It doesn't affect the product or mood modifiers in any way. This is purely a quality of life mod meant to reduce the amount of time to set up shop. So you don't have to deselect all the go find human leather in the list. One thing I did notice after making it was that the different labels do sometimes help with organization of bills. For example, I always have seperate bills for butchering animals and human likes, but they previously always looked the same.

Also you can already do this in-game, you just need to change the settings in the bill. Not hard to do, and should always be configured regardless, to prevent production of something you don't want your colonists to accidentally use.

Unless this mod removes the negative penalty or makes it adjustable in some way, in which case ignore my comment

the words "human leather" and "quality of life" should not belong in the same sentence