The time for investor voice in the forced labour regulation debate is now
By Sian Lea, Business and Human Rights Manager, and Serena Chen, Business and Human Rights Intern, Anti-Slavery International
In today's business landscape, sustainable and equitable considerations are essential for responsible investors. However, the reality is that many daily products have ties to forced labour, an abhorrent form of exploitation that deprives people of their freedom and subjects them to degrading and abusive working conditions.
Despite increasing awareness of the issue, the business response to prevent and address forced labour risks has been inconsistent and insufficient in reducing its global prevalence. Following the lead of landmark legislation in the United States which prohibits the trade of goods made with forced labour, namely the Tariff Act and the Uyghur Forced Labour Prevention Act (UFLPA), the EU's proposed forced labour regulation is an ambitious step towards better business practice and eradicating forced labour worldwide. However, civil society remains deeply concerned about the slow pace of negotiations in the Council of the EU.
Investors have continued to engage with companies to address workers’ rights and forced labour risks in supply chains. In January, over 80 institutional investors overseeing assets exceeding US$2.44 trillion (Euro € 2.29 trillion) voiced their support for a robust EU-level forced labour regulation that incorporates a worker- and remedy-centered approach, includes mandatory human rights due diligence, requires complete value chain tracing, and addresses systematic state-sponsored forced labour.
As the legislative proposal to remove forced labour goods from the EU market progresses, investors should use their individual and collective leverage to urge EU policymakers to keep the legislative process on track, calling for a comprehensive and rigorous EU forced labour regulation that is remedy- and worker-centric.
The current state of play
Globally, around 17.3 million people are in forced labour in the private sector and a further 3.9 million are estimated to be in state-imposed forced labour. To tackle this endemic problem, a group of MEPs published a paper advocating for import controls on products made with forced labour in February 2021. This was catalysed by the European Green Deal and the value-driven approach the EU had taken with Coronavirus. Subsequently, and encouraged by civil society, the European Commission proposed a forced labour regulation in September 2022.
For the EU to create laws, both the European Parliament and the Council of the EU must examine and make any amendments to the European Commission's proposal before entering the final stage of trilogue, where all three institutions negotiate and agree on the final text. Presently, this legislation has not been prioritised by lawmakers in the Council of the EU. If the delay persists, there is a risk that momentum will be lost for passing this important legislation.
What is in the regulation and what can be improved
The current proposal bans the sale, import, and export of products made with forced labour within the EU market. It is promising because it applies to all products from all regions and companies of all sizes. However, the following concerning gaps persist that limit the proposal’s ability to make a significant difference for workers trapped in forced labour:
For goods to be released back to the market once they’ve been held due to forced labour, companies must demonstrate that they have provided remedy to victims, whether through returned wages or recruitment fees or other non-financial acts.
Authorities investigating forced labour allegations must engage affected and at-risk workers and their legitimate representatives (e.g. civil society, trade unions) confidentially to consider their views and interests, even when deciding a ban is the most appropriate course of action.
The regulation should include scope for consideration of entire product groups from specific industries in countries and regions with credible reports of state-imposed forced labour, such as in Turkmenistan and the Xinjiang Uyghur Autonomous Region.
The regulation should oblige companies to map and disclose their supply chains proactively. This helps to identify high-risk products and improves visibility and control for companies.
To understand how the proposed law can incorporate the above elements, see the model law against forced labour proposed by Anti-Slavery International, the European Center for Constitutional Human Rights (ECCHR), and the Greens/EFA Group in the European Parliament.
Investors should continue to engage with policymakers on the forced labour regulation
As a follow-on action to the January 2023 Investor Statement in Support of Robust Forced Labour Regulations, which remains open for sign-on here, investors should use their power and voice to urge EU member states, notably Spain in its capacity as the presidency of the Council of the EU, to push the regulation forward to its final stage: the trilogue. More generally, it remains paramount for investors to actively engage with any EU policymakers they hold relationships with to continue to emphasise their support for the regulation.
As stewards of capital, investors play a vital role in eradicating forced labour from global supply chains. Embracing an effective EU law with global impact is a strong step towards ending forced labour. We cannot risk an indefinite delay for this crucial piece of legislation that has the potential to set a global standard and level the playing field across businesses and industries.