With first-of-its-kind legislation, the state of New York (U.S.) seeks to take bold action in turning fashion into a force for good. The Fashion Sustainability and Social Accountability Act, if passed this spring, will require global clothing and footwear companies to disclose at least 50% of their entire supply chain, including material sourcing, greenhouse gas emissions, and labor practices.
The act provides a defining sustainability standard that the fashion industry sorely needs. Although human rights and labor laws are either in place or being debated in the European Union as well as Germany, France, Britain, and Australia, fashion remains one of the least regulated, yet most impactful, industries in the world. Retailers and manufacturers annually contribute approximately 10% of global carbon emissions, nearly 20% of wastewater, and the removal of 70 million tons of trees ‒ all of which are drastically affecting the climate.
“The passage of the Fashion Sustainability and Social Accountability Act would be a landmark move that will only strengthen the fashion industry, given the growing consumer demand for sustainable brands,” says Mark Burstein, executive vice president and industry principal at Logility. “By rethinking the supply chain from sourcing to distributing and, ultimately, discarding, industry players can gain consumer loyalty and trust by uncovering hidden opportunities for imaginative designs and become true stewards of our planet and communities.”
What This Act Could Mean for Your Supply Chain
The Fashion Sustainability and Social Accountability Act will require fashion retail sellers and manufacturers doing business in New York state, and generating more than US$100 million in annual revenue worldwide, to relay their environmental and social due diligence policies. Such information includes the total volume of material produced, carbon emissions, water consumption and pollution, median wages, measures for responsible conduct embedded in policies and management systems, and chemical usage, storage, and disposal practices.
Within the first year of the act’s enforcement, affected businesses will need to map, at a minimum, 50% of their supply chain. Then, six months later, they must provide an assessment of their environmental and social impact. Both disclosures must be publicly available on their web sites and in compliance reports. Meanwhile, regardless of size, location, and tier, the brands’ suppliers will likely also experience increased scrutiny and additional reporting requirements from their retail or manufacturing customers.
While the ‘due diligence’ act does not specify which half should be reported, it does call on brands to focus on areas that pose the most significant risks. Doing so will help companies meaningfully reduce their footprint by setting their true baseline and working actively to meet science-based targets, as defined by the Organization for Economic Co-operation and Development and the United Nations.
Companies that fail to meet these accountability requirements may be penalized up to 2% of their annual revenue. The fine will help fund a community benefit trust managed by the Department of Environmental Conservation and used to implement one or more environmental improvement projects that directly and verifiably enhance ecological justice. The legislation also permits a ‘name and shame’ approach in which a list of offenders will be published by the state’s attorney general each year.
How to Raise the Bar on Transparency and Compliance
The NY Fashion Act is a well-timed measure that can help fashion businesses take on some of their most significant growth opportunities, even while supply chain pressures continue to challenge the industry. According to a joint report by the Business of Fashion (BoF) and McKinsey & Company (McKinsey), 15% of surveyed industry executives cite sustainability as one of their top three concerns. In addition, 12% rate the same topic as an opportunity in the year ahead.
These findings from BoF and McKinsey suggest that the benefits of implementing meaningful sustainability measures and mitigation strategies outweigh any associated costs and efforts. In a similar vein, while every brand is unique, rising expectations for visibility into environmental and social impact leave little room for error.
“Retail and manufacturing organizations and their suppliers must consolidate multiple data sources into a single repository to analyze information across specific departmental or functional areas and supplier tiers,” Burstein recommends. “This approach not only reduces the burden on IT to gather this insight and generate reports, but also provides a level of transparency and understanding that can drive radical change for the business, the planet, and people.”
With the Logility® Digital Supply Chain Platform, businesses acquire a range of data-driven solutions for managing corporate social responsibility (CSR) ‒ embedded with advanced analytics, machine learning, and artificial intelligence ‒ to provide that level of “radical transparency.” The unified platform helps improve vendor management and compliance, supply and manufacturing planning and optimization, product traceability, corporate responsibility, and product lifecycle management. Furthermore, it empowers the entire supply chain network to collaborate and take control of direct and indirect instances of child and forced labor, unsafe working conditions, community violations, and environmental degradation.
The platform enables fashion companies to tick off all the boxes of this act with:
- Visibility into social compliance information across all suppliers
- Ability to perform, review, monitor and submit corrective action plans regarding social compliance
- Environmental status to help ensure all suppliers are compliant with corporate practices
- Review of total emissions from each supplier as well as root-cause analysis to understand reasons behind variances that may require action.
Whether they know it or not, fashion brands and their retailers, manufacturers, and suppliers could soon face a pivotal moment in their operations. If the New York legislature successfully passes this act, meaningful progress toward sustainable fashion can become a reality that every business must embrace.
The time to act is now. Consumers expect it, communities rely on it, and our planet needs it to heal. But most of all, the economic survival of the fashion industry requires it. Contact Logility now to discuss how this act will impact your brand and how to be prepared.