Fashion business is known for its speedy and constant changes. It is not unusual for a trend to stay on top for just a few weeks, or for some materials to be so fragile that consumers are forced to buy new products more often. However, the environmental, social, and corporate governance (ESG) impact of the apparel industry has been a concern for both consumers and governments based on some alarming numbers about textile waste, such as an estimation made in 2017 that 92 million tons of textile waste were created annually. The Fashion Act aims to address these concerns.
The New York Fashion Sustainability and Social Accountability Act (S7428/A8352), commonly known as the Fashion Act, sponsored by New York State Senator Alessandra Biaggi and Assemblywoman Anna R. Kelles, contains regulations to compel apparel and footwear companies with more than $100 million in revenue doing business in New York to apply and disclose environmental and social due diligence policies. This bill is supported by a coalition of nonprofit organizations with an emphasis on fashion and sustainability, although some fashion professionals criticize the measures established in the legal text for not being as strict as they could be.
Key points of the Fashion Act regulations:
The main focus of the Fashion Act is transparency. The bill requires supply-chain mapping by retailers and manufacturers, from the farms where the raw materials originate to factories and shipping, with disclosure of at least 50% of the supply chain, although the regulation does not provide any specification about which part should be disclosed.
Another requirement established in the legal proposal is that companies will need to annually address and report on the results of due diligence policies and measures related to identifying, preventing, mitigating, and accounting for potential ESG risks through a social and environmental sustainability report, in accordance with the Organization for Economic Co-operation and Development guidelines for multinational enterprises and responsible business conduct.
The impact of apparel industry activities is also an important part of the Fashion Act. Actual and potential negative social and environmental impacts must be disclosed. On the social side, labor conditions are a relevant aspect, considering that it is widely known that slavery and human trafficking, mostly of women and children, are linked with this sector, mainly at the bottom of the supply chain.
Environmental factors such as greenhouse gas reporting, water pollution, and chemicals management must be disclosed by companies, as apparel and footwear sectors are responsible for 4%-8.6% of total global greenhouse gas emissions. To ensure that companies in the fashion field will effectively improve on these matters, targets must be set and met annually by the apparel and footwear industry, with the aim of reducing their environmental footprint, specifically greenhouse gas emissions. These targets must have estimated timelines and quantifiable benchmarks to fulfill the bill’s requirement. This information, along with other information related to the production of products, must be publicly accessible through the companies’ websites.
If the proposal becomes law, fashion companies will have to map their supply chains and meet the sustainability reporting requirements 12 months from enactment, while complying with the impact disclosure requirements will be required in 18 months. If the apparel and footwear sellers and manufacturers fail to comply with the Fashion Act, they can be fined up to 2% of their annual revenues over $450 million.
The Fashion Act’s worldwide scope:
According to the Fashion Act text, “every fashion retail seller and fashion manufacturer doing business in the State and having annual worldwide gross receipts that exceed one hundred million dollars” shall be obligated by this proposal if it comes to be a law.
The bill also states what it means by “doing business in this state,” defining it as “actively engaging in any transaction for the purpose of financial or pecuniary gain of profit.” Hence, a company that sells products in New York, even without a storefront in the state, would be obligated to comply with the Fashion Act if its annual worldwide gross income achieves the amount established by the proposal.
It is crystal clear that the bill’s effects would be felt far beyond the borders of New York, affecting fashion companies worldwide. Supply chains and operations will need to be dramatically modified to comply with the Fashion Act’s requirements; and because of this, this legal proposal would be the first of its kind in regulating the fashion industry on such a wide scale based on sustainability.
Similar fashion industry regulations already in force:
California was the first state to show concern about the textile industry. More than a decade ago, the California Transparency in Supply Chains Act began requiring transparency from retailers and manufacturers doing business there regarding efforts to eradicate slavery and human trafficking from their direct supply chains. Also in that state, the California Garment Worker Protection Act sets requirements for hourly wages of apparel workers.
At the federal level, the United States has the Uyghur Forced Labor Prevention Act, which has as its main purpose “ensuring that goods made with forced labor in the Xinjiang Uyghur Autonomous Region” do not enter the country by banning cotton and other products from that Chinese region made under such circumstances.
Leading the pack in Europe, France is vigorously acting to reduce apparel waste and promote the economy by creating new legal obligations requiring textile companies to encourage recycling. The government prohibits industries from destroying unsold clothes, with the provision of fines of up to €15,000.
In addition, the European Union is apparently starting to think about regulations on this subject that are specifically related to the fashion industry that would require companies to produce longer lasting and easier-to-repair textiles sold within Europe.
Restyling how the fashion industry does business:
Although the Fashion Act raises some serious concerns for companies about complying with such requirements, it’s more than urgent to rethink the fast-fashion machine and the way the market leads us to consume apparel as disposable items. Enforcing industry responsibilities concerning the supply chain and ESG impact is one way to change this scenario, but retail sellers and fashion manufactures should not wait for the enactment of regulations to start putting in place their own measures in this matter.
To get ahead and avoid becoming overwhelmed by the bill’s requirements, a fashion company should start by gathering accurate data and information about its environmental and social impacts, as this will bring to light potential ESG issues, allowing for the development of measures to address them. And as for the supply chain, having several suppliers for the same material or product that meet the company’s standards can be the key to maintaining production, if a problem eventually arises in this area.
The Fashion Act could bring on a fashion revolution, impacting not only the way apparel and footwear are produced and consumed, but also bringing environmental, social, and corporate governance to the table, showing the textile industry that it is not just about selling garments; it’s also about styling their business in a responsible way.
