New York State Proposes ESG Requirements for the Fashion Industry
The “Fashion Sustainability and Social Accountability Act” would require fashion companies to disclose environmental, social, and governance measures.
The Fashion Sustainability and Social Accountability Act (A8352/S7428) was introduced to the New York Senate on January 7, 2022, and is currently under review. If enacted, it would require fashion retailers and manufacturers conducting business in New York State and with worldwide revenues exceeding $100 million to disclose their environmental, social, and governance (ESG) measures. These disclosures would include identifying a minimum of 50% of their supply chain across all tiers of production (i.e., from raw material suppliers to manufacturing), developing and publicly sharing social and environmental performance metrics, and implementing science-based targets (SBTs) to reduce impacts in these sectors. Companies not currently using SBTs may find they differ significantly from other approaches that are more inclusive of offsets and may require significantly different business changes to achieve.
Under the proposed bill, companies would be required to identify “environmental and social impact” performance metrics and include reduction targets for energy and greenhouse gas emissions, chemical management, and water usage. The bill would also require independent verification of greenhouse gas reporting following guidelines outlined by the World Resources Institute’s (WRI) Greenhouse Gas Protocol Policy and Action Standard.
Other requirements of the bill include company disclosure of annual volumes of materials produced categorized by specific types of materials, along with the amount of production that has been replaced with recycled materials. Companies would also be required to report median wages of suppliers’ employees compared to local minimum and living wages and disclose corporate strategies designed to incentivize the rights of workers. Climate change targets conforming to science-based WRI guidance would be required and reported annually.
This bill, if enacted, will require businesses to design specific and measurable sustainability targets to minimize adverse impacts on environmental health and societal well-being. Companies will need to collect and analyze data to monitor and assess existing greenhouse gas emissions associated with all phases of production, in addition to water consumption and hazardous chemical usage and disposal, and strategize ways to establish and meet their SBTs to minimize their climate impacts and avoid regulatory penalties, litigation, and reputation risks if they fail to meet their goals.
Passage of this bill could open the doors for further regulation of other industries. For example, the New York Senate more recently introduced bill S8596, which would establish a “Supply Chain Transparency Assistance Program” for businesses in eight global supply chain categories: food, construction, fashion, fast-moving consumer goods, electronics, automobiles, professional services, and freight. This newer legislation aims to help small and medium-sized businesses achieve ethical, transparent, and sustainable supply chains and help New York state achieve its net-zero greenhouse gas emissions economy-wide goal by 2050. Additionally, the U.S. Securities and Exchange Commission (SEC) is encouraging increased standards for greenhouse gas emission disclosures. Together these actions indicate an increased focus on regulating supply chain transparency and greenhouse gas emission reporting for many industry groups.
How Exponent Can Help
Exponent’s interdisciplinary team of scientists and engineers have the expertise to assist clients throughout all parts of sustainability implementation. As companies rapidly pivot operations in response to changing climate conditions and stakeholder expectations, our team can help with product stewardship by supporting the development of sustainable manufacturing practices, evaluating life-cycle assessments of products, and leveraging risk-based methods to assess environmental and ecological impacts throughout supply chains and production processes. Exponent advises clients on strategies for effectively incorporating renewable energy and materials into existing operations and assists with assessing existing emissions, identifying measurable goals to evaluate sustainability progress, and developing approaches for meeting those goals in alignment with regulatory requirements.