On January 5, 2022, the Fashion sustainability and social accountability Act (Assembly Bill A8352) was referred to the legislative Consumer Affairs and Protection Committee of the New York State. If passed, the Act would be the first of its kind in the US, requiring fashion retail sellers and manufacturers, on pain of a fine based on annual revenues, to disclose environmental and social due diligence policies.
More than a comply or explain obligation
Every fashion retail, seller and manufacturer operating in the State of New York and having annual worldwide gross revenues exceeding $100 million would be subjected to the obligation to disclose “its environmental and social due diligence policies, processes and outcomes, including significant, real or potential adverse environmental and social impacts and disclose targets for prevention and improvement”.
The disclosure requirement would cover, at a minimum, 4 types of information.
First, companies would have to provide supply chain mapping. Taking a risk-based approach, a minimum of 50% of suppliers by volume across all tiers of production shall be mapped and names of prioritised suppliers disclosed.
Second, in line with the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises, companies would be expected to report on measures taken to embed responsible business conduct into management systems, areas of significant risks, significant adverse impacts on risks identified, prioritised and assessed, prioritisation criteria, actions taken to prevent or mitigate risks, measures to track implementation and results, and provision of or cooperation in any remediation.
Third, companies would have to provide information on prioritised adverse impacts.
Regarding environmental impacts, information includes a quantitative baseline and reduction targets on energy and greenhouse gas emissions, water and chemical management, annual volume of material produced and how much production has been displaced with recycled materials. All information shall be independently verified and a greenhouse gas report must comply with the Greenhouse Gas Emission Protocol Corporate Accounting and Reporting Standard and the Corporate Value Chain Scope Three Standard.
Regarding social impacts, information includes the median wages of workers of prioritised suppliers and how this compares with local minimum wage and living wages, and the company’s approach for incentivising supplier performance on workers’ rights.
Fourth, companies would be expected to disclose their targets for impact reductions and for tracking due diligence implementation and results.
A legislation with some teeth
The Attorney General is required to publish annually a report listing non-compliant companies.
To ensure compliance with the Act, the Attorney General is entitled to bring civil proceedings for an injunction, monetary damages or civil performance of a statutory duty.
Companies found no to be complying with their obligations may be fined up to 2% of annual revenues of $450 million or more. Fines would be deposited in a Community Benefit Fund and be expended for the implementation of environmental benefit projects.
Further, any citizen may bring a civil action against any person who is alleged to have violated an order by the Attorney General, or to compel the Attorney General to investigate a company’s compliance, or against the Attorney General where there is an alleged failure of him/her to perform duty.
Sponsors of the bill aim to bring it to a vote in late spring. To be continued.