Updates on Supply Chain Due Diligence: The EU Forced Labour Regulation

At the end of last year, the EU Member States adopted Regulation (EU) 2024/3015 of the European Parliament and of the Council of 27 November 2024 on prohibiting products made with forced labour on the Union market and amending Directive (EU) 2019/1937 – known as the EU Forced Labour Regulation. The EU Forced Labour Regulation is the latest in a series of EU laws requiring transparency and due diligence in the supply chain for companies operating within the EU. It will apply from 14 December 2027.

The EU Forced Labour Regulation is designed to complement the European Supply Chain Directive (Corporate Sustainability Due Diligence Directive – CSDDD), which must be transposed into national law by mid-2026, as well as the German Supply Chain Due Diligence Act (LkSG). The EU Forced Labour Regulation contains provisions that prohibit companies from placing and making available products made with forced labour on the Union market or exporting them from the Union market.

Forced labour, as defined in the EU Forced Labour Regulation, means all work or service which is exacted from any person under the menace of any penalty and for which the said person has not offered himself voluntarily. This definition aligns with Article 2 of Convention No. 29 of the International Labour Organization (ILO). The LkSG also uses this definition in Section 2(2) No. 3.

The regulation applies to all "economic operators." Unlike the LkSG and CSDDD, the EU Forced Labour Regulation is not limited to certain companies or company sizes. Instead, it applies to all natural and legal persons or associations that place or make available products made with forced labour on the Union market or exporting them from the Union market, regardless of their registered office, company size, industry sector or similar.

Unlike previous EU regulations, the scope of the EU Forced Labour Regulation is not limited to specific types of products. The prohibition of the EU Forced Labour Regulation applies to all products sold within the EU, including their components, regardless of geographic origin or industry sector.

Although forced labour is a global and cross-industry phenomenon and the EU Forced Labour Regulation is not limited to specific product types, some industrial sectors in Germany have a higher likelihood of forced labour according to information from the ILO, the OECD and the Human Rights Committee. These industries include:

The good news is that the EU Forced Labour Regulation explicitly states that the regulation does not introduce any additional due diligence obligations beyond those already established in EU or national law. Instead, the EU Forced Labour Regulation merely prohibits the distribution of products made with forced labour.

If companies fail to comply with the EU Forced Labour Regulation, authorities can order the prohibition of placing, making available, or exporting such products. Furthermore, they may require affected products to be withdrawn or removed from the market. The consequences for non-compliance are still unclear, as penalties will be determined by individual Member States. However, it is expected that there will be a comprehensive fine system with substantial financial penalties, as is often the case.

To avoid potential sanctions for violating the forced labour ban, companies should, for economic reasons alone, ensure that the products they distribute are not made with forced labour. The European Commission will publish guidelines by mid-2026 to help companies understand how to fulfill their due diligence obligations regarding forced labour. Additionally, a database of areas and products with a risk of forced labour will be established.

Until then, companies are advised to follow the requirements of the LkSG, particularly by implementing risk management strategies, including risk analysis, and reviewing contracts with suppliers for necessary amendments. The EU Forced Labour Regulation acknowledges that compliance with legally mandated due diligence obligations will be taken into account by authorities. Even companies not directly subject to the LkSG can benefit from aligning with these practices. Companies should also prepare for authorities to request documentation at short notice, demonstrating the measures they have taken to identify, prevent, mitigate, eliminate, or remediate the risk of forced labour in their business operations and supply chains. Therefore, maintaining thorough and up-to-date documentation is essential.