The sleep sack should be perfectly safe just made out of cotton fabric since the baby can not move himself/herself to a flame.
Years ago, there were a lot more open flame heating and a high risk of a child catching their clothes on fire. Therefore, flame retardant chemicals were developed for children's sleepwear which have a scary list of ingredients. You should be fine to make the bedding with just cotton and flannel that is not treated. Because bedding we buy is not treated.