The proposed New York Fashion Sustainability and Social Accountability Act (S7428/A8352, hereinafter the “Fashion Act”) is the first of its kind legislation in the United States as it attempts to impose social and environmental sustainability disclosure requirements on global fashion brands. However, this comes as no surprise as several EU countries, Australia, and the UK have also began taking steps toward what is becoming a similar universal goal – for example, the UK Modern Slavery Act, which aims to hold companies accountable for their suppliers’ employment standards by requiring an annual statement confirming whether slavery and human trafficking are absent from the business and supply chain.

The objective of the Fashion Act is two-fold:

1. To require retail sellers and manufacturers to disclose environmental and social due diligence policies; and
2. To establish a community benefit fund for the purpose of implementing one or more environmental benefit projects that directly and verifiably benefit environmental justice communities.

What is the Fashion Act’s current status?

The Fashion Act was introduced in October 2021 into the New York state legislature by Senator Alessandra Biaggi and was then referred to the Consumer Protection Senate Committee in January 2022; its sponsors hope to bring it to a vote late Spring.

Who would be required to report?

The Fashion Act would apply to all those global apparel/footwear manufacturers and retail sellers that (i) “do business in New York” and (ii) exceed $100 million in revenue. Doing business in New York is currently defined broadly as “actively engaging in any transaction for the purpose of financial or pecuniary gain or profit,” meaning even a company without a storefront in New York could fall within the Fashion Act’s purview.

What reporting requirements does the Fashion Act impose?

1. Supply-chain mapping: The Fashion Act would require companies to map a minimum of 50% of their supply chain across all production tiers. While the Fashion Act does not specify which 50% of the supply chain is subject to disclosure, it promotes “good faith” efforts that focus on those supply chains relevant to the prioritized risk. In addition, companies must disclose the names of the prioritized suppliers.
2. Due diligence disclosure: Annually, the company must publish a social and environmental sustainability report that addresses the due diligence policies, processes and activities conducted to identify, prevent, mitigate and account for potential environmental and social risks, as well as the results of each. Such reports must be done in accordance with the Organization for Economic Co-operation and Development guidelines for multinational enterprises and responsible business conduct.
3. Impact disclosure: Companies must disclose their actual and potential negative environmental and social impacts including, among others, greenhouse gas reporting; impacts on water and chemical management; volume of production replaced with recycled materials; and the monitoring and improving of labor conditions.
4. Impact reduction targets: Companies must set and meet annual targets to reduce their environmental footprint, specifically greenhouse gas emissions, including estimated timelines and quantifiable benchmarks for improvement.
5. Publicly accessible: All of the above disclosures must be made publicly available on a company’s website.

How long after enactment will the requirements be enforced?

After enactment, companies subject to the law will be given 12 months to comply with the supply-chain mapping and sustainability reporting requirements and 18 months to comply with the impact disclosure requirements.

What are the penalties for non-compliance?

Failure to comply could subject the company to fines of up to 2% of their annual revenues over $450 million. Amounts collected as a result of non-compliance will be deposited to a new community benefit fund administered by the New York Department of Environmental Conservation to be used for environmental justice projects.

Annually, the New York Attorney General will be required to publish a list of the companies found to be non-compliant.

Both the New York Attorney General and private citizens will have the ability to enforce the law against non-compliant companies. The Fashion Act authorizes a private right of action:

1. Against anyone in alleged violation of the law or an order by the New York Attorney General relating to the law;
2. To force the New York Attorney General to investigate or enforce a company’s compliance; or
3. Against the New York Attorney General for failure to perform the respective duties to enforce the law.

Key takeaways

1. As drafted, the Fashion Act would have a very far reach that would impact and require compliance from nearly every major fashion brand.
2. Manufactures and retailers should promptly start to examine and assess the different areas of their business that are implicated by the enactment of the Fashion Act. Fashion brands should start by assessing first and foremost whether they can accurately trace their supply chain and conduct risk assessments followed by remediation, as necessary, in order to make the appropriate aforementioned disclosures.
3. Regardless of the Fashion Act’s successful passing, sustainable laws and regulations are imminent as this trend becomes part of a global initiative to take on climate change.