Fashion businesses in New York with revenues surpassing $100 million may soon be required to report information to authorities on a range of environmental, social, and governance (ESG) measures, according to the New York Times.
The Fashion Sustainability and Social Accountability Act (or Fashion Act) is poised to make New York the first state to enforce policies that require top fashion brands to map a minimum of 50 percent of their supply chain from farms where materials originate through to the distribution center.
That means brands including Prada, Armani, Shein, and others will need to have the data and technologies in place to trace products throughout the supply chain, from the source of raw materials and the factories where goods are produced to the freight carriers used for shipping.
New York State Senator Alessandra Biaggi and Assemblywoman Anna R. Kelles sponsored the sustainability-focused bill with support from nonprofits including the New Standard Institute, the Natural Resources Defense Council, and the New York City Environmental Justice Alliance.
Both apparel and footwear companies will be required to report on a variety of ESG metrics if the bill is passed.
The bill isn’t just limited to sustainability — fashion brands and retailers would also need to assess their social impact throughout the supply chain.
Companies would need to report on metrics related to fair wages, energy consumption, greenhouse gas emissions, and water and chemical management.
Based on their performance against these metrics, apparel and footwear companies would then need to implement plans to reduce their environmental impact and improve ethical treatment of employees.
Companies would also be required to report their material production volumes, which will show how much cotton, leather or polyester they include in their products. This information will be published online and made accessible to consumers.
“As a global fashion and business capital of the world, New York State has a moral responsibility to serve as a leader in mitigating the environmental and social impact of the fashion industry,” said Ms. Biaggi in a press release.
Fashion companies will have 12 months to comply with the traceability requirements after the bill is passed and 18 months to deliver their impact disclosures. If they violate the law, they will be fined up to 2 percent of their annual revenues.
The total amount of these fines would be distributed to a new Community Fund operated by the Department of Environmental Conservation and allocated toward environmental justice projects.
Violating the bill has the potential to not only hurt profit margins, but also cause damage to brand reputation. In addition to being fined, fashion brands found to be in violation of the law would be publicly named on an annual list of noncompliant companies.
Apparel and footwear companies have received a heavy dose of backlash for over-the-top displays of environmental negligence before, as was the case when Burberry was publicly called out for burning over $36 million worth of unsold goods in 2019.
In general, the public is eager to see fashion brands take ESG initiatives seriously and reduce their environmental impact.
More than a third of consumers are willing to pay more for sustainable products as of 2021, and 85% of consumers have shifted their buying behavior to be more sustainable in the past five years.
But despite the general public’s knowledge that apparel companies contribute significantly to climate change, there hasn’t been any sweeping legislation in the US to reduce the environmental impact of the industry.
This bill would change that. More importantly, it could influence other states to enact similar laws that enforce ESG initiatives and hold apparel and footwear companies to a higher standard.
This is highly likely, given that New York City is considered the fashion capital of the world. There will be a symbolic impact as well as a legal impact on the fashion industry if this bill succeeds.
It signals the beginning of a shift all retailers have anticipated for a while now: ESG initiatives are no longer optional. Soon, all apparel and footwear retailers will be subject to some form of reporting requirements related to sustainability and the ethical treatment of workers.
In a recent white paper and webinar, Bamboo Rose and Treadler provide guidance on how retailers can establish ESG as a core competency for growth and resilience by leveraging proven technologies and collaborative strategies with all partners across the supply chain.
Implementing technologies capable of collecting and analyzing data across the complete production and supply chain operations will be critical for companies required to report on sustainability measures to avoid fines, maintain margins, and succeed in ESG initiatives.
Supply chain visibility is more important than ever as governments in the US and abroad turn the lens on retailers and their impact across the sourcing, manufacturing, and logistics processes.
Ready to succeed in new ESG initiatives? Try the Bamboo Rose platform today.