Human Rights Due Diligence Update: Groundbreaking New York Fashion Sustainability Legislation Proposed as EU Initiative Stalls

January 27, 2022

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In February and March 2021, we published updates on global legislative developments regarding mandatory human rights due diligence and supply chain reporting (see here and here).

At that time, it was expected that the European Commission (“THIS”) would publish draft legislation at pan-European level as a proposal for sustainable corporate governance (“GCS”) in the summer of 2021. The planned draft directive has been hailed as potentially game-changing: guiding how companies should manage issues in their own operations and value chains with respect to human rights. people, climate change and the environment, and related governance.

Comparatively, fewer material developments have occurred in the United States, with the most notable change to the law in this area in recent years being the California Transparency in Supply Chains Act 2010. But the landscape may be changing. , both with the recently passed federal Uyghur Forced Labor Prevention Act and a new bill pending in New York State (the proposed Fashion Sustainability and Social Accountability Act) that could impose significant statement to the fashion industry.

Pan-European developments – EC draft legislation significantly delayed

As it stands, the draft EC directive has yet to be delivered and updates on its status have not been provided by the EC. However, it would appear that this delay is the result of a (second) rejection by the EC’s Internal Regulatory Scrutiny Board (an independent body responsible for quality control and impact assessment of the legislation). The latest indications from the EC are that the draft directive is now expected in February 2022.

Unsurprisingly, this delay has drawn widespread condemnation and concern from civil society. For example, on December 8, 2021, in an open letter signed by 47 civil society organizations and trade unions to EC President Ursula von der Leyen (see here), complaints were made about the delays of a “Crucial New Law That Can Help Millions Seek Justice for Human Rights Violations…” and expressing “God[p] concert[n]” about “total lack of transparency on the reasons for this new delay”. The letter called on the president to “publicly reaffirm [the] commitment … to make the supply chains of companies operating in the EU market sustainable through ambitious and binding legislation on human rights and environmental due diligence”.

Developments in the United States – Proposed Revolutionary Bill

Meanwhile, in the United States, human rights due diligence legislation has advanced with two significant developments.

At the federal level, on December 23, 2021, President Biden signed the Uyghur Forced Labor Prevention Law (theUFLPA”) in the law. The UFLPA creates a rebuttable presumption that all goods produced – even partially – in China’s Xinjiang Uyghur Autonomous Region are the product of forced labor and are therefore barred from entering US ports. The UFLPA also builds on previous legislation, such as the Uyghur Human Rights Policy Act of 2020, by expanding that law’s sanctioning authority to cover foreigners responsible for human rights abuses. linked to forced labor in the Xinjiang region. We explore the UFLPA in detail in our Customer Alert, here.

At the state level, earlier this month, two New York State Senators introduced landmark legislation to set out sweeping sustainability mandates for the fashion industry – an industry that is ( by some estimates) responsible for around 4-8.6% of global greenhouse gas emissions. The Fashion Sustainability and Social Responsibility Act (theFSSAA“), sponsored by Senator Alessandra Biaggi and Assemblyman Dr. Anna Kelles, is a proposal that, if passed, would require fashion retailers and manufacturers doing business in New York State with annual global gross revenues exceeding $100 million to publish detailed information on their websites on their “environmental and social due diligence policies, processes and results, including material actual or potential adverse environmental and social impacts(see here). The FSSAA would therefore impose obligations on many household fashion names and brands based around the world.

Disclosures under the FSSAA project include, among others: (i) supply chain mapping of at least 50% of suppliers by volume at all levels of production; (ii) a “sustainable development report” identifying the risks of each company, in accordance with the principles of the United Nations and the International Labor Organization; (iii) independently verified greenhouse gas reports; and (iv) quantitative measures, such as publishing the median wages of supplier workers relative to the local minimum wage. The FSSAA requires that all disclosures be made on the retailer’s or manufacturer’s website within one year of the enactment of the legislation.

In terms of enforcement, the FSSAA, if passed, would require the Attorney General of New York (“HER”) to publish an annual report on corporate compliance with the law. And, if enacted, failure to meet the requirements of the legislation would give the AG the power to fine vendors and manufacturers up to 2% of annual revenues of $450 million or more. This money will then be deposited into a community benefits fund, which will be used for environmental projects that directly and verifiably benefit environmental justice communities.

While the legislation could take years, advocates hope the bill will pass by the spring of 2022 and certainly no later than the end of the 2022 New York State legislative session in June. . The legislation has four co-sponsors and is currently pending before the New York House Consumer Affairs and Consumer Protection and Senate Consumer Protection Committees and, if it makes it out of committee, it will be voted on by all. of the legislative body.

Conclusion

These initiatives in the United States are another indication of the general direction of changing due diligence expectations. If enacted, the FSSAA would not only make waves in the fashion world, but could also prefigure legislation requiring ESG disclosures for other industries in the United States.

With this in mind, alongside planned European legislation and individual national developments, companies should continue to reflect on their knowledge of their own supply chains, human rights and environmental risks within their business, as well as as internal due diligence processes/compliance methodologies. Companies’ expectations in terms of substantial management of environmental and human rights risks, as well as their reporting obligations, should only increase.


This alert was prepared by Susy Bullock, Stephanie Collins and Ryan Butcher* in London; and Roscoe Jones, Jr., Howard S. Hogan, Perlette Michèle Jura and Jessica C. Benvenisty in the United States.

Gibson Dunn attorneys are available to answer any questions you may have regarding these developments. Please contact the Gibson Dunn lawyer you usually work with, any member of the firm’s Environmental, Social and Governance (ESG) practice, or the following authors in London and the United States:

Susy Bullock – London (+44 (0) 20 7071 4283, [email protected])
Stephanie Collins – London (+44 (0) 20 7071 4216, [email protected])
Roscoe Jones, Jr. – Washington, DC (+1 202-887-3530, [email protected])
Howard S. Hogan – Washington, DC (+1 202-887-3640, [email protected])
Perlette M. Jura – Los Angeles (+1 213-229-7121, [email protected])
Jessica C. Benvenisty – New York (+1 212-351-2415, [email protected])

Do not hesitate to contact the following ESG practices managers:

Susy Bullock – London (+44 (0) 20 7071 4283, [email protected])
Elizabeth Ising – Washington, DC (+1 202-955-8287, [email protected])
Perlette M. Jura – Los Angeles (+1 213-229-7121, [email protected])
Ronald Kirk – Dallas (+1 214-698-3295, [email protected])
Michael K. Murphy – Washington, DC (+1 202-955-8238, [email protected])
Selina S. Sagayam – London (+44 (0) 20 7071 4263, [email protected])

* Ryan Butcher is a trainee solicitor working in the firm’s London office who is not yet admitted to practice law.

© 2022 Gibson, Dunn & Crutcher LLP

Publicity for Lawyers: The enclosed materials have been prepared for general information purposes only and are not intended to provide legal advice.

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