Earlier this month, New York State Assemblyman Kelles and State Senator Biaggi presented the Fashion Sustainability and Social Accountability Act to the New York State Assembly and Senate. If the legislation became law, it would amend New York general business law to require fashion companies to publicly disclose extensive information about their environmental, social and governance (“ESG”) policies, impacts and improvement goals.
Specifically, the law would require all fashion retailers and manufacturers operating in New York with global gross annual revenues exceeding $ 100 million to disclose:
- ESG due diligence policies and processes;
- ESG outcomes, including actual or possible negative environmental and social effects; And
- Binding objectives for the prevention and improvement of ESG results and policies.
The information required would include, among other things, the supply chain mapping of at least 50% of the suppliers by volume across all production levels, a sustainability report and independently verified greenhouse gas reports. They would also include information such as the median wages of employees of priority suppliers and how they compare to minimum and subsistence wages. The above information should be published on the website of the company in question within one year of entry into force or delivered to consumers in writing within 30 days of the request if the company does not have a website.
The justificatory section of the law expresses concern about “fast fashion” and its perceived impact on environmental sustainability, as well as the use of exploited and child labor by some actors in the clothing and footwear industry. The law would be enforced by the state attorney general’s office and would allow citizens to bring civil action against businesses and individuals who violate it. Companies found not to comply with the law could be fined up to 2% of annual revenues of $ 450 million or more. The money will be deposited into a community charity fund, which will be used to promote environmental justice initiatives, implementing environmental benefit projects for communities affected by persistent environmental health disparities.
This legislation would greatly increase ESG reporting requirements and the potential liability for fashion companies that have a relationship with New York. It will therefore be crucial to monitor whether it advances to 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 New York’s high heels and develop similar ESG legislation for fashion companies.