The European Commission has proposed a ban on goods made with forced labour, either produced in the European Union or imported into the bloc.
Published on Wednesday, the proposal comes a year later European Commission President Ursula von der Leyen stated that such a ban was necessary.
According to details from the Commission, the proposal builds on internationally agreed definitions and standards and means that national authorities can – after an investigation – remove products made with forced labor from the EU market.
“EU customs authorities will refuse products made with forced labour at the EU borders,” the Commission said.
In practice, the rules are shaped through a risk-based enforcement approach. In the first phase, national authorities will assess forced labor risks based on a variety of information sources, such as civil society comments, corporate due diligence and a database of forced labor risks around specific products and geographies.
If there are reasonable grounds for suspecting the use of forced labour, authorities can investigate, request information from companies and carry out checks and inspections. This will not be limited to EU countries.
If forced labor is found, authorities will order products to be withdrawn from the market and prevent more products from entering the market, with companies having to get rid of the affected goods.
If a company or non-EU authority does not cooperate in providing evidence, the national authority can make a decision based on the available data.
Now that the legislation has been proposed, it will be discussed and approved by the European Parliament and Member States before it enters into force. It will likely see changes during this process.
The Commission noted that approximately 27.6 million people are engaged in forced labor worldwide.
“In today’s geopolitics, we need both secure and sustainable supply chains,” said Internal Market Commissioner Thierry Breton.
“We cannot maintain a model of consumption of goods that have been produced unsustainably.
“Industrial and technology leaders are expected to be more assertive in defending our values and setting our rules and standards.
“Our single market is a formidable asset to prevent forced labor products from circulating in the EU, and a lever to promote greater sustainability around the world,” he said.
Executive Vice President and Commissioner for Trade, Valdis Dombrovskis, added: “Our ban will apply to domestic products, exports and imports. Competent authorities and customs go hand in hand to make the system robust.
“We have tried to minimize the administrative burden for companies, with a tailor-made approach for SMEs.
“We will also further deepen our collaboration with our global partners and with international organizations.”
Welcome piece of the puzzle
Saskia Kort-Chick, director of ESG research and engagement – responsible investing at AllianceBernstein, said legislation was welcome and that this move from the EU could be a piece of the puzzle in a “complex challenge”.
She noted that there is a good business case for tackling the issue: “So far, we’ve seen big differences in how well-prepared companies are. It requires companies to have a clear understanding of their value chain. Supply Chain Mapping, tracking and due diligence processes, including social audits and employee initiatives, are among the actions companies can take.
“Using these practices could help identify forced labor risks, as well as increase supply chain stability and efficiency. We would welcome similar legislation in other markets, which would create a more level playing field and more legal certainty.”
Clear costs of non-compliance
Matt Crossmanstewardship director at Rathbones, added that it has been too long that enforcement in this area has been voluntary.
“Rules like these make it very clear: the use of forced labor is unacceptable. It also crystallizes a human rights risk in a clear price of non-compliance,” he said.
Crossman noted how the EU rules will align with those of the US: “Harmonize the measures with similar rules in the US, which have been successful, at least in limited, specific situations. When a good is discontinued, the company can show compliance by remedying the forced labor situation. But many believe the EU should learn from the US – and adopt a much more victim-oriented regime.”
He stated that it is important to remember that the law is in addition to a planned law on human rights by diligence.
“As responsible investors, we support regulators who encourage companies to adequately assess and prevent human rights issues in their operations,” said Crossman.