Navigating the EU Forced Labour Regulation
Introduction
In a landmark step toward eliminating exploitative practices from global supply chains, the EU has introduced the Forced Labour Regulation. This legislation is designed to combat labor exploitation by preventing products made with forced labor from entering the European market.
With enforcement expected by 2030, and existing pressures from other stakeholders who are committed to ethical sourcing, companies operating in, or trading with, the EU must prepare to meet these stringent requirements. Here’s what the regulation entails, who it impacts, and how businesses can prepare.
What the EU Forced Labour Regulation is aspiring to do
The EU Forced Labour Regulation sets out a comprehensive framework to ban the sale, import, and export of goods produced using forced labor, including child labor. This move is part of a broader effort by the EU to align trade practices with human rights standards and ensure ethical sourcing across global supply chains. The regulation provides clear guidelines for eliminating forced labor in product production, helping to safeguard workers' rights and eliminate unethical practices.
By prohibiting products produced with forced labor from entering the EU market, the regulation also aims to prevent exploitation and facilitate greater transparency in supply chains.
Who is impacted
The Forced Labour regulation applies to businesses that operate in, or trade with, the EU market. This includes:
Companies importing goods into the EU
Companies exporting goods from the EU
Businesses selling products in the EU market, whether they are based in the EU or elsewhere.
Essentially, any business engaged in the global supply chain that touches the EU market needs to be aware of, and comply with, this regulation. Companies across industries – especially those in sectors like textiles, agriculture, electronics, and manufacturing – must take a close look at their supply chains to ensure they are free from forced labor.
What disclosures are required
The Forced Labour Regulation operates alongside the Corporate Sustainability Due Diligence DIrective (CS3D) to enforce due diligence obligations. Businesses must actively assess their supply chains and operations for instances of forced labor.
Key disclosure and compliance requirements include:
Prohibition of goods made with forced labor, including child labor, from being sold, imported, or exported in the EU.
Manufacturers of banned goods will be required to withdraw these products from the EU market and either donate, recycle, or destroy them.
Goods may only be reintroduced into the EU market once the manufacturer can demonstrate that forced labor has been fully eradicated from their supply chain.
This regulation works in tandem with existing due diligence obligations under CS3D, creating a strong legal basis for companies to monitor and address forced labor risks.
Key deadlines to be aware of
April 2024: The European Parliament approved the regulation, moving it closer to implementation.
Mid-2027 - 2028: The regulation is expected to go into full effect, pending final approval from the European Council. Compliance will be required 36 months after the regulation enters into force, allowing companies time to adjust their supply chains and ensure full compliance by this deadline.
How to get started
For companies that will be impacted by the Forced Labour Regulation, it’s crucial to take proactive steps to ensure compliance before the enforcement deadlines. Here are some steps to consider:
Monitor the regulatory rollout: Stay informed about the final approval process and any updates from the European Council as the regulation moves toward implementation.
Conduct a full assessment of your supply chain: Begin by evaluating your current operations and supply chains for any potential use of forced labor. This may involve engaging with suppliers and third-party auditors to ensure transparency.
Identify any banned goods: If your company currently sells goods in the EU that may be flagged for forced labor, begin preparing to either remove these products or make necessary adjustments to your supply chain to eliminate forced labor.
Plan for product withdrawal or reentry: If your products are found to have been produced using forced labor, create a plan to either remove, recycle, or modify your supply chain to comply with the regulation and reintroduce goods once compliant.
Our recommendation
Even if your company is not immediately subject to this regulation, we recommend aligning your practices with the EU Forced Labour Regulation as soon as possible. Not only does this provide a pathway for compliance, but it also serves as a key benchmark for ethical sourcing standards that are likely to influence industry-wide practices. Proactively aligning with these guidelines can ensure your business is demonstrating commitment to sustainability and human rights.
Additionally, early preparation – such as gathering supply chain data, implementing due diligence processes, and working with suppliers to eliminate forced labor – will help reduce risks and ensure that your company is ahead of the curve as compliance deadlines approach.
Where Bespoke ESG can support
At Bespoke ESG, we understand the challenges of navigating new regulations like the EU Forced Labour Regulation. Our team of experts is here to assist with:
Conducting comprehensive supply chain assessments to identify risks related to forced labor.
Helping you build due diligence processes that ensure compliance with both the Forced Labour Regulation and CS3D.
Offering strategic advice on how to adjust your sourcing practices to meet regulatory standards.
Supporting your company in preparing for product withdrawals and implementing corrective actions if necessary.
We’re committed to helping your business uphold ethical standards and comply with emerging sustainability regulations.
Disclaimer: The information provided in this document is for general informational purposes only and does not constitute legal advice. Regulatory advice is provided solely within the scope of contracts between Bespoke ESG and its clients.