H1032

	SECTION 1. Chapter 29 of the General Laws is hereby amended by inserting after section 2JJJJJJ, added by section 7 of chapter 248 of the acts of 2024, the following section:-
	Section 2KKKKKK. (a) There shall be established and set up on the books of the commonwealth a separate fund to be known as the Fashion Environmental Accountability Fund for the purpose of requiring fashion sellers, as defined in subsection (a) of section 115 of chapter 93, to be accountable for adherence to environmental standards. The attorney general shall administer the fund to assist in verification and enforcement of environmental due diligence by fashion sellers pursuant to section 115 of chapter 93. There shall be credited to the fund: (i) revenue from appropriations and other money authorized by the general court and specifically designated to be credited to the fund; (ii) funds from public and private sources such as gifts, grants and donations to further environmental accountability; and (iii) interest earned on money in the fund. Amounts credited to the fund shall not be subject to further appropriation and any money remaining in the fund at the end of a fiscal year shall not revert to the General Fund.
	(b) Amounts credited to the fund may be expended, without further appropriation, by the attorney general for purposes related to the instruction of fashion sellers on environmental due diligence, including, but not limited to: (i) development of curricular educational materials to fashion sellers pursuant to subsection (l) of section 115 of chapter 93; and (ii) professional development training, including the provision of trainings, seminars, conferences and materials for fashion sellers to use in the teaching proper environmental due diligence.
	(c) Amounts received from private sources shall be approved by the attorney general and subject to review before being deposited in the fund to ensure that pledged funds are not accompanied by conditions, explicit or implicit, on the implementation of human rights and environmental due diligence that may be detrimental to the neutral and rigorous teaching of environmental and social standards or unduly influence the direction of environmental and human rights policy. The review shall be made publicly available on the attorney general’s website.
	(d) Annually, not later than October 1, the attorney general shall report to the clerks of the house of representatives and senate, the joint committee on judiciary and the house and senate committees on ways and means on the fund’s activities. The report shall include, but not be limited to: (i) the source and amount of funds received; (ii) the expenditures made from the fund and the purposes of such expenditures; (iii) any funds provided to institutions and other stakeholder organizations; (iv) anticipated revenue and expenditure projections for the next fiscal year; and (v) the number of fashion sellers that have used the fund to implement a new program or enhance or maintain current programming. The report shall be publicly available on the attorney general’s website.
	SECTION 2. Chapter 93 of the General Laws is hereby amended by adding the following section:- 
	Section 115. (a) For the purposes of this section the following words shall, unless the context clearly requires otherwise, have the following meanings:
	 	“Due diligence report”, a document prepared by the fashion seller  to communicate all relevant information concerning the existence, implementation and outcomes of due diligence in order to comply with the requirements of this section and to comply with any rules or regulations established, pursuant to this section.
	“Environmental due diligence”, the process fashion seller shall carry out to identify, cease, prevent, mitigate, account for and remediate actual and potential adverse impacts to the environment in their own operations and in their supply chain, in compliance with, at a minimum, the standards outlined in the most recent Organization for Economic Cooperation and Development Guidelines for Multinational Enterprises and the Organization for Economic Cooperation and Development Due Diligence Guidance for Responsible Supply Chains in the Garment and Footwear Sector. 
	“Fashion bag”, any flexible packaging made of textiles, leather or other animal products, woven material or other similar materials intended for repeated use. 
	"Fashion seller”, a business entity that sells articles of wearing apparel, footwear or fashion bags that together exceed $100,000,000 in annual gross receipts but, shall not include the sale of used wearing apparel, footwear or fashion bags, nor shall it include multi-brand retailers, except where the apparel, footwear and fashion bags private labels of those companies together exceed $100,000,000 in global revenue. 
	“Footwear”, any covering worn or intended to be worn on the foot.
	“Gross receipts”, the gross amounts realized, otherwise known as the sum of money and the fair market value of other property or services received, on the sale or exchange of property, the performance of services or the use of property or capital, including rents, royalties, interest and dividends, in a transaction that produces business income, in which the income, gain or loss is recognized or would be recognized if the transaction were in the United States, under the Internal Revenue Code, as applicable for purposes of this section. Amounts realized on the sale or exchange of property shall not be reduced by the cost of goods sold or the basis of property sold. Gross receipts, even if business income, shall not include the following items:
	     	(i) repayment, maturity or redemption of the principal of a loan, bond, mutual fund, certificate of deposit or similar marketable instrument;
	(ii) the principal amount received under a repurchase agreement or other transaction properly characterized as a loan;
	(iii) proceeds from issuance of the taxpayer's own stock or from the sale of any shares of stock issued by a corporation that have thereafter been repurchased by said corporation.  ;
	(iv) damages and other amounts received as the result of litigation;
	(v) property acquired by an agent on behalf of another;
	(vi) tax refunds and other tax benefit recoveries;
	(vii) pension reversions;
	(viii) contributions to capital, except for sales of securities by securities dealers;
	(ix) income from discharge of indebtedness;
	(x) amounts realized from exchanges of inventory that are not recognized under the Internal Revenue Code;
	(xi) amounts received from transactions in intangible assets held in connection with a treasury function of the taxpayer's unitary business and the gross receipts and overall net gains from the maturity, redemption, sale, exchange or other disposition of those intangible assets; and
	(xii) amounts received from hedging transactions involving intangible assets.
	“Hedging transaction”, a transaction related to the taxpayer's trading function involving futures and options transactions for the purpose of hedging price risk of the products or commodities consumed, produced or sold by the taxpayer.
	“Independently verified”, audited by a verification body approved by the attorney general.
	“Open data principles”, data that can be freely used, re-used and redistributed by anyone. Such data shall be findable or easily discoverable on a website or within a database, accessible or available in a machine readable, convenient, modifiable form and published as a whole, complete dataset, interoperable or able to be mixed with different data sets and reusable or provided under an open license that permits re-use and redistribution, including the intermixing with other datasets.
	“Risk-based approach”, commensurate with  the likelihood and severity of the harm. The fashion seller shall prioritize the order in which it takes action based on the likelihood and severity of harm. Severity of impacts shall be determined according to their scale or gravity, scope and irremediable character.
	“Significant suppliers” suppliers representing 75 per cent of fabric by volume.
	“Supply chain tiers”, a 4 tier system defined as the following:
	 	(i) tier 1: suppliers who produce finished goods for fashion sellers, including suppliers’ subcontractors, who provide the following services including, but not limited to sewing and embroidering;
	 (ii) tier 2: suppliers to tier 1, including subcontractors, who provide the following services or goods including, but not limited to knitting, weaving, washing, dyeing, finishing, printing for finished goods and components and materials for finished goods when they are stand-alone operations and not integrated with tier 1. Components shall mean materials used to build a product including, but not limited to buttons, zippers, rubber soles, down and fusibles;
	(iii) tier 3: suppliers to tier 2 suppliers, including subcontractors, who process raw materials such as spinning; and
	 	(iv) tier 4: companies, including subcontractors, that provide raw materials to tier 3.
	“Wearing apparel”, any costume or article of clothing worn or intended to be worn by individuals.
	(b) Every fashion seller shall effectively carry out environmental due diligence for the portions of their business related to wearing apparel, footwear or fashion bags, including wearing apparel, footwear or fashion bags produced as a private label, which shall include: 
	(1) Supply chain mapping consisting of:
	(i) companies taking a risk-based approach and implementing good faith efforts to map suppliers across tier 1 through tier 4, inclusive, of production;
	(ii) disclosure of suppliers of the production supply chain shall include: the name, address, parent company, and product type as follows:
	(iii) (A) tier 1 suppliers shall be disclosed within 12 months of the effective date of this section and shall contain a minimum of 80 per cent of suppliers by volume; (B) tier 2 suppliers shall be disclosed within 2 years of the effective date of this section and shall contain a minimum of 75 per cent of suppliers by volume; (C) tier 3 suppliers shall be disclosed within 4 years of the effective date of this section and shall contain a minimum of 50 per cent of suppliers by volume or dollar value; and (D) tier 4 suppliers shall be disclosed within 6 years of the effective date of this section and shall contain a minimum of 50 per cent of suppliers by volume or dollar value. 
	(2) Environmental due diligence for fashion sellers,  shall include: 
	(i) being in compliance with the environmental guidelines of the Organization for Economic Cooperation and Development Guidelines for Multinational Enterprises and the Organization for Economic Cooperation and Development Due Diligence Guidance for Responsible Supply Chains in the Garment and Footwear Sector; and
	 	(ii) requiring that a fashion seller, at a minimum: (A) embed responsible business conduct into its policies and management systems; (B) identify areas of significant risks in the context of its own activities and business and supply chain relationships; (C) identify, prioritize and assess the significant potential and actual adverse impacts of those risks; (D) cease, prevent or mitigate those risks; 
	(E) track implementation and results; and 
	(F) provide for or cooperate in remediation in the event of an adverse impact.
	(c) Fashion sellers shall cease, prevent or mitigate risk pursuant to subclause (D) of clause (ii) of paragraph 2 of subsection (c) by, but not be limited to, the following:
	
	(1) Fashion sellers shall incentivize improved supplier performance on environmental impact by embedding responsible purchasing practices in its supply chain relationships and contracts, including but not limited to, contract renewals, longer term contracts, price premiums, providing reasonable assistance to suppliers, so that they can meeting applicable environmental standards including but not limited to meeting carbon emission reduction targets set out in this act, and developing pricing models that account for the cost investments.
	(2) Establish quantitative baseline and reduction targets on greenhouse gas emissions. 
	Greenhouse gas emissions inventory shall be reported annually, starting in 2027 for emissions in prior fiscal year, include absolute figures and conform with the accounting and reporting requirements of the most recent Greenhouse Gas Protocol Corporate Accounting and Reporting Standard, Scope 2 Guidance and, starting in 2028, the most recent Corporate Value Chain Scope 3 Accounting and Reporting Standard promulgated by the World Resources Institute and the World Business Council for Sustainable Development. Greenhouse gas emissions inventory reported in the due diligence report described in subsection (g) shall be independently verified no less than once every 2 years. Fashion sellers shall not be subject to an administrative penalty under this section for any misstatements with regard to scope 3 emissions disclosures made with a reasonable basis and disclosed in good faith. 
	Greenhouse gas emission reduction targets shall be near-term and long-term, covering scopes 1, 2 and 3 emissions and align with, at a minimum, Science Based Target initiative’s most recent target validation criteria as promulgated by World Resources Institute, Carbon Disclosure Project, United Nations Global Compact and the World Wildlife Fund. For fashion sellers with global revenue over $1,000,000,000 dollars, the absolute contraction approach must be used to calculate scope 3 emissions. Fashion sellers shall meet targets and report their compliance on an annual basis in their due diligence report, as described in said subsection (g). If found to be out of compliance, fashion sellers shall have 18 months to remedy their emissions and return to the necessary reduction pathway to deliver on their targets. In non-target years, non-compliance shall mean an increase in absolute emissions in 5 consecutive years, for companies over $1,000,000,000 in revenue. In target years, non-compliance shall mean not reaching the target. 
	(3) In accordance with internationally recognized methodologies for chemical management and wastewater testing, fashion sellers, within 2 years of the effective date of this section, for all significant tier 2 dyeing, finishing, printing and garment washing suppliers, shall: 
	(A) sample and report on wastewater chemical concentrations and water usage; 
	(B) report on chemical inventory; 
	(C) provide evidence that the supplier is in compliance with local chemical management laws; (D) for significant suppliers that use indirect wastewater management, fashion sellers shall (i) report the chemical concentrations of the wastewater treatment facilities; (ii) report on the percentage of significant suppliers that have chemical remediation plans in place and 
	(iii) what the fashion seller is doing to remediate. Reporting shall be independently verified as set forth below in subsection (g) of this section.  
	(d) Not later than 3 years after the effective date of this act, fashion sellers shall be considered out of compliance if their significant tier 2 dyeing, finishing, printing and garment suppliers have not made adequate progress in remediation of wastewater pollution concentrations and chemical management.
	(e) In the event of an adverse impact pursuant to subclause (F) of clause (ii) of paragraph (2) of subsection (b) of this section, remediation shall adhere to the following requirements: 
	(e) Remedies in the event of an adverse impact, pursuant to subclause (F) of clause (ii) of paragraph 2 of subsection (b) of this section: 
	Remedies shall require that a fashion seller: (A) Utilize responsible exit or disengagement strategies; and (B) consult and engage with impacted and potentially impacted stakeholders and rights holders and their representatives; (C) seek to restore the affected locations, places or persons, where practicable, to the state or circumstances the location, place or person would have been in had the adverse impact not occurred; and (D) work to ensure that such remediation, to the extent practicable, is proportionate to the significance and scale of the adverse impact; and
	
	Remedies shall include, depending on the nature and extent of the adverse impact, remediation, restitution and financial or non-financial compensation, including establishing compensation funds for victims or for future outreach and educational programs, punitive sanctions including the dismissals of staff, responsible for wrongdoing and establishing and undertaking measures to prevent future adverse impacts, that include, but are not limited to, the development of internal protocols, practices and procedures to prevent future adverse impacts. 
	(f) The environmental due diligence requirements pursuant to this section shall not be conditional upon the company being effectively involved in the subsidiary’s day-to-day operations or exercising a sufficient degree of control on companies within its supply chain. 
	(g). 1. Every fashion seller shall develop and submit to the attorney general annually, beginning within 18 months of the effective date of this section, an environmental due diligence report. Such report shall also be made publicly available on the fashion seller’s website in a machine readable and reusable format, published in line with open data principles through a clear and easily discoverable link to the required information. In the event the fashion seller does not have an internet website, the company shall provide a written disclosure to any person who has requested information within 30 days of receiving a request. Such report shall also include the fashion seller’s annual volume of material produced, including breakdown by material type. The due diligence report shall also contain annual activities and financial spending to support supply chain environmental due diligence.  
	2.  The attorney general or the attorney general's designated administrator shall identify and notify fashion sellers that have failed to file and that they have 30 days to file before being placed on a public non-compliant list and may be referred to the attorney general for investigation.
	3. The attorney general or the attorney general's designated administrator shall review the environmental due diligence reports for completeness. 
	4.  Fashion sellers shall have 12 months from the introduction of any updated guidance documents to integrate into their next annual due diligence report. 
	5. The attorney general shall, in consultation with the department of environmental protection, promulgate all rules and regulations necessary to implement the provisions of this section within 6 months of the effective date of this section. 
	6.  The attorney general, in consultation with the department of environmental protection, shall also develop and disseminate educational materials to fashion sellers, including providing alerts on time sensitive issues, emerging issues and high-risk country situations and assisting fashion sellers in improving the quality of their due diligence processes. 
	7. The attorney general, in consultation with the department of environmental protection, shall develop regulations regarding information required to be reported by fashion sellers in the environmental due diligence report described in subsection (a) of this section. 
	8.  The attorney general shall develop regulations on reporting requirements that minimizes duplication of effort and allows a fashion seller to submit a due diligence report to the attorney general’s office that is prepared to meet other national and international reporting requirements, including any reports required by the federal government, as long as those reports satisfy all of the requirements of this section. 
	9. The attorney general shall, in consultation with the department of environmental protection, develop a process for accrediting verification bodies authorized to provide verification services. 
	
	(i)The verification process shall include: (A) demonstration of qualifications of verification staff, including their education, experience and professional licenses; (B) disclosure of any judicial proceedings, enforcement actions or administrative actions filed against the body within the previous 5 years; and (C) review of policies and mechanisms in place to prevent conflicts of interest and to identify and resolve potential conflict of interest situations if they arise.
	 	(ii) Verification bodies must employ and retain at least 5 total full-time staff with expertise in the requirements they seek to verify.
	(iii) The attorney general shall require applicants to submit, at a minimum, the following information: (A) identification of services provided by the verification body, the industries that the body serves, and the locations where those services are provided; (B) a detailed organizational chart that includes the verification body, its management structure and any related entities; and (C) the verification body’s internal conflict of interest policy that identifies activities and limits to monetary or non-monetary gifts that apply to all employees and procedures to monitor conflicts of interest.
	(iv) Verification bodies shall not be authorized to provide services to a company where a conflict of interest exists. A conflict of interest shall include: (A) the verification body and reporting entity sharing any management staff or any of the senior management staff of the reporting entity have been employed by the verification body, or vice versa, within the previous 2 years; (B) any employee of the verification body, or any employee of a related entity, or a subcontractor who is a member of the verification team that has provided the reporting entity with services related to the areas of verification, or any services designated by the attorney general, within the previous 2 years; (C) any staff member of the verification body providing any type of non-monetary incentive to a reporting entity to secure a verification services contract; and (D) any additional criteria provided by the attorney general.
	
	(v) Verification bodies that have been accredited by the attorney general shall notify the attorney general within 30 days if they no longer meet the verification requirements set forth by this section. 
	(h) Compliance. 
	(1) The requirements imposed on fashion sellers by this section shall be investigated and enforced by the attorney general or an administrator designated by the attorney general to bring civil proceedings for an injunction or fines for monetary damages as described in this section or civil performance of a statutory duty. Fashion sellers shall be deemed non-compliant with this section if they fail to conduct effective due diligence or fail to file a due diligence report pursuant to this section.
	(2) The attorney general or the attorney general's designated administrator shall identify and notify fashion sellers that have failed to file a complete due diligence report. If they fail to file a complete report, after a period of 3 months, the attorney general shall seek enforcement for failure to file a complete report.    
	(3) The department of environmental protection shall review and certify effective due diligence for environmental matters in the due diligence report and identify fashion sellers for referral to the attorney general for any failures. 
	(4) The attorney general shall compile and maintain a list of non-compliant fashion sellers on the attorney general’s website. The attorney general shall investigate any fashion seller who fails to file a due diligence report or fails to conduct effective due diligence, once any grace period lapses and the fashion seller remains in non-compliance.
	(5) Fashion sellers found to be out of compliance with this section after the attorney general or the attorney general's designated administrator as applicable, has provided notice of noncompliance and after a 3 month period to meet obligations under this section has lapsed, may be fined up to 2 per cent of annual revenues. Such fines shall be deposited in the Fashion Environmental Accountability Fund established in section 2KKKKKK of chapter 29.
	(6) The attorney general or the attorney general’s designated administrator shall use a risk-based approach in enforcement and shall publish enforcement guidelines.
	(7) Any person may report a violation of this section to the attorney general's office.
	
	SECTION 3. This act shall take effect 6 months after its passage.