28 October 2022

EC’s proposal to ban products made using forced labour Statement

As customers, we cannot ignore that 28 million people worldwide are forced to work under the threat of violence or punishment. As a result, products we consume every day may be tainted by forced labour.

Accountancy Europe welcomes the proposed EU regulation to ban products made with forced labour. It is a milestone in the fight against modern-day slavery worldwide. Professional accountants contribute to preventing human rights risks by monitoring if companies have the appropriate business processes and internal controls in place. In addition to carrying out due diligence, accountants also help providing transparency on companies’ environmental and social impacts.

Our key messages to policymakers are the following:

Design simple and effective legislation

Companies need practical rules to address the risk of forced labour in their value chains. The legislation needs to be simple to be effective; its implementation should not turn into a bureaucratic exercise. The regulation should be pragmatic and take a risk-based approach.

Support business with practical tools and clear guidance

Businesses will need clear, practical guidance to address their value chain’s potential exposure to human rights violations. Such guidance will be especially important for SMEs. It should include supply chain mapping, risk identification & management, and due diligence procedures.

Accountants can help SMEs comply with the new Regulation

SMEs will rely on the partners in their ecosystem – such as accountants – to make them aware of and help fulfil their obligations. Their role in helping SMEs assess risks and map their supply chains should be explicitly recognised and encouraged. Accountancy Europe has been active in this area. See our 3-step checklist for SMEs’ accountants to help them produce an ESG risk mapping – including on modern slavery.

Promote robust due diligence through strong corporate governance

Integrating human rights due diligence into company’s policies and management systems is fundamental to effectively combat forced labour. Independent third-party verification can enhance confidence that a business meets due diligence requirements. To be credible and effective, such assurance requires high-quality methods, competent professionals following transparent procedures with strong quality and independence standards, and public supervision.

Ensure coherence with due diligence and transparency related initiatives

We call on policymakers to ensure that the forced labour initiative is aligned and consistent with related due diligence and transparency obligations. These include the Corporate Sustainability Due Diligence Directive (CS3D) and the Corporate Sustainability Reporting Directive (CSRD), which envisages the adoption of EU Sustainability Reporting Standards (ESRS). Coherence across related policy instruments will help to avoid a myriad of overlapping obligations, which would risk obscuring business reality and overburdening companies to no added benefit.

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