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 asked, what becomes of the forced labor regulation that requires scrutiny to be effective?
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“From December 2027, the FLR will ban companies from selling products made with forced labor and empower the European Commission, designating authorities to investigate risks at regional, sectoral and company levels,” said 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 overlooked 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 because 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 said. Even if the CSDDD’s scope ends up focusing 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 smaller 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, making the legislation critical when it comes to the FLR,” von Reitzenstein said. “Effective enforcement and meaningful impact depend on companies being equipped with clear, risk-based due diligence measures. Without this, the FLR cannot function as intended.”
Indeed, the CSDDD and FLR were designed to be complementary, said Lisanne Hekman, a human rights consultant at 2Impact Consulting in South Holland. At the same time, she said, the regulations “work quite differently” and can still operate independently of each other.
“The FLR doesn’t directly impose human rights due diligence obligations on companies,” she said. “Instead, national authorities will be responsible for investigating if products were made using 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 need the CSDDD to employ credible due diligence in their supply chains, Hekman said. 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 said.
Hekman said 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 offenders. 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 need to ensure that the goods they produce on the continent are free from forced labor.
“Because 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 said.
Still, the fact that the EU needed a purpose-built instrument to target forced labor was evident from the get-go, said Samira Rafaela, a former Member of the European Parliament who was its lead negotiator for the FRD. The CSDDD doesn’t prohibit products made with modern slavery, regardless of country 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 said. “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 look at Tiers 1 and 2,” she said. “You need 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 because you have not taken care of what the CSDDD should have required you to do.”
Rafaela would be lying if she said 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 because some parties weren’t happy with the outcome. Tinkering with the forced labor ban now would be destructive, she said.
“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 said. “It’s crucial for the European Union to stand its ground now and not change or amend 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, lawmakers are “mucking about” while the “concrete is set” on supply chain traceability and transparency. Most companies, van Heerden said, want to “know where the landmines are” because the reputational risks involved are far too great.
“And also just for supply chain resilience and business continuity,” he said. “The pandemic, tariffs and so on have just made it so uncertain that supply chain management is like a moving target at the moment. So the more information they can get, 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 asking for ESG data, because it’s helpful, right?” he said. “Investors, in particular, are asking for ESG data. And a lot of suppliers told me that they need 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 because 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 said. “You know what your chances of being inspected in the Italian logistics sector are? Once every 18 years. And inspections are announced. You get two weeks’ notice by appointment. And you’re told which documents you need to have ready. So you’d have to be incompetent to get caught with forced labor, you know what I mean?”
At the same time, it’s the job of Europe’s lawmakers to grapple with the “complex realities” of opaque, fragmented and constantly evolving global supply chains, von Reitzenstein said. Yet what she’s seeing is an ebbing of the willingness to develop ambitious due diligence and supply chain transparency legislation that would help.
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 make 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 said, is “both urgently needed and deeply complex to implement.”
The UFLPA has been hugely influential in terms of the broader regulatory landscape: Canada and Mexico have outlawed goods made using 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 looking 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 made 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 saying that the United States needed 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 said, decoupling the CSDDD and the FLR would be a major mistake.
“At Cascale, we urge policymakers and industry leaders to stop diluting the CSDDD and instead reinforce it, because the FLR cannot work in isolation,” she said. “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.”
