At the beginning of this year, New York state legislators proposed the Fashion Sustainability and Social Accountability Act (“Fashion Act”).[1] The bill represents a first-of-its-kind type of legislation within the United States which seeks to reign in and hold accountable some of the fashion industry’s biggest brands for their role in human rights abuses across the globe and their contributions to the climate crisis.[2] This blog will detail the bill’s major provisions and the potential effects it could have on fashion brands, environmental and human rights interest groups, and the public at large. This blog will also argue that if the bill passes, it could represent a model for further human rights and environmental-based regulation of other consumer goods around the country.
The Purpose of the Fashion Act and its Major Provisions
The Fashion Act would apply to any apparel or footwear company that has revenues of 100 million dollars or more in the State of New York.[3] The bill would cover many of the world’s top brands, including Prada, Armani and some of the major players in the fast fashion sector like Boohoo and Shien.[4] The Fashion Act has been introduced as growing evidence has shown that the fashion industry has played a significant role in the climate crisis. For example, the World Economic Forum has estimated that the fashion industry is responsible for around 10% of global carbon emissions and has ranked the industry second in terms of worldwide water consumption.[5] Domestically, many of the nation’s former textile plants have been designated toxic waste Superfund sites by the Environmental Protection Agency.[6] Despite all the data highlighting the fashion industry’s many negative social and economic repercussions, it has surprisingly remained largely unregulated.[7]
Despite this lack of regulation, many companies have chosen to self-impose greater social and environmental standards than those currently required under the law. The H&M group, which operates one of the world’s preeminent fast-fashion retailers, has recently begun releasing a yearly report that details the environmental impacts of the company’s operations and its attempts to protect human rights throughout its supply chain.[8] The Fashion Act seeks to codify these best practices into law by promoting both environmentally friendly conduct on the part of industry players and making sure they properly vet their supply chains to ensure that their suppliers recognize their workers’ dignity and human rights.[9] The bill seeks to do this by imposing a regulatory floor that will eliminate the competitive disadvantage companies face when trying to conduct business ethically.[10]
The first major provision included in the draft version of the Fashion Act is a requirement to conduct supply chain mapping.[11] The bill requires that both manufacturers and retailers make a good faith effort to list and track at least half of their supply chain across all production areas, from raw materials to finished products.[12] The bill also specifies that companies should choose what areas of their supply chains to audit based on those parts of the supply chain most likely to pose a risk to the environment and the human rights of those working for suppliers.[13] The Fashion Act further mandates that companies disclose the names of those suppliers they have chosen to audit.[14]
Another significant part of the Fashion Act involves due diligence disclosures. This part of the bill would require that companies falling under the Fashion Act’s purview would be required to publish annual social and environmental sustainability reports.[15] This report would include information on what policies, processes, and activities a given company has undertaken to identify, prevent, mitigate, and account for environmental and social risks.[16] The reports must also detail the outcomes and findings of the company’s activities. These reports would also be mandated to cover certain reporting criteria dictated in the United Nations guiding principles on Business and Human Rights and the International Labor Organization’s Declaration on Fundamental Principles and Rights at Work. The UN documents require that companies detail what plans they have to mitigate risks of human rights abuses, what measures they are creating to track the implementation of those action plans, and any remediation efforts that they take.[17]
The Fashion Act’s due diligence disclosure requirements set it apart from similar bills like the California Transparency in Supply Chains Act because the New York bill imposes stiffer standards.[18] The California Transparency in Supply Chains Act only imposes requirements that a company disclose their human rights due diligence process, if one exists, and does not require that such a due diligence process exist itself in the first place.[19] In contrast, the New York bill imposes due diligence obligations on the companies themselves.[20]
The Fashion Act also requires that companies make an impact disclosure. This impact disclosure would have to be made within 18 months of creating any policy or process indicated in the due diligence disclosure.[21] The impact disclosure would force companies to provide information on several environmental and social factors. The report would require that companies disclose their greenhouse gas emissions and amounts of materials produced on the environmental side.[22] Among the required social indicators would be the median wage of workers and how that compares to industry competitors and the company’s system for incentivizing suppliers’ recognition of their workers’ human rights.[23] The company’s system of incentives would likely include things like contract renewals, longer contract terms, and price premiums for the material supplied. All of the information from both the impact disclosure and due diligence disclosure would be made publicly available on the company’s website.[24]
The Fashion Act also has enforcement mechanisms. The primary enforcement mechanism for the bill would be through the New York Attorney General’s Office.[25] Under the bill, the Attorney General would be empowered to bring civil proceedings for injunctions, damages, and performance of duties against any company not in compliance with the Fashion Act’s provisions.[26] Companies which receive a notice of non-compliance from the Attorney General but who continue to fail to conduct their duties for another three months would then be subject to fines of two percent of their annual revenues over 450 million dollars.[27] The funds would be placed in a community development fund which would be used to implement environmental benefit projects.[28]
The bill would also provide for an additional private right of action that would provide citizens with their own ability to bring suits against any person or company violating the Act’s requirements.[29] These private actions would compel the Attorney General to investigate companies to ensure compliance with the provisions of the Act.[30] The private actions section of the bill seems to provide a possible means by which labor unions and environmental groups could directly put pressure on companies who are not in compliance with the bill.[31] One final additional enforcement mechanism is through “naming and shaming;” under the bill’s current language, the Attorney General would publish a list of companies found to be non-compliant annually.[32]
The bill is currently working through the consumer protection committees in both the New York State Senate and State Assembly.[33] Whether the bill will pass or when the legislature might take it up for a full vote is not yet clear. Still, at this early stage, the bill has managed to garner support from a wide variety of non-profits focused on the fashion industry, including the New Standard Institute, the Natural Resources Defense Council, and the New York City Environmental Justice Alliance, as well as from famous designer Stella McCartney.[34]
Main Takeaways and Reactions to the Act
The Fashion Act provides a much-needed model for human rights and climate-based regulations of consumer products.[35] The Fashion Act improves on other bills which have come before it, like the California Transparency in Supply Chains Act. The Act does this by not just simply requiring disclosure of due diligence reporting if it exists but by actively requiring companies to undertake this reporting. The bill thus avoids the competitive disadvantage and race to the bottom created by California law.
Another important takeaway is the bill’s use of the public as an important part of the enforcement mechanism to regulate the fashion industry.[36] By publicly disclosing the names of companies in non-compliance, the bill creates a path by which various stakeholders, including company shareholders and the general buying public, might go about holding these companies accountable.
A potential issue the bill faces are the unclear metrics for measuring qualitative aspects of the Act. Unless the legislature creates defined and uniform ways for companies to measure progress, much of the potential utility of the reporting requirements might end up being nonexistent in practice. If given the opportunity, companies may go out of their way to choose purposefully complex and difficult-to-understand metrics to avoid greater scrutiny from the public and shareholders. Without clear metrics, the fashion industry may also attempt to “greenwash” their environmental impacts by choosing statistics that make their environmental impacts seem less detrimental than they actually are.[37] In addition, the vast, often intercontinental nature of supply chains would be made more difficult to investigate without uniform reporting requirements.
A likely outcome of the Fashion Act’s increased reporting requirements would be an increased cost of doing business for large fashion houses.[38] The increased costs would primarily stem from the need to hire outside advisors to help fashion brands comply with and navigate through the bill’s requirements. While this may raise costs for the companies, the accountability these companies will face and the resulting pressure it will create towards more sustainable and ethical practices will be of significant value in the long run. By forcing all companies to report this data across the board, the bill removes the marketplace’s perverse incentives and competitive disadvantages ethical companies face.
Another potential concern with the Fashion Act is that it may raise costs for consumers. It is thought that the effect on prices would likely be particularly acute for fast fashion brands whose business model relies on low-cost items to attract sales. While rising costs are a significant concern, consideration should be given to the fact that many companies in the fashion industry are only able to offer such cheap goods by failing to fully take into account the true costs their activities have on the environment and their employees. Ultimately, for the Fashion Act to be successful, consumers will have to show some willingness to accept higher prices in order to achieve better human rights and environmental outcomes.
Conclusion
The Fashion Act is a laudable attempt by the New York Legislature to reign in the conduct of the fashion industry. The bill is unique in that it focuses on a particular industry. Hopefully, it will become a model by which other industries that abuse human rights may be regulated. The bill is also important because it seeks to regulate the industry by removing competitive disadvantages, which have been historically used as an excuse for inaction on human rights issues.
- A8352, 2021–2022 Assemb., Reg. Sess. (NY. 2022), https://nyassembly.gov/leg/?bn=A08352&term=2021. ↑
- Vanessa Friedman, New York Could Make History With a Fashion Sustainability Act, N.Y. Times (Jan. 7, 2022), https://www.nytimes.com/2022/01/07/style/new-york-fashion-sustainability-act.html. ↑
- Id. ↑
- Id. ↑
- Morgan McFall-Johnson, These facts show how unsustainable the fashion industry is, World Econ. Forum (Jan. 30, 2020), https://www.weforum.org/agenda/2020/01/fashion-industry-carbon-unsustainable-environment-pollution/. ↑
- A Superfund site is a location which contains high levels of pollution, and which requires a long-term and often costly clean-up to reduce negative environmental impacts. The clean-up of these sites is paid for by the Comprehensive Environmental Response, Compensation, and Liability Act of 1980. See, e.g., Eastland Woolen Mill Superfund Site, Env. Protection Agency, https://www.epa.gov/superfund/superfund-success-stories-epa-region-1 (Mar. 20, 2022) ↑
- Emily Farra, A New Piece of Legislation Could Make New York a Leader in Sustainable Fashion, Vogue (Jan. 7, 2022), https://www.vogue.com/article/new-york-fashion-bill-sustainability-social-justice. ↑
- Sustainability Performance Report 2020, H&M Group, https://hmgroup.com/wp-content/uploads/2021/03/HM-Group-Sustainability-Performance-Report-2020.pdf (last visited Mar. 6, 2022). ↑
- Id. ↑
- Id. ↑
- Jason Halper, Ellen Holloman, Sara Bussiere, Timbre Shriver, Is Sustainability En Vogue or the Newest Staple? What New York’s Proposed Fashion Sustainability and Social Accountability Act Could Mean for the Fashion and Other Industries, XII Nat. L. Rev. 42 (2022) [hereinafter National Law Review]. ↑
- Id. ↑
- Id. ↑
- Id. ↑
- Lavanga Wijekoon, Kate Bresner, Michael Congiu, Stefan Marculewicz, The Fashion Industry Meets Human Rights Due Diligence: New York’s Proposed “Fashion Sustainability and Social Accountability Act”, Littler (Feb. 14, 2022), https://www.littler.com/publication-press/publication/fashion-industry-meets-human-rights-due-diligence-new-yorks-proposed [hereinafter Littler Article]. ↑
- Id. ↑
- Id. ↑
- Id. ↑
- Id. ↑
- Id. ↑
- Id. ↑
- Id. ↑
- Id. ↑
- Id. ↑
- National Law Review, supra note 11 ↑
- Littler Article, supra note 15 ↑
- Id. ↑
- Id. ↑
- Id. ↑
- Id. ↑
- Id. ↑
- Id. ↑
- Id. ↑
- Vanessa Friedman, New York Could Make History With a Fashion Sustainability Act, N.Y. Times (Jan. 7, 2022), https://www.nytimes.com/2022/01/07/style/new-york-fashion-sustainability-act.html. ↑
- National Law Review, supra note 11 ↑
- Id. ↑
- Id.; Greenwashing is a deceptive tactic used by companies in which they exaggerate their concern for the environment while continuing unsustainable business practices. ↑
- Id. ↑
