At the end of 2027, a new law against forced labor will enter into force. With the EU Forced Labor Regulation, the Union bans products that in any way involve forced labor - a ban that covers all countries, companies and industries. Here are the most important things you should know about the new regulation.
Adopted by the European Council at the end of 2024, the EU Forced Labour Regulation (FLR) aims to tackle forced labour and human rights abuses in global supply chains by banning products that can be linked to it. The regulation is planned to come into force by the end of 2027 and will affect all EU companies, regardless of size, sector or type of product. Components are also included in the EU rules. It also doesn't matter how the sale is made - for example, whether it is a physical sale, a distance sale or an online sale.
EU Ban on the Sale and Export of Products
The EU Forced Labor Regulation imposes an EU ban on the sale and export of products that may be associated with forced labor and human rights violations. The ban applies to all companies in the EU - or more precisely, economic operators. This means any natural or legal person or group of persons, regardless of their size. Thus, there is no lower limit to how small an affected company can be.
However, the aim of the regulation goes beyond the EU to tackle global supply chains and the problems of poor working conditions. The consequence is that companies become responsible for their entire supply chain, regardless of the stage at which the problem occurs. For this reason, the regulation is also integrated with international labour standards, in particular those of the International Labour Organisation (ILO). The regulation uses the ILO definition of forced labour. According to this, forced labor is defined as being exacted under the menace of any penalty and where the person has not offered to perform it voluntarily.
Products Covered by the EU Forced Labor Regulation
According to the EU Forced Labor Regulation, all products of all companies, regardless of size or sector, are covered if forced labor has occurred. This applies to both full and partial forced labor in any part of the production process, regardless of where in the chain it occurs. In other words, it does not matter whether the forced labor occurs in the extraction of the raw material, in the processing or in the final production.
CSDDD and Due Diligence Requirements
The EU Forced Labor Regulation and the CSDDD both address forced labor, but from different angles. The CSDDD does not ban the sale of certain products. Instead, it requires due diligence of the supply chain to identify and prevent human rights impacts, of which forced labor is a part.
The EU Forced Labor Regulation itself does not contain any requirements for due diligence, although the EU rules require that the risk of forced labor in operations and supply chains be reduced or eliminated. However, it does affect this work indirectly, by giving companies strong incentives to work on their supply chains.
It should also be noted that there is a recommendation to analyze working conditions in all regions where you operate, whether suppliers or subcontractors. Other recommendations include:
- Review of supplier contracts with forced labor clauses.
- Internal processes to reduce risk. This is to identify and manage forced labor risks.
- Systems to monitor compliance. Take action when breaches are detected.
Implementation of the Regulation
The EU plan is for Member States to implement the EU Forced Labour Regulation so that it enters into force by the end of 2027. Compliance will be ensured by each country appointing an authority responsible for this. These authorities will then decide which products to ban. Member States will also be responsible for deciding on the level of sanctions and ensuring compliance.
To support national authorities in their work, the European Commission will create a database of high-risk products and areas, using a risk-based approach. This means that companies operating in specific sectors can expect a higher level of scrutiny.
There is an expectation that the different authorities will cooperate with each other and with the European Commission. For investigations related to forced labor outside the EU, the European Commission will also be able to assist with investigations.
Impact of the EU Forced Labor Regulation
The European Commission will also provide guidance on how to design sanctions linked to the EU Forced Labor Regulation. However, the idea is that sanctions against companies should be effective, proportionate and dissuasive. This means, for example, taking into account the seriousness of the infringement. This can include things like how long it has been going on, whether it has happened before and, as I said, how serious it is.
For businesses, the consequences may also include increased costs as a result of more extensive and intensive compliance work. It is anticipated that this may be particularly felt by SMEs, as they are also subject to EU rules. To reduce the burden, the European Commission will offer tools to help them succeed in their due diligence.
Read more about How to Prepare
It is a good idea to start preparing for the EU Forced Labor Regulation now. We recommend you read our other article on this topic, where we look at how you can work proactively and strategically to get your business ready for the new legislation.
Read more in our blog EU Forced Labor Regulation - how to prepare.
