Forced Labour Regulation: how can companies prepare?

The Forced Labour Regulation (FLR) is a game-changer for businesses operating in or trading with the EU. With its implementation approaching, companies need to understand how to comply. At 2impact, we specialise in guiding businesses through sustainability challenges like the FLR, offering expert advice to ensure your company is fully prepared.

To help you stay ahead, let’s dive into the latest developments. On 30 June 2026, the European Commission published the long-awaited guidelines on the application of the EU FLR. These guidelines clarify how the regulation will be implemented in practice, including the conduct of investigations and the role of companies' due diligence efforts.

While it does not introduce new legal obligations, the guidelines provide valuable insight into what competent authorities will expect from companies once the regulation takes effect in December 2027. In this blog, we summarise the key elements of the guidelines and explain what they mean for companies.

What does the Forced Labour Regulation entail?

The Forced Labour Regulation bans any product made with forced labour from entering, circulating, or being exported from the EU market. It follows the ILO’s definition: forced labour is any work or service performed under coercion and without free consent. This includes both privately imposed and state-imposed forced labour. The regulation applies regardless of where forced labour occurs in the supply chain. Even if only a component of a product is produced using forced labour, the entire product falls within the scope of the regulation.

How will investigations work?

Competent authorities will prioritise investigations using a risk-based approach. This approach focuses on products, sectors, and companies where forced labour risks are considered most significant. This assessment is based on:

• the scale and severity of the suspected forced labour,
• the quantity of products placed or made available on the EU market,
• the share of product components suspected to have been made with forced labour.  

After, authorities will decide which company to investigate based on three factors:  

• the company’s proximity to the alleged forced labour  
• their leverage to prevent or mitigate forced labour,
• its size and economic resources.

Depending on where the suspected forced labour occurred, the investigation will be led either by the European Commission or by the competent authority of an EU Member State, as we outline in the step-by-step process below.

Phase 1: initial assessment of potential violations

The investigation process begins with an initial assessment to identify potential violations. Authorities gather information from databases like the EU Forced Labour Risk Database, and information from petitioners.  

Phase 2: Preliminary phase

If there is a likelihood of a violation, authorities request information from the company about the measures they have taken to identify, prevent and mitigate forced labour risks within their operations and supply chains. Where relevant, they may also seek information from suppliers or other stakeholders.  

Phase 3: Formal investigation

If a substantiated concern arises, authorities request additional documentation, such as details about the product, supply chain structure and actors, and facility and location information. Authorities may also conduct field inspections to gather further evidence.

Phase 4: Decision

If the authority establishes that the product is made with forced labour, a decision is made to prohibit the product from the EU market. The products concerned must be withdrawn and disposed of. Companies may face penalties if they fail to comply with a ban decision, for example by continuing to place banned products on the market or failing to withdraw them.

What do the guidelines say about due diligence?

The Forced Labour Regulation does not impose a legal due diligence obligation on companies. However, the guidelines make clear that companies with robust Human Rights Due Diligence (HRDD) processes will be better positioned both to prevent forced labour risks and to respond effectively if they become subject to an investigation.  

To support companies, the guidelines provide practical due diligence recommendations based on internationally recognised standards, including the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct. These recommendations follow the OECD's six-step due diligence framework.

Step 1: Embed responsible business conduct into policies and management systems

Companies should establish clear policies on forced labour and integrate these into their governance and management systems. Training relevant workers and communicating expectations to suppliers and other business partners is essential in this step, preferably through written contracts. These contracts should  cascading due diligence requirements and grounds for disengagement to share responsibility.  

Step 2: Identify and assess adverse impacts

Companies should identify where forced labour risks are most likely to occur within their operations and value chains. They should assess the severity of those risks and prioritise the most significant issues for action. The EU database of Forced Labour, currently under development, can serve as a starting point.  Additional resources that can be used include supplier self-assessments, on-site inspections and audits, worker interviews and stakeholder engagement.

Step 3: Cease, prevent or mitigate adverse impacts

Where risks are identified, companies should take appropriate action to prevent or or mitigate them. This may include implementing corrective action plans, adapting purchasing practices, engaging suppliers, increasing leverage, or, as a last resort, ending business relationships.

Step 4: Track implementation and results

Companies should monitor whether their actions are effectively reducing forced labour risks. Monitoring should be based on appropriate qualitative and quantitative indicators and should inform continuous improvement. For example, companies can track the proportion of preventive or corrective measures implemented within planned timelines.

Step 5: Communicate how impacts are addressed

Companies should publicly communicate how they identify and address forced labour risks. SMEs can focus on simple communication actions such as including a short update in the annual reports or sharing outcomes with employees and key stakeholders.

Step 6: Provide for or cooperate in remediation

To determine the appropriate remediation action, it is necessary to understand the root cause of forced labour. Where a company has caused or contributed to forced labour, it should provide for or cooperate in remediation to restore affected individuals, as far as possible, to the position they would have been in if the harm had not occurred. Where the company is linked to an impact through a business relationship, it should use its leverage to encourage the responsible party to provide effective remediation. SMEs can support remediation by joining industry initiatives, working with NGOs, engaging with trade unions, participating in multi-stakeholder platforms, or sharing remediation costs with other SMEs.

What does this mean for companies?

Although the Forced Labour regulation is not itself a due diligence regulation, the new guidelines clearly demonstrate that due diligence will play an important role in practice. During investigations, companies will be expected to show what steps they have taken to identify and address forced labour risks in their operations and supply chains.

Companies that have robust HRDD processes in place, including supplier engagement, will be better prepared to respond to requests from competent authorities and reduce their exposure to forced labour risks.

With the regulation becoming applicable from December 2027, now is the time for companies to review their existing HRDD processes and strengthen them where necessary. 

Has this blog sparked your interest?

Feel free to contact our colleague Elise at elise@2impact.nl. Together we can discuss how we can help.

To dive deeper into the Forced Labour Regulation and explore how your company can prepare, 2impact is organising a Share & Learn session. Join us to discuss practical strategies, ask questions, and learn from peers. Stay tuned for more details on how to participate!