The OSC 7 escape is already used by many terminal emulators (including for example VTE and Terminal.app), to inform the terminal about the currently active working directory. One of its use cases is that it allows reliably opening new terminals in the current working directory, assuming that client support is present.

An implementation for Alacritty was proposed in https://github.com/jwilm/alacritty/pull/2937, however to my knowledge there is no documentation on the behavior of this escape.

Creating a more formal standard describing the behavior in a specification on this project rather than using existing implementations would both help with consistency across implementations and might also be a great example of the terminal-wg's goals.