In early January 2022, in what looked like a groundbreaking move, the Fashion Sustainability and Social Accountability Act (Fashion Act) was unveiled in New York State. The Fashion Act, if passed, would make New York the first US state to pass a law that would hold fashion companies accountable for their role in climate change and other human rights impacts. Given the international nature of fashion companies, growing consumer demand for transparency and sustainability from fashion companies, and increasing legislation surrounding human rights and sustainability, it is likely that New York’s Fashion Act will be setting a trend rather than standing alone.
Though legislation related to mandatory human rights due diligence is currently being discussed in the European Union, and countries including France, the United Kingdom, Germany and Australia have laws in place related to human rights and modern slavery, this would be one of the first laws specifically targeting the social and environmental actions of the fashion industry—which has been called “one of the least regulated industries”—and requiring changes. It would also go beyond California’s Garment Worker Protection Act by including the manufacturing portion of the value chain.
The Act also stands out in terms of the sheer number of companies that would be impacted—meaning that companies that have only started considering ESG issues will be held to the same standard as industry leaders and will need to seriously enhance their performance related to human rights and environmental impacts.
At a high level, the Fashion Act requires global apparel and footwear companies doing business in New York with more than $100 million in revenues to disclose their environmental and social due diligence policies.
Specifically, companies are asked to map at least 50% of their supply chain, disclose their material production volumes, share where in their supply chain they have the greatest social and environmental risk or impact when it comes to fair wages, energy, greenhouse gas emissions, water and chemical management, and share concrete plans to reduce those impacts—and disclose this information online. The Act references standards including the Paris Climate Accords and the UN Guiding Principles on Business and Human Rights (among others) when describing how the plans and disclosures should be made.
Companies would be given one year to comply with the mapping requirements and 18 months to comply with the disclosure requirements. The Act would be enforced by the New York State Attorney General and noncompliant companies that don’t remedy the issue within three months of notice may be fined up to 2% of their annual revenue—meaning that the lowest earning companies would be fined a minimum of $2 million.
While the Fashion Act is a New York law, it is expected that, if passed, the implications will be global, due to the number of fashion companies doing business in New York with revenue over $100 million, and their supply chains spanning both the country and the globe.
Fashion companies should therefore pay close attention to the progression of the Fashion Act, as well as their sustainability and human rights risks and impacts. We have previously advised on why and how to assess human rights impacts and have provided a deep dive into climate change and human rights, steps to setting net-zero greenhouse gas emissions, and guidance on sustainability reporting.
Given the Fashion Act’s consistency with existing environmental and human rights standards, fashion companies leading on sustainability and human rights will be well-positioned to comply. For example, setting public targets in-line with a 1.5C pathway, reporting on key material issues and human rights risks, as well as maintaining supply chain transparency are all consistent with the new mapping and disclosure requirements.
So far, the Act has been both praised and criticized—and two letters, written by a group of 20 labor and advocacy groups, as well as reuse advocates, have suggested revisions. Regardless of its passage, the emergence of the Fashion Act reinforces BSR’s position that the role of business in addressing sustainability challenges has never been more important than today—and the size and scale of the Fashion Act indicates a global trend towards sustainability and human rights.
The Fashion Act is currently being considered in Senate and Assembly committees, and the sponsors hope to bring it to a vote in late spring. It would need to be passed by both houses of the New York state legislature and signed by the Governor before it becomes law.