If one proposed piece of legislation passes this spring, fashion brands could soon encounter a harsh reality that could cost millions if their supply chain isn’t up to snuff.
While brands have already had to wade through significant and often confusing legislative changes in 2022 via the Uyghur Forced Labor Prevention Act, they may need to freshen up on the terms of the recently introduced Fashion Sustainability and Social Accountability Act, commonly referred to as the New York Fashion Act.
Despite the locality its informal name implies, the bill carries vast global implications, says Mark Burstein, executive vice president and industry principal at supply chain software provider Logility.
“The Uyghur Act is like a ripple in the ocean. The New York Fashion Act is a tsunami, and the warning sirens are wailing right now,” Burstein said in a recent fireside chat with Sourcing Journal. “The smart companies are moving to higher ground. The others are still on the beach watching the tide go out and wondering, ‘When is the tsunami going to come?’ Many of those companies are going to end up as casualties.”
Under the proposed bill, apparel and footwear companies that generate $100 million in global revenue and conduct business in New York must map at least 50 percent of their end-to-end supply chains, but that’s just the start.
Brands also must publish their own environmental and social sustainability report and set binding science-based targets to ensure that they are cutting greenhouse-gas emissions in line with the Paris Agreement’s goal of limiting temperature increases to 1.5 degrees Celsius above pre-industrial levels.
Additionally, businesses must disclose the annual volume of material produced, broken down by type, such as polyester, leather or cotton, as well as median worker pay as measured against local minimum and living wages. Alongside those disclosures, the brands must outline their approach to incentivizing supplier performance on workers’ rights, whether through means like contract renewals and price premiums.
If organizations don’t comply with the mapping requirements within 12 months, and don’t fulfill their sustainability-related disclosures within 18 months, they will be subject to a fine of up to 2 percent of their annual global revenue.
“Using Nike as an example, their non-compliance would result in a fine of $1 billion every year,” Burstein said. “They could just choose to not sell products in the state of New York, but obviously that’s not going to happen.”
The potential fines serve as a wake-up call for fashion players that haven’t done enough to understand their supply chains in depth, ultimately backing them into a corner where they risk a serious financial hit by not acting.
Burstein called out most companies for being reactive instead of proactive to these problems, referring to what Logility defines as the five maturity stages of traceability, in which 90 percent of the industry remains at “Stage 0.”
“Some large global brands actually have achieved Stage 1, and about a dozen or so have reached Stage 2 or 3,” Burstein said. “None of them have reached Stage 4 or 5, but a few are on the way.”
Click the image on the video above to learn more about complying with the New York Fashion Act.