New York continues to position itself as a leader in the global fashion industry. Under recently proposed landmark legislation, the State of New York is poised to become the first jurisdiction in the world to regulate fashion companies’ sustainability practices.
A Push for the Fashion Industry to Prioritize Sustainability
The Fashion Sustainability and Social Accountability Act (Assembly Bill A8352), which was introduced last fall by Assemblywoman Dr. Anna R. Kelles and New York State Senator Alessandra Biaggi, would require any global apparel and footwear company operating in New York with at least $100 million in annual revenue to “map [its] supply chains, disclose environmental and social impacts and set binding targets to reduce those impacts.”
Advocates maintain that the Fashion Act would accelerate the urgency for fashion businesses to conduct their manufacturing more responsibly. “[I]t is essential that we ensure industries are practicing ethical standards in labor and environmental sustainability while at the same time ensuring a thriving statewide fashion industry,” said Assemblywoman Dr. Anna Kelles. “The Fashion Act is good for the environment, good for workers, good for industry and good for New York, the world’s fashion capital.”
The New Standard Institute, the Natural Resources Defense Council and the New York City Environmental Justice Alliance have all voiced support for the bill, joined by designer Stella McCartney. “The Fashion Act is an example of a step toward a better, more regulated future,” McCartney said. “Our duty is clear, and now more than ever, we need to make changes to the way in which we do business. Action cannot be delayed, and we need to commit to making a difference.”
Requirements Under the Fashion Act
The Fashion Act would encompass a broad range of fashion industry businesses, spanning from large luxury multinationals like LVMH to fast-fashion companies like Shien. Under the proposed legislation, covered fashion retailers and manufacturers must disclose their environmental and social due diligence policies, processes and outcomes, including significant real or potential adverse environmental and social impacts. Companies would then have to post the mandatory disclosures on their website homepages with a clear and easily understood link to the required information.
The Fashion Act establishes minimum disclosure requirements for covered fashion retailers and manufacturers. They include, but are not limited to, supply chain mapping; impact and due diligence disclosure, including a social and environmental sustainability report and an impact disclosure on prioritized adverse environmental and social impacts within 18 months after enactment of the policies, procedures and outcomes, including a quantitative baseline and reduction targets on energy, greenhouse gas emissions, water and chemical management and an annual volume of material produced with breakdown by material type and what targets fashion retail sellers and manufacturers have for impact reductions and for tracking due diligence implementation and results, including where possible estimated timelines and benchmarks for improvement.
The Fashion Act defines “due diligence” as the process companies should carry out to identify, prevent, mitigate and account for how they address actual and potential adverse impacts in their own operations, supply chains and other business relationships, as recommended by the Organization for Multinational Enterprises, the Organization for Economic Cooperation and Development Due Diligence Guidance for Responsible Business Conduct and United Nations Guiding Principles for Business and Human Rights.
As noted, the Fashion Act would require detailed supply chain mapping. Taking a “risk- based approached,” covered fashion retailers must use good faith efforts to map suppliers across all tiers of production, from raw material to final production. A minimum of 50% of suppliers by volume across all tiers of production must be mapped. Businesses must also use good faith efforts to map the suppliers and associated supply chains relevant to the prioritized risk and obtain and disclose the names of prioritized suppliers.
Should the Fashion Act become law, the New York Attorney General would be tasked with enforcement. However, the proposed bill also contains a private right of action that would allow consumers to take civil action against a person or company deemed to have violated the law. Companies found to be out of compliance, and which do not remedy within three months of notice of non-compliance, may be fined up to 2% of annual revenues.
Likelihood the Fashion Act Becomes Law
At this point, it is unclear if the Fashion Act will garner enough support to become law. The bill is currently under consideration by the Assembly Consumer Affairs and Protection Committee and the Senate Consumer Protection Committee. Sponsors have said they are hopeful that the Fashion Act could come up for a vote by spring 2022. New York fashion retailers and manufacturers are encouraged to stay on top of legal updates and contact experienced counsel with any questions.
Howard D. Bader serves as general counsel for clients in a wide range of industries on an international scale. With over three decades of legal experience, he has represented clients in numerous legal matters, including commercial litigation, intellectual property, bankruptcy and creditors’ rights and mergers and acquisitions, as well as numerous corporate transactions and business law matters.
Howard D. Bader
hbader@sh-law.com
(212) 784-6926
www.sh-law.com
