The European Union’s new Forced Labor Product Ban Regulation (FLR), set to take effect in December 2024, represents a significant move in the global battle against forced labor. This regulation prohibits products made using forced labor or child labor from entering or leaving the EU market, sending a clear message to businesses that the EU will no longer tolerate these practices. To operate within the EU, companies—whether EU-based or not—must ensure their supply chains are free from forced labor.
Forced labor, as defined by the International Labor Organization (ILO), involves any work or service extracted from individuals under threat of punishment, without voluntary consent. Products such as tomatoes, cotton, meatpacking, garments, and cars have been linked to forced labor concerns.
According to the ILO’s 2022 Global Estimates, 17.3 million people suffer forced labor exploitation in the private sector, with women and migrants disproportionately affected. Additionally, state-imposed forced labor affects 3.9 million people. The private sector benefits from $63.9 billion in forced labor profits each year, much of it embedded within supply chains.
Surprisingly, the EU had not previously banned forced labor-produced products until now. The new regulation, which divides enforcement responsibilities between the European Commission and EU member states, aims to address this gap. When forced labor occurs inside the EU, member states will investigate, while the European Commission will handle cases outside the EU. A new global risk database will provide valuable data about regions and sectors prone to forced labor, serving as a resource for both regulators and companies.
The regulation’s investigative process involves two phases. When a product is flagged for potential forced labor links, the importer has 30 days during the preliminary investigation phase to share details about their supply chain practices. If forced labor is confirmed, the product will be banned and publicly listed in the EU’s forced labor portal. The ban is effective across all member states, preventing export as well.
Reinstating a banned product requires companies to prove their entire supply chain is free from forced labor. Companies subject to the Corporate Sustainability Due Diligence Directive (CSDDD) may also face regulatory actions or civil liability for inadequate due diligence regarding forced labor risks.
However, the CSDDD is under scrutiny. EU President Ursula von der Leyen, supported by France and Germany, is pushing for a proposal that could weaken the CSDDD, including removing civil liability for human rights abuses. The Forced Labor Regulation relies on the CSDDD to define due diligence obligations, making any delay or weakening of the directive a challenge for businesses working to prevent forced labor.
The regulation also falls short in one area: it does not require companies to provide remediation to victims as a condition for lifting the import ban, despite this being a responsibility under the UN Guiding Principles on Business and Human Rights. Instead, the European Commission will offer guidelines and collect data on corporate remediation efforts. Remediation should become a requirement for lifting bans in future revisions of the regulation by 2029.
Member states will begin enforcing the ban by December 2027, but companies should start addressing their supply chains now. The regulation applies retroactively to products already in the EU, as long as the link to forced labor remains active.
To comply, businesses must first conduct comprehensive supply chain mapping and risk assessments, identifying areas vulnerable to forced labor. They should then engage local communities and workers to gather intelligence and address risks at the supplier level. Investing in staff training on the regulation’s requirements will also be crucial.
Rather than viewing this regulation as a burden, businesses should see it as an opportunity to lead in ethical trade practices. With increasing consumer demand for transparency and sustainability, aligning with these values can strengthen a company’s market position. A 2024 McKinsey survey revealed that 85% of companies see sustainability as a value-creating opportunity, with the majority also recognizing it as a means to manage risks.
The EU’s new forced labor law marks a pivotal step in the fight for a more just global economy. By addressing forced labor proactively, businesses can comply with the law and contribute to building a fairer, more sustainable world.
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