This whole issue of flame retardance for children's sleepware arose about 20 years ago thanks to the well-meaning but misguided efforts of Ralph Nader and the Consumer Products Safety Commission. He kind of latched onto this as one of his crusades back then, believing that children are somehow very likely to burn in their beds while sleeping apparently, and they passed this law about children's sleepware needing to be flame retardant. I used to have a small business sewing children's cotton pajamas, especially for families who liked to use natural fibers, because you actually could not buy any children's pajamas then that weren't made of polyester or acrylic, since cotton can't be made flame retardant.
Since then, there have been some changes that will allow some kid's PJs to be sold in all cotton if they are knit and very tight fitting, like long underwear.
Nonetheless, the law requires makers of cotton flannel fabric to put that warning on their product - to comply with those consumer safety laws passed 2 decades ago.
However, if you put your kid in synthetic fibers that will supposedly not burn, guess what? The stuff might not "flame" but it MELTS!!! It becomes a mass of melted plastic. I don't think that's any better than the flaming of cotton.
Personally, I've been making cotton flannel PJs for my kids and grandkids and clients for years and they are wonderful. If there's fire, you have a problem no matter what they're wearing.
(And BTW, why are we only concerned about children's clothing burning? So does this mean it's OK for adults to burn up in their beds? Why not make EVERYTHING flame retardant? It's pretty ludicrous.)
Lastly, there are dangers to being around and inhaling the fumes from flame retardant chemicals. So I'll choose natural fibers without chemical finishes everytime.