It should, but doesn't
As long as the Tanning labor is enabled the tannery building is available and/or the reaction to make leather is active the Civ has full access to leather regardless of ethics. The fact that these buildings are also hardcoded means DfHack is the only way to remove them in this way.
Generated Ponies will trade, wear and carry leather items with impunity.
All core DF features are still covered in the current version, Fleece is considered Leather for leather items and moods, bones is available from butchering, since that's actually not possible to remove.
This mod is also not made to really be compatible with adventure mode, that was WAY out of my scope when I initially started this.
It's delivered as is, with full rights of everyone who can be arsed to change or add whatever they may want to their game, and share with the thread, and I've implemented a bunch of changes people have made to the "official" build when I've been too busy to actually update the damn thing myself
If you want to play with butchery enabled, it's fairly easy, just don't overwrite any of the default materials and tissues I include with the mod, and re-add the buildings and reactions to the entity file.