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Exploring Retail Sustainability Regulation and Compliance: How Retailers Can Prepare

Over 50% of Americans report that they believe climate change is a serious issue, and over two-thirds believe that corporations aren’t doing enough to impact climate change for the better. A major component of this frustration can be directed to a perceived (and real) lack of sustainability practices across the retail industry

While change has been on the horizon, with ESG-related proposals up 22% as noted in our insights here, a push to adapt more quickly has spurred due to new laws up for proposal. Currently, for example, New York is considering passing the Fashion Sustainability and Social Accountability Act, or NY Fashion Act, and at the federal level, the Fashioning Accountability and Building Real Institutional Change Act, or FABRIC Act, is undergoing Senate review. Both proposed acts would lead to serious implications for the retail industry as a whole. 

So, moving forward, how can organizations ensure retail sustainability regulation and compliance? Below, we dive into the basics of these laws and how you, as a retailer, can help position yourself to comply with new regulations.  

The New York Fashion Sustainability and Social Accountability (NY Fashion) Act 

The Fashion Act seeks to level the playing field by holding retail companies accountable for the sustainability, ethical soundness, and overall quality of their supply chain. This accountability would be required all the way down to the raw material producers. Introduced in the 2021-2022 legislative session by New York State Senator Alessandra Biaggi and Assembly member Dr. Anna Kelles, the NY Fashion Act would: 

  1. Require companies to know and disclose their supply chains. 
  2. Mandate company responsibility for their impact in those supply chains, through the legally binding Mandatory Due Diligence Framework. 
  3. Outline regulation and enforcement practices. 

This Act would apply to brands with an annual global revenue of at least $100 million who do business in New York. If approved, any company wishing to continue business in New York would need to become transparent about their current practices and provide actionable, science-backed plans to improve their practices within a set time range. Businesses that don’t wish to comply would be banned from conducting business in the state of New York. The general belief among supporters of the Act is that since New York City is such a lucrative fashion capital, the money many apparel brands currently save through their unsustainable practices would be outweighed by the cost of losing all of New York’s business. 

The Fashioning Accountability and Building Real Institutional Change (FABRIC) Act 

Like the NY Fashion Act, the Fashioning Accountability and Building Real Institutional Change Act (FABRIC) Act is a legislative proposal seeking to transform the U.S. fashion industry by putting more pressure on apparel businesses to focus on improving labor practices, environmental impacts, and sustainability in production. Introduced in the Senate by Senator Kirsten Gillibrand (NY) and in the House of Representatives by Carolyn Maloney (NY), the FABRIC Act would: 

  1. Hold brands and manufacturers accountable for more ethical workplace standards by enforcing a minimum hourly wage and penalizing labor law violations.
  2. Use financial incentives in the form of corporate tax credits to bring more production back to the U.S.
  3. Reinvigorate the American fashion/manufacturing industry using a $40 million domestic garment manufacturing program.

This Act’s implications for ethical, sustainable fashion are significant and multifaceted. The FABRIC Act is intended to lessen the environmental impact of the fashion industry by implementing stricter environmental regulations and offering additional support for domestic production, which will cut down on supply chain admissions. The Act would also require brands and manufacturers to disclose more information regarding their labor practices, supply chains, and environmental impacts. This transparency aims to help consumers make more informed choices and support brands that show an effort for improving their work ethic and impact on the environment. The FABRIC Act hasn’t reached its final form, but it’s another strong indicator that sustainable and ethical fashion is becoming increasingly important to both consumers and regulatory bodies. 

So, What’s Next? 

Although both laws are still undergoing provisions prior to being voted on in their respective legislative houses, it’s important to understand the possible implications and how you can best prepare your company for these changes and any similar ones that may occur down the line. With supply chain visibility and accountability being at the forefront of both laws, it’s imperative to assess your current supply chain operations to ensure they align with these new standards. A formal assessment and documentation can ensure your firm is ready for the impacts of these laws. This can also serve as a great time to assess supply chain opportunities to bring production back stateside if that makes sense for your business to benefit from these new incentives.  

Even if these acts are not passed, they still remain clear indicators that sustainability and ethical manufacturing are increasingly important in the public eye. Currently, 77% of shoppers hold retailers accountable for sustainability, and many of them are willing to pay higher prices for sustainable, ethically made products. Additionally, this preference for sustainable retail is only likely to grow in the future, especially as younger generations like Generation Z and Generation Alpha gain purchasing power. Properly assessing and aligning your supply chain and manufacturing operations can ensure your company is prepared for the continued sustainable evolution within retail.  

At Clarkston Consulting, we help businesses connect their sustainability and corporate responsibility goals to their business objectives. Our supply chain experts are ready to help ensure your operations are ready for, or start moving toward, the standards that these laws would require and consumers are coming to expect. Whether you’re just starting to set a sustainability strategy or getting ready to publish your next report, Clarkston can provide expertise on sustainability best practices within the supply chain. 

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Tags: Sustainability