We are widely aware that fast fashion comes at a great cost. According to the World Economic Forum, “the fashion industry produces 10% of all humanity’s carbon emissions and is the second-largest consumer of the world’s water supply.”[1] Yet, the absence of regulation of this industry is notorious. Efforts to rectify the situation have been left up to the companies and nongovernmental organizations.
To change this narrative and in an attempt to “greening” the industry, New York lawmakers are finally talking sustainability… Under the sponsorship of US State Senator Alessandra Biaggi and US Assemblywoman Anna R. Kelles, the New York state legislature unveiled last January the Fashion Sustainability and Social Accountability Act (“Fashion Act”). The goal of the bill is to hold fashion’s biggest brands accountable for their environmental and social impacts. If passed, the Fashion Act would make New York the first state in the US to impose sustainability-related obligations on the world’s biggest fashion brands. Proponents say the bill “could shift how the fashion industry operates globally.”[2]
The Fashion Act’s Goal
Let’s put things as they are: although from an environmental and social point of view adopting overall ethical methods of production is wonderful, from an economic point of view it may represent a competitive disadvantage. Fast fashion is characterized by being cheap and, to be cheap, its producers tend to neglect the environment and workers and focus on trying to make the supply chain as inexpensive as possible. Now… when companies begin to make sustainability a core part of their business model, prices inevitably rise resulting in a competitive disadvantage.
This is where the Fashion Act would come into play: by requiring brands an increased commitment to sustainability, it would eliminate the mentioned competitive disadvantages. In the words of the founder of the New Standard Institute, Maxine Bédat, the bill is “inherently pro-business,” because “[r]ight now, companies are uncompetitive if they do the right thing,” and this bill will create a regulatory floor that requires every company doing business to “do the right thing.”[3]
The Fashion Act’s Supporters
It should come as no surprise that the bill is backed by the industry’s top players. Supporters include the New Standard Institute, the Natural Resources Defense Council and the New York City Environmental Justice Alliance, as well as designer Stella McCartney.
Although this list is amazing, we cannot help but notice that there were huge players who were conspicuous by their absence, among them, the Council of Fashion Designers of America (CFDA) led by Tom Ford and Steven Kolb and the American Apparel & Footwear Association (AAFA). In response to the widespread astonishment, they released a joint statement explaining that “[a]s industry organizations, [they] were not involved in the drafting of the bill, nor [were they] aware of any companies who were consulted. [They] are currently taking time to understand the bill and look forward to speaking with its authors to provide [their] input and share [their] perspectives.”[4]
To whom would the Fashion Act apply?
The Fashion Act would apply to global apparel and footwear companies with more than $100 million in revenue doing business in New York. As you may know, New York is the home of thousands upon thousands of brands, including the world’s largest and most famous. This is, from luxury companies like LVMH and Armani to fast fashion ones like Boohoo and Shein. So if passed, the bill could, and will certainly have a global impact.
Key provisions in the Fashion Act
The bill requires fashion companies (manufacturers and retailers) to map at least 50% of their supply chain. Even though it doesn’t specify which 50% is subject to disclosure, it calls brands to use “good faith efforts”[5] to focus on areas with the greatest social and environmental risks (prioritized risk).
Also, subject companies have to: (1) publish an annual “impact and due diligence disclosure, including a social and environmental sustainability report”[6]; (2) disclose actual and potential negative environmental and social impacts. The latter must include, among other things, “a quantitative baseline and reduction targets on energy and greenhouse gas emissions, water [and] chemical management”[7]; (3) disclose annual Science-Based targets to reduce the company’s adverse environmental impact, “including where possible estimated timelines and benchmarks for improvement.”[8]
All these disclosures must be available online. Companies will have 12 months to comply with the mapping directive and 18 months to make their initial impact disclosures.
The finishing touch? Both the attorney general and the citizens would be able to enforce the proposed law against a non-compliant company. Non-compliant companies could be fined up to 2% of their annual revenues of $450 million or more.[9] The proceeds would go to a new Community Fund administered by the Department of Environmental Conservation and used for environmental justice projects.
The Fashion Act: The Silver Bullet?
Is the Fashion Act the silver bullet? No … Is it a good start? Without a doubt! But let’s not forget that the bar is too low.
The importance that the Fashion Act places on public disclosure is a very smart strategy. The fact that all disclosures must be available online, will incentivize companies to adopt robust policies and procedures on sustainability matters. Not to mention the powerful incentive that is that both the attorney general and the citizens can enforce the law against a non-compliant company (in addition to this, the attorney general would publish a list of non-compliant companies on an annual basis). So, at the very least, listed non-compliant companies should expect an avalanche of claims against them from various stakeholders, including their customers.
But there is a downside to this. Since there are no clear standards on the subjects to disclose there is a “risk for companies of having to defend a substantial amount of litigation, some of which may lack merit.” [10] Also, although the required disclosures must be quantitative, science-based, and accurate, there is no consensus on the appropriate methodology or metrics to measure them.[11] How do we compare and evaluate them then? Until regulators adopt the referred standards, misleading disclosures may appear. So, as I always say, beware of greenwashing!
Also, although a smart strategy, is ‘disclosure’ all there is to it? According to Bédat, disclosure is just a baseline. She says that the bill goes beyond establishing mechanisms for improving working conditions and environmental standards throughout the supply chain.[12] But ambiguity is a huge concern. The fact that the bill doesn’t specify which 50% of their supply chains is to be disclosed, allows companies to be selective about the information they give away.
The Fashion Act is also halfway there in terms of ‘overproduction’. Let’s not lose sight of the fact that overproduction causes millions and millions of garments to end up in landfills! This should have played a central role in the bill. Guess this issue will still be up to each company…
Ultimately, the bill is a great start and a clever response to the fashion industry’s desperate demands in terms of sustainability. The Fashion Act represents a regulatory effort to bring oversight to an unmanageable industry. In Bédat’s words: “We need[ed] it to be the most robust and aggressive bill possible that can get passed, and that’s what we presented here.”[13]
What do you think of the Fashion Act? Do you think it’s enough? What would you have regulated? Let us know in the comments below!
