American Apparel and Footwear Associates (AAFA) reiterated their commitment to sustainable efforts to meet the 2030 and 2050 climate targets of the Paris Agreement. The companies further commented, “As an industry body, we were not involved in drafting the bill, nor were we aware of any of the companies consulted. We are currently taking the time to understand the bill and provide our input and share our views.” I’m looking forward to talking to its authors. “
Despite the brand silence, the bill has received approval from multiple industry insiders. Prominent fashion designers Stella McCartney and Mara Hoffman have publicly supported the law. The head of Stockholm Fashion Week, Katrina Midby, said Forbes: “Transparency is the key to sustainable change for our industry, but it shouldn’t be a voluntary move like it is now, which is why I strongly support New York fashion law.”
Others have suggested that the emphasis on transparency in the bill is not enough. Celine Seman, founder of the Slow Factory Foundation, expressed concern that the bill could be less enforceable. Seman said Enjoy“Mapping providers don’t necessarily bring us closer to stopping destruction.” The current language of the law is not entirely clear about what constitutes “non-compliance” – primarily, whether a company must achieve its stated reduction targets in order to comply with the law.
Meanwhile, Maxine Bidat, founder of the New Standards Institute and one of the architects of the Fashion Sustainability Act, argued that the bill goes beyond transparency: “It’s not just about reporting. It’s about setting and meeting these goals. “Bidat acknowledged that the bill was not clear on some of the sections. He added that the bill’s sponsors were looking at amendments to make it clearer. [elsewhere in the bill]”
Impact of the law for ESG compliance
The law is part of a growing international trend for corporate ESGs to make due diligence and disclosure mandatory.
In the United States, this includes legislation passed by the US House of Representatives last year that would set a minimum threshold for such appropriate action and the type of information that companies should include in their disclosure reports. While that particular measure is unlikely to pass changes in the absence of the Senate that would narrow the requirements, it does indicate that lawmakers are serious about setting standards in law.
Other measures have made it legal and will have a major impact on corporate human rights mitigation plans. In particular, President Biden signed the Uighur Forced Labor Prevention Act in December. The new law is aimed at stopping the forced labor in China’s Xinjiang region, and any and all imported goods, including inputs from Xinjiang, are made with forced labor and should therefore be barred from entering the United States. Extensive companies need to exercise due diligence in the supply chain to determine whether their imported products are physically connected to Xinjiang – although the law will also require detailed guidance from agencies to help companies conduct special due diligence and better understand their potential. Risk
In addition, the US Securities and Exchange Commission has stated its intention to create a mandatory ESG Disclosure Reporting Framework that may eventually be adopted by other federal agencies – in line with key ESG priorities announced by the Biden administration.
In Europe, the Dutch company has implemented regulations requiring due diligence to prevent child labor, while the EU Commission will begin implementing landmark regulations this year, imposing a broader ESG due diligence and disclosure standard that will become the leading government structure for responsible business. Practice
Civil society groups – particularly labor rights and environmentally sustainable organizations – and clothing companies will be closely monitoring the New York State Assembly in the coming months to monitor the progress of the Fashion Sustainability Act. Given New York’s huge commercial activity and outside political influence, a new law regulating ESG standards in that state could have a significant impact on efforts to establish a federal ESG standard.
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