Earlier this month, New York State Assemblywoman Kelles and State Senator Biaggi introduced the Fashion Sustainability and Social Accountability Act in the New York State Assembly and Senate. If the legislation becomes law, it would amend New York’s general business law to require fashion companies to publicly disclose extensive information about their environmental, social, and governance (“ESG”) policies, impacts, and targets for improvement.
Specifically, the Act would require all fashion retail sellers and manufacturers doing business in New York that have annual worldwide gross receipts surpassing $100 million to disclose:
- ESG due diligence policies and processes;
- ESG outcomes, including actual or possible negative environmental and social impacts; and
- Binding targets for prevention and improvement of ESG outcomes and policies.
The required disclosures would include, among other things, supply chain mapping of at least 50% of suppliers by volume across all production tiers, a sustainability report, and independently verified greenhouse gas reporting. They would also include information such as prioritized suppliers’ median employee wages and how they compare with minimum and living wages. The above disclosures would have to be posted on the relevant company’s website within a year of enactment, or given to consumers in writing within 30 days of request if the company does not have a website.
The justification section of the Act expresses concern over “fast fashion” and its perceived impacts on environmental sustainability, as well as some apparel and footwear industry actors’ use of exploited and child labor. The Act would be enforced by the office of the State Attorney General and would allow citizens to bring civil actions against businesses and individuals who violate it. Companies discovered to be out of compliance with the Act could be fined up to 2% of annual revenues of $450 million or more. The money will be deposited into a community benefit fund, which will be used to further environmental justice initiatives, implementing environmental benefit projects for communities impacted by persistent environmental health disparities.
This legislation would greatly increase ESG reporting requirements and potential liability for fashion businesses that have a relationship with New York. It will be critical therefore to monitor whether it moves forward in the New York State Assembly and Senate. And if you can legislate in New York, you can legislate anywhere, so it will be important to monitor whether other states follow in New York’s high heels and develop similar ESG-related legislation for fashion companies.