What the EU Forced Labour Regulation means for companies
From 14 December 2027 onwards, an EU-wide market ban will apply to products made with forced labour. There are no thresholds or sector-specific exemptions.
Current discussions on supply chain regulation are focused primarily on reducing the burden on companies. For example, the German Federal Ministry for Economic Affairs and Energy (BMWE) has suspended the review of company reports submitted under the German Supply Chain Act (LkSG). An amendment to the Act is also under parliamentary consideration. The European Corporate Sustainability Due Diligence Directive (CSDDD) likewise entered into force only in a diluted form. This has created the impression in many quarters that the issue is becoming less important.
However, this view is too narrow. The EU Forced Labour Regulation has introduced legislation that follows a different logic. Rather than requiring companies to make “reasonable efforts” in their supply chain management, it prohibits products made with forced labour—regardless of a company’s size, turnover, sector, or registered office.
The Forced Labour Regulation at a glance
The regulation prohibits economic operators from selling or making available on the EU market, or exporting from the EU, products made wholly or partly with forced labour.
Key features
Product-based rather than company-based
The relevant point of reference is the product, not the organisation. The prohibition may apply to any stage of production. It is sufficient for just one component to have been manufactured using forced labour.
Origin-neutral
The prohibition applies both to imported products and to products manufactured in the EU.
Different areas of responsibility
The European Commission investigates potential infringements outside the EU, while national authorities are responsible for cases within the EU.
Directly applicable law
The regulation applies in all EU Member States without requiring transposition into national law.
No threshold and no “de minimis” exemption
The regulation applies to all natural and legal persons that make products available on the European Union market or export them—including small and medium-sized enterprises—and also covers state-imposed forced labour.
Legally, the definition of forced labour is based on ILO Convention No. 29 and covers any work or service exacted under the menace of a penalty and not offered voluntarily. Examples include debt bondage, the retention of identity documents, the withholding of wages and abusive recruitment practices.
Three sets of rules, three different approaches
The LkSG, the CSDDD and the Forced Labour Regulation follow different approaches. Both the LkSG and the CSDDD impose best-efforts obligations. A company fulfils its obligation if it establishes, documents, and effectively implements appropriate processes, even if an infringement occurs within its supply chain. By contrast, the Forced Labour Regulation focuses on the outcome: the product must not have been made using forced labour.
| LkSGNational law | CSDDDEU directive | Forced Labour RegulationEU Regulation |
|---|---|---|
| Scope: Companies with at least 1,000 employees | Scope: Large companies | Scope: All companies |
| Type of obligation: Best-efforts obligation | Type of obligation: Best-efforts obligation | Type of obligation: Outcome-based obligation |
| Focus: Processes and reporting | Focus: Processes and climate transition plan | Focus: Product rather than process |
| Consequence of an infringement: Fine and exclusion | Consequence of an infringement: Sanctions determined by each EU Member State | Consequence of an infringement: Market ban |
No due diligence obligation, yet due diligence offers the best protection
The regulation does not prescribe risk assessments, reports or complaints procedures. Nevertheless, such processes are important because oversight authorities prioritise cases on a risk-based basis and consider the measures taken and evidence provided by a company. A lack of information about product origins, upstream suppliers and controls will therefore make it more difficult for a company to demonstrate compliance during an investigation.
Companies can build on their existing LkSG structures. Risk assessments, preventive measures, and cooperation with suppliers already provide important information. However, this information must be prepared on a product- and batch-specific basis. Simply knowing which suppliers present a critical risk is not sufficient if products and intermediate inputs cannot be clearly traced and assigned.
Initial selection: risk-based rather than comprehensive
The decisive factors are the severity and scale of the suspected forced labour, as well as the quantity of the product and the proportion of components produced under such conditions. Information may be sourced from the EU risk database, public authorities or third parties, such as NGOs, trade unions and individuals.
Preliminary investigation: request for information from the company
The company must provide information on its products, its suppliers and the due diligence measures it has put in place. There is a statutory minimum timeframe for this. If there is no reasonably substantiated suspicion, the proceedings are terminated at this stage.
Investigation: collection of evidence and inspections
The authority may request further information and, with the consent of the company and the country in which it is based, may also carry out checks outside the EU. If the company refuses to cooperate, the authority will make a decision on the basis of the information available.
Decision: prohibition, withdrawal and disposal
If a breach is identified, the authority will prohibit the placing on the market and export of the goods. Products already supplied must be recalled and disposed of at the company’s expense. This decision applies in all Member States and is enforced by the customs authorities. It is revoked as soon as the company provides evidence that forced labour has ceased and that effective remedial action has been taken.
“We are too small, so this does not affect us.”
The regulation does not provide for any threshold. It applies to everyone who makes products available on the European Union market or exports them—regardless of their size, legal form or registered office.
“We only purchase within the EU.”
The prohibition also applies to products manufactured in the EU. Furthermore, it is the product that is assessed, not the immediate contractual partner. What matters is the entire upstream supply chain, extending all the way back to raw-material extraction—not merely the direct supplier.
“A certificate or audit is sufficient evidence.”
Individual pieces of evidence are not enough. What matters is a sound risk assessment, cooperation with suppliers, complaints mechanisms, corrective measures, and complete documentation.
What companies should do now
There is still time for structured preparation before the regulation becomes applicable. However, companies should not wait until shortly before that date. A sensible approach consists of three steps:
Identify product risks: Which categories of goods, regions of origin and production stages present an increased risk? Purchasing data, rather than lists of suppliers, should be used as the starting point.
Integrate the requirements into existing processes: LkSG and CSDDD structures should be capable of providing product-specific information. A separate parallel system should be avoided wherever possible.
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