The new EU regulation would create a framework for enforcing the ban on products made with forced labour, including through investigations, new IT solutions and cooperation with other authorities and countries.
According to the agreed text, national authorities or, if third countries are involved, the EU Commission, will investigate suspected use of forced labour in companies’ supply chains. If the investigation concludes that forced labour has been used, the authorities can demand that relevant goods be withdrawn from the EU market and online marketplaces, and confiscated at the borders. The goods would then have to be donated, recycled or destroyed. Goods of strategic or critical importance for the Union may be withheld until the company eliminates forced labour from its supply chains.
Firms that do not comply can be fined. However, if they eliminate forced labour from their supply chains, banned products can be allowed back on the market.
At Parliament’s insistence, the Commission will draw up a list of specific economic sectors in specific geographical areas where state-imposed forced labour exists. This will then become a criterion to assess the need to open an investigation.
The Commission can also identify products or product groups for which importers and exporters will have to submit extra details to EU customs, such as information on the manufacturer and suppliers of these products.
A new Forced Labour Single Portal would be set up to help enforce the new rules. It includes guidelines, information on bans, database of risk areas and sectors, as well as publicly available evidence and a whistleblower portal. A Union Network Against Forced Labour Products would help to improve cooperation between authorities.
The rules also foresee cooperation with third countries, for example in the context of existing dialogues or implementation of trade agreements. This may include information exchange on risk areas or products and sharing best practices, in particular with countries with similar legislation in place. Commission acting as a lead competent authority may also carry out checks and inspections in third countries, if the relevant company and the government of the third country agree to it.
The European Parliament and Council will now both have to give their final green light to the provisional agreement. The regulation will then be published in the Official Journal and enter into force the following day. EU countries will thereafter have 3 years to start applying the new rules.
Investors call for more transparency in Zara’s supply chain
Forced labour is a hot topic in both the US and Europe, particularly in the fashion and food supply chains. An example of the timeliness of the EU’s decision is the recent case of Zara, where Inditex, owner of high street fashion brand, is under pressure from investors to be more transparent about its supply chain. Unlike rivals such as H&M and Primark, Inditex has not published its full list of suppliers, prompting calls for greater openness, reports Reuters.
Several fashion brands and retailers, including Adidas, H&M, Nike, and Primark, already publish comprehensive supplier lists, disclosing factory names and addresses. However, Inditex only provides annual figures on the number of suppliers in specific countries without divulging individual factory information.
As Reuters explains, investors, represented by Dutch asset manager MN and others, are pushing Inditex to disclose its full supplier list.
MN leads the dialogue for Platform Living Wage Financials (PLWF), advocating for higher incomes for industry workers. Despite the investor pressure, Inditex declined to comment on the demands for increased transparency, adds the news agency in its exclusive article.
While the investors engaging with Inditex collectively hold a substantial stake in the company, they are not considering divesting. However, MN did advise its clients to divest from another retailer, TJX, due to concerns about human rights due diligence in its supply chain.
Improved transparency could influence investment decisions, as demonstrated by Norway’s sovereign wealth fund, which regularly engages with Inditex on supply chain risk management and human rights issues, Reuters warns.