The European Council has made several proposals to tighten up guidance banning products made with forced labour for sale on the EU market. But what does it mean for fashion brands and retailers? And how should they prepare?

The European Council announced proposals for improvements to the text that prohibits products made with forced labour from the EU market.

Under the terms of the proposal, products made using forced labour, as defined by the International Labour Organization, are banned from the EU market and banned from being exported from the EU to third countries.

Determination is based on a range of different sources of information, such as submissions from civil society, a database on forced labour risk areas or products, as well as information on whether the companies concerned carry out their due diligence obligations concerning forced labour.

If suspicion arises that a product has been made using forced labour it would prompt an investigation by authorities.

If the investigations confirm the product has been made using forced labour, the product will be pulled from the market and banned from sale or export. Companies will be required to dispose of the goods concerned, and the customs authorities will oversee the enforcement of the prohibition on exports or imports of banned products at the EU borders.

SME’s are not exempt from the regulation, but consideration will be based on their size and economic resource, as well as the scale of forced labour.

What are the key changes to the EU forced labour law?

Among its proposals, the EU Council mandate clarifies the scope of the forced labour regulation by including:

• Products offered for distance sales

• The creation of a forced labour single portal

• Reinforcement of the role of the Commission in investigating and proving the use of forced labour

• Alignment of the proposed measures with both international standards and EU legislation.

When it comes to investigating forced labour suspicions and claims, the Commission said if there is a “Union interest” – in a nutshell, considerable belief of forced labour taking place and dependent on the scale or size; the risk is outside the territory of the union; or the products have a significant impact on the internal market – it would automatically take over the pre-investigation phase. Otherwise, the pre-investigation phase will be carried out by a national competent authority.

In the case of cross-border investigations a “lead competent authority” will be appointed.

The Commission will be responsible for preparing the final decision such as banning a product and a non-confidential summary of the decision will be filed on the forced labour single portal.

What it means for the apparel and footwear sector

The announcement has been broadly welcomed by industry trade bodies and experts across the sector.

Professor Shawn Bhimani, Northeastern University and Primary Investigator, Supply Trace, tells Just Style: “We are pleased the Council has adopted its position on the proposed regulation prohibiting products made with forced labour on the EU market. Enforcement of this law to stop the importation and trade of goods made with forced labour has the potential to improve the working conditions of millions worldwide – something we should ultimately all be striving towards.”

Bhimani says the regulation marks a shift from brands “knowing and showing” their supply chains to taking practical steps toward remediation.

It will specifically impact European brands who will now be required to understand, identify and remediate forced labour risks in their supply chains which Bhimani says is “a significant shift in what is expected of them.”

Meanwhile, in its position paper, the Federation of European Sporting Industry, said: “The Sporting Goods Industry has a zero-tolerance policy on forced labour in all forms within its supply chains and is working in tight collaboration with its suppliers where possible to identify and eliminate forced labour and the conditions that can lead to forced labour in sourcing countries, inside and outside the European Union.

“Therefore, FESI and its members welcome the EU’s proposal for a legislation tackling this complex issue.”

Jerome Pero, spokesperson for the Federation of European Sporting Industry, says it has been very involved in supporting the preparation of this legislative initiative.

“From the outset, we firmly believed that if done right the initiative could improve the situation for workers worldwide (including in Europe) and for businesses operating in Europe by harmonising EU legislation, providing a level playing field for companies and improving legal certainty, provided the processes and guidelines were clear.”

But he is under no illusion the regulation is not the silver bullet solution and is instead “an additional tool.”

“It will not in itself eradicate forced labour in very complex value chains, nor will it substitute itself to the roles and responsibilities of states. We are hopeful however that it will clarify the framework under which companies operate and will support and accelerate traceability and transparency initiatives.”

Pero notes the co-legislators have already successfully addressed many of FESI’s initial concerns such as recognising that authorities need verifiable and credible information before launching pre-investigations, refraining from copying the US WRO model, moving away from the reversed burden of proof, embracing the risk-based approach, and allowing recycling and donations to be considered in addition to destruction of goods.

“However, the effectiveness of this regulation will only be ensured if it is practical to implement and does not overburden companies that – for the most part – already have efficient systems in place to detect and prevent labour right violations in their sphere of influence.”

FESI is calling for the introduction of a database with regularly updated information about products and geographical areas at severe risk of forced labour. We believe that this database will help economic operators to conduct internal checks in the supply chain where deemed appropriate.

Is the apparel sector ready for the new rules?

For the most part, when it comes to multinationals, they have or are in the process of taking steps to become compliant.

Companies have been preparing for the legislation and started already before the UK Modern Slavery Act came into play. CSRD reporting and CSDDD almost being adopted have accelerated efforts toward compliance, says FESI’s Pero.

The challenges, however, remain in smaller companies and those only operating in Europe. Bhimani explains that they may be unprepared for the due diligence and documentation requirements associated with an import ban.

But he says trade associations in the apparel and footwear industries, both in the US and globally, have developed significant resources for entities of all sizes to address forced labour in the fashion industry, and can be an invaluable resource as regulatory obligations continue to expand.

While Pero adds even within larger multinational organisations, challenges remain in mapping very complex value chains upstream and downstream beyond a certain level.

“But multi-stakeholder efforts will provide capacity building and support,” he agrees.

On SMEs, he says the situation is a little more complicated due to limited capacity, leverage and visibility.

“Indeed, as this regulation applies to all products put on the EU market notwithstanding the size of companies or nature of the product they will also be in the scope and will be very important to support them in complying with the regulation.”

What can fashion brands and retailers do to prepare for the incoming changes?

Though the enforcement of the regulation is still a few years away, the experts advise fashion brands and retailers to take a proactive approach in preparing for its arrival.

Shortly ahead of the launch of the Supply Trace platform, a project collaboration between Bhimani and Laura Murphy, professor of human rights and contemporary slavery at Sheffield Hallam University, which is backed by the Laudes Foundation and that aims to help companies eliminate modern slavery risks in their supply chains, Bhimani says one of the most important things to do is to fully map supply chains from raw materials to finished product.

“Second, they must educate internal and external stakeholders on the human costs, market risks and regulatory standards related to forced labour. Finally, brands and retailers should conduct a risk assessment based on these two exercises to best identify and address forced labour risks within their supply chains.”

Pero agrees, adding sports and fashion brands must start to continue to “proactively prepare” for compliance with the upcoming regulation on the ban of products made with forced labour.

FESI’s checklist to prepare fashion companies for the new legislation

• Familiarise yourself with the European Commission’s Decent Work Worldwide guidelines

• Engage with multi-stakeholder initiatives and dialogue with other stakeholders such as companies, NGOs, and policymakers

• Consider appointing a dedicated human rights team or department

• Develop risk indicators of forced labour pending the establishment of EU guidelines and databases

• Implement due diligence processes under a risk-based approach

• Provide training to relevant staff on procedures for investigating and reporting to market enforcement authorities in the event of an investigation

• Conduct a comprehensive mapping of the entire supply chain

• Engage with suppliers, request copies of their policies on forced labour or conduct site visits

• In cases where forced labour is identified, leverage company influence to address the situation, reserving disengagement as a last resort.