As discussions over streamlining sustainable regulations enter their final phase in the European Union, Elisabeth von Reitzenstein, a policy expert in Brussels, has grown increasingly troubled by a seemingly irrelevant issue that could gain importance as the relitigation of supply chain due diligence rules reaches its conclusion.
If the corporate sustainability due diligence directive’s obligations are limited to the first tier of suppliers or, worse, to only segments of the supply chain where evidence irrefutably demonstrates that violations are taking place, she questioned, what becomes of the forced labor regulation that requires scrutiny to be effective?
“From December 2027, the FLR will ban companies from selling products built with forced labor and empower the European Commission, designating authorities to investigate risks at regional, sectoral and company levels,” declared von Reitzenstein, senior director of public affairs at Cascale, the multi-stakeholder organization formerly known as the Sustainable Apparel Coalition. “However, the regulation stops short of prescribing how companies must ensure compliance, instead assuming reliance on existing or forthcoming due diligence systems, particularly those mandated by CSDDD.”
The FLR hasn’t factored into the so-called “omnibus” bill, which is designed to ease requirements on companies reporting on the social and environmental impact of their operations but its critics regard as a form of deregulation meant to pander to business interests on an increasingly right-tilting continent. One reason it might have been overviewed is that it was a done deal a year ago. Then again, so was the CSDDD.
Von Reitzenstein surmises that the “relative silence” surrounding the FLR stems not only from its “politically sensitive nature” but also becaapply it takes a risk-based approach that places the burden of proof on so-called competent authorities, rather than forcing companies to act.
But that doesn’t mean it can be ignored, she declared. Even if the CSDDD’s scope concludes up focutilizing only on direct suppliers, as the European Commission and European Council have suggested, companies will not have the necessary information to ensure compliance. Further complicating matters, the European Parliament prefers to take a risk-based approach, but one that includes a restriction on information requests from compacter business partners that would curtail meaningful engagement. Without a robust due diligence framework that provides precise operational guidance, the FLR “risks becoming powerless.”
“The CSDDD requires companies to identify and address negative human rights and environmental impacts in their value chains, creating the legislation critical when it comes to the FLR,” von Reitzenstein declared. “Effective enforcement and meaningful impact depconclude on companies being equipped with clear, risk-based due diligence measures. Without this, the FLR cannot function as intconcludeed.”
Indeed, the CSDDD and FLR were designed to be complementary, declared Lisanne Hekman, a human rights consultant at 2Impact Consulting in South Holland. At the same time, she declared, the regulations “work quite differently” and can still operate indepconcludeently of each other.
“The FLR doesn’t directly impose human rights due diligence obligations on companies,” she declared. “Instead, national authorities will be responsible for investigating if products were built utilizing forced labor anywhere along the value chain. If they find that’s the case, they can ban it from the EU market, require its withdrawal or mandate its disposal.
Businesses don’t required the CSDDD to employ credible due diligence in their supply chains, Hekman declared. They can follow best practices as described in the United Nations Guiding Principles and the Organisation for Economic Co-operation and Development guidelines for multinational enterprises. The European Commission is also expected to issue due diligence guidance as part of the FLR.
“The regulations are also different in that the CSDDD only applies to large companies, whereas the FLR applies to all products and all companies placing or exporting goods on the EU market,” she declared.
Hekman declared that while the omnibus talks appear like a setback for corporate accountability, the FLR can still remain a “powerful driver” for human rights that levies hefty financial penalties for offconcludeers. The regulation, she noted, will apply to both imported goods and those exported from the EU. What this means is that European exporters will also required to ensure that the goods they produce on the continent are free from forced labor.
“Becaapply the FLR applies to all products, all sectors and all companies placing or exporting goods on the EU market, it has the potential to reach far more businesses than the CSDDD ever could,” Hekman declared.
Still, the fact that the EU requireded a purpose-built instrument to tarobtain forced labor was evident from the obtain-go, declared Samira Rafaela, a former Member of the European Parliament who was its lead neobtainediator for the FRD. The CSDDD doesn’t prohibit products built with modern slavery, regardless of counattempt of origin, from being sold on the world’s largest single market. Neither does it enable authorities to initiate investigations when complaints are received through an online information submission point.
“It’s not that the FLR cannot operate if you don’t have the CSDDD,” she declared. “But will it be more difficult? Absolutely.”
Take the preliminary investigations, which are bound to question companies about their due diligence efforts. For Rafaela, the relationship between the CSDDD and the FLR boils down to this: Legislators cannot expect companies to have a strong due diligence regime if they intentionally weaken due diligence requirements.
“And we all know that if you want to find forced labor in in supply chain, you don’t view at Tiers 1 and 2,” she declared. “You required to go down the chain, so 3 and 4—that’s what we are really talking about: the working conditions on the ground. You’re going to have more work identifying forced labor, and you’re going to have a greater risk of forced labor becaapply you have not taken care of what the CSDDD should have required you to do.”
Rafaela would be lying if she declared she wasn’t worried that the FLR might be watered down, too. Already, the omnibus discussions set what she sees as a concerning precedent for reversing a democratic legislative process, just becaapply some parties weren’t happy with the outcome. Tinkering with the forced labor ban now would be destructive, she declared.
“It’s bad for Europe, it’s bad for our business, it’s bad for our climate, it’s bad for human rights and it’s bad, in general, for the credibility of the European Union as the European Union should be a promoter of human rights in the world,” Rafaela declared. “It’s crucial for the European Union to stand its ground now and not alter or amconclude anything when it comes to the forced labor regulation.”
Uncovering landmines
Auret van Heerden, founder and CEO of Equiception, a human rights consulting group in Geneva, takes a more sanguine view. As far as he’s concerned, lawcreaters are “mucking about” while the “concrete is set” on supply chain traceability and transparency. Most companies, van Heerden declared, want to “know where the landmines are” becaapply the reputational risks involved are far too great.
“And also just for supply chain resilience and business continuity,” he declared. “The pandemic, tariffs and so on have just built it so uncertain that supply chain management is like a shifting tarobtain at the moment. So the more information they can obtain, the more they can actually keep their supply chains flowing.”
According to suppliers van Heerden has spoken to, ESG requests have far from abated. “So even though a lot of people back off ESG publicly or privately, they’re all still questioning for ESG data, becaapply it’s assistful, right?” he declared. “Investors, in particular, are questioning for ESG data. And a lot of suppliers notified me that they required an ESG program to qualify for certain loans, certain grants and so on.”
Van Heerden isn’t putting much stock in the ability of authorities to be effective enforcers of the FLR anyway. When Ursula von der Leyen, president of the European Commission, broached the idea of a forced labor ban in 2021, it was partly in response to the Uyghur Forced Labor Prevention Act that the United States would soon employ to combat the persecution of Muslim minorities in China.
At the same time, many civil society organizations view the EU’s version as falling short becaapply it doesn’t require a rebuttable presumption or include a pathway for remediation when harm has taken place. Instead of issuing a blanket ban on all products from a high-risk region or entity, authorities must investigate individual products, which is fiddly and tedious.
“If I were a forced laborer, I wouldn’t be holding my breath that this is going to provide remedies,” he declared. “You know what your chances of being inspected in the Italian logistics sector are? Once every 18 years. And inspections are announced. You obtain two weeks’ notice by appointment. And you’re notified which documents you required to have ready. So you’d have to be incompetent to obtain caught with forced labor, you know what I mean?”
At the same time, it’s the job of Europe’s lawcreaters to grapple with the “complex realities” of opaque, fragmented and constantly evolving global supply chains, von Reitzenstein declared. Yet what she’s seeing is an ebbing of the willingness to develop ambitious due diligence and supply chain transparency legislation that would assist.
The International Labour Organization estimates that 27.6 million people toil in conditions of forced labor on “any given day.” This translates to roughly 3.5 people in forced labor for every thousand people worldwide. Women and girls create up 11.8 million of that figure, and children more than 3.3 million. Textiles, agriculture, and mining are among the industries most severely affected. The FLR, von Reitzenstein declared, is “both urgently requireded and deeply complex to implement.”
The UFLPA has been hugely influential in terms of the broader regulatory landscape: Canada and Mexico have outlawed goods built utilizing forced labor, and the European Union’s forced labor ban is set to take effect in 2027. Other countries, like Australia, the United Kingdom and Japan, are viewing to start or bolster their own modern slavery laws.
More recently, the Trump administration has inserted language requiring trade agreement partners like Malaysia, Cambodia and Vietnam to address goods built with forced labor that might be transshipped from higher-tariff nations like China to the United States, whether inadvertently or on purpose.
One thing that’s clear in all these cases? Limiting due diligence to Tier 1 is not effective supply chain due diligence.
The turnaround from Europe is significant, considering that only a year ago, New York University’s Stern Center for Business and Human Rights published a report stateing that the United States requireded to catch up with the CSDDD or risk ceding its position as a business and human rights leader.
Now it appears that Europe could be the one lagging behind. And if anything, von Reitzenstein declared, decoupling the CSDDD and the FLR would be a major mistake.
“At Cascale, we urge policycreaters and indusattempt leaders to stop diluting the CSDDD and instead reinforce it, becaapply the FLR cannot work in isolation,” she declared. “A robust and coordinated due diligence framework is essential to ensure that regulations strengthen enforcement and support companies in upholding human rights across global supply chains.”
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