In January, the New York State Assembly and Senate introduced identical bills seeking to impose environmental, social and governance (ESG) requirements of the fashion industry. (https://www.nysenate.gov/legislation/bills/2021/A8352) If passed, the “Fashion Act” would make New York the first state in the country to require fashion retail sellers and manufacturers to publish extensive disclosures about their supply chains and their environmental and social due diligence policies, processes and outcomes and to set binding targets to reduce those impacts.
The Fashion Act applies to fashion retail sellers and fashion manufacturers, defined as business entities that primarily sell articles of apparel or footwear and list “retail trade” or “manufacturing” as their principal activity. Subject companies must do business in New York State and have annual global gross revenues exceeding $100 million.
The Fashion Act imposes ESG disclosure of a supply chain map; social and environmental sustainability report; impact disclosures of certain environmental and social impacts; and annual reports tracking progress toward risk and impact reduction. Subject companies must prominently post these disclosures on their websites.
Subject businesses must map at least 50% of their supply chain by volume across all stages of production from raw material to final production. Such a supply chain map must include suppliers and supply chains associated with certain prioritized risk areas identified in the entity’s Sustainability Report, including names of such suppliers.
Briefly, the Sustainability Report must identify business risks and measures taken to ensure “responsible business conduct” in policies, according to principles set forth by the United Nations and other organizations. The Sustainability Report should also identify areas of significant risks in the context of its supply chains, including, for example, geography-related risk factors (governance, human rights, or environmental adverse impacts) and enterprise-specific risk factors (known instances of misconduct). The Report should identify actions taken by to mitigate identified risks, including benchmarks for improvement and progress. The Report should also assess the extent to which the company’s activities have impacted the identified risks and ways it has remediated following discovery of an adverse impact.
The proposed rule requires disclosure of greenhouse gas (GHG) emissions, which must be based on the reporting standards of the World Resources Institute and be independently verified. Reporting must include a baseline of current energy usage, GHG emissions, water usage and chemical management, as well as reduction targets.
The proposed Fashion Act allows both the New York State attorney general and the public the right of enforcement action. A private citizen may start a civil action for alleged violations of the Fashion Act.
Should the Fashion Act become law, it would require companies to comply with its various disclosures within 12 to 18 months of promulgation.
Please note that this is not a legal interpretation of the proposed bill. Please read the proposed bill and speak to qualified, experienced legal counsel before taking any actions. CCES has the experts to help your firm – whether in the fashion industry or not – to perform a professional GHG emissions inventory (“carbon footprint”) for your operations ahead of this or other legislation. Such a carbon footprint can help your company find ways to make your operations more streamlined and save you expenses. Contact us today at karell@CCESworld.com or at 914-584-6720.