The European Union's new Forced Labor Regulation will require companies to identify and eliminate forced labor in their operations and supply chains, Human Rights Watch and the Cornell Global Labor Institute (GLI) said today, releasing a question-and-answer document about the new law.
The question-and-answer document provides details and guidance to companies and other stakeholders so that they can begin preparing for the implementation of the EU Regulation, which will prohibit the sale in EU markets of all products linked to forced labor as of December 2027. The document provides an in-depth analysis of the EU Regulation-its mechanisms, potential impact, and key challenges, as well as the expectations of a broad range of stakeholders and the opportunities the regulation presents.
"The EU Forced Labor Regulation can end the economic incentives that allow forced labor to persist by imposing significant financial and reputational risks for companies that fail to prevent abuses," said Samira Rafaela, visiting fellow at Cornell GLI and former member of the European Parliament and co-rapporteur of the Forced Labor Regulation. "Ultimately, it is a significant step toward meaningful supply chain reform and can ensure that products entering the EU are free from forced labor."
The EU Regulation, if properly enforced, will prompt companies to eradicate forced labor from their operations and supply chains, Human Rights Watch and GLI said.
The 2022 International Labour Organization (ILO) Global Estimates on Modern Slavery estimated that 17.3 million people are victims of forced labor exploitation in the private sector worldwide, with an 8 percent increase between 2016 and 2021. Another 3.9 million people are victims of state-imposed forced labor in areas such as the Xinjiang Uyghur Autonomous Region in China, in Turkmenistan, and in North Korea. A recent ILO report on the economics of forced labor found that profit of companies from forced labor in the private sector is US$63.9 billion annually.
The EU Regulation sets up rules and processes for the European Commission and national competent authorities to ban products wholly or partially made with forced labor from being sold in the EU. It applies to all companies regardless of size, origin, or location. The regulation sets up two separate investigation processes to address forced labor depending on where it occurs, through national regulators if forced labor happens within an EU member state, or via the European Commission for cases of forced labor outside the EU.
Investigators will take a risk-based approach in deciding which cases to prioritize, focusing on the most important cases in terms of severity and scale, including cases involving state-imposed forced labor. A new EU forced labor risk database will help inform investigators and companies of geographic areas, sectors, and products most at risk of forced labor.
The EU Regulation also provides that a company under investigation can demonstrate its good faith by providing information on their due diligence efforts to tackle forced labor. This should include meaningful and active engagement with suppliers and local stakeholders, including victim groups, civil society, trade unions and independent researchers. Genuine stakeholder engagement is essential for companies to stay informed about risks of forced labor and build on best practices and expertise of actors working in the field, Human Rights Watch and GLI said.
The EU Regulation will complement the EU Corporate Sustainability Due Diligence Directive, adopted in 2024, which requires big companies to set up meaningful due diligence processes throughout their supply chain to identify, prevent, mitigate, and remedy environmental damages and human rights abuses according to a risk-based approach.
Although the recent EU Commission's Omnibus I proposal is reopening the text of the EU Due Diligence Directive, it remains unclear how deeply key provisions such as liability or scope will be affected. While these changes to the EU Due Diligence Directive would not directly affect the content and purpose of the Forced Labor Regulation, it will create additional uncertainty as to what level of due diligence will be expected from companies.
"Companies will limit the risk of facing Forced Labor Regulation enforcement measures if they demonstrate they have promptly addressed forced labor in their supply chain and provided remedies for victims," said Hélène de Rengervé, senior EU corporate accountability advocate at Human Rights Watch. "With less than three years to go before the Regulation is fully enforced, companies should start now to set up tools and processes to meaningfully identify and address forced labor in their supply chains."
