Global battery supply chain firms and intermediaries are among those at heightened risk of financial and criminal sanctions under sweeping new European laws aimed at tackling forced labour, research by Batteries International has revealed.

European Union member states are expected to propose potentially swingeing fines by the end of this year — ahead of full enforcement of the Force Labour Regulation (FLR) starting in December 2027.

Analysts have warned companies and individuals involved in supply chains for batteries, BESS and clean energy tech should act now or risk falling foul of FLR, which will impact complex international sourcing arrangements, high-risk jurisdictions and long lead times.

Meanwhile, a call for tenders giving the Commission supply chain traceability and risk detection systems for forced labour investigations closes on September 28, 2026.

European Commission guidance published earlier this month said fines could be calculated based on the total value of goods (in violation of an FLR ban decision) on the EU market, or on the annual global turnover of the company concerned.

Other sanctions

Individual EU nations may also decide to impose additional sanctions — all adding up to potentially highly-damaging penalties.

Under the FLR, batteries and other products could be banned from being marketed or sold in the EU if violations are found. Exports from the EU could also be prohibited and companies forced to dispose of affected products.

Customs authorities will also be empowered to block circulation of products if what European Commission guidance describes as ‘risk management systems’ determine that a product entering or leaving the EU might violate FLR.

Breaches of the regulation could also lead to potential criminal action.

Companies found to have breached FLR “must in no way benefit” economically from the disposal of banned products and would also have to provide detailed evidence relating to disposal — such as recycling or making products “inoperable”.

Products with suspected links to forced labour imposed by nation states will be a particular priority for investigators.

And just by being part of a Commission agreement or a project involving the battery sector would not exempt companies from investigation or penalties.

New risk

Peter Hood, a partner with London-headquartered multinational law firm Fieldfisher, told Batteries International on September 18 that his own analysis showed that for businesses operating in the clean energy, battery and BESS sectors, FLR presents more than a compliance issue — it also has the potential to create material supply chain and project delivery issues. 

Hood, a lawyer who leads Fieldfisher’s international business and human rights team, said FLR creates a new market access risk for all products linked to forced labour.

While clean energy, battery and BESS supply chains are not formally singled out, their use of high-risk products, critical minerals, complex multi-tier sourcing and long project lead times makes them obvious candidates for scrutiny.

Battery cells, modules, inverters, power electronics, solar products and critical minerals all move through complex, multi-tier supply chains crossing jurisdictions where documented instances of forced labour are high and the ability to conduct due diligence is limited, Hood said.

“Nevertheless, if a product or component is found to be linked to forced labour at any stage in its upstream value chain, the consequences can include withdrawal and disposal, leading to project delay, financing issues and contractual claims.”

According to Hood, the most exposed businesses will be those that discover too late that their supplier contracts and due diligence processes do not provide the access, traceability data or evidence needed to satisfy an authority, lender, customer or public-sector counterparty.

Warranties

Clean energy projects depend on long-lead equipment and tightly sequenced procurement, construction, grid connection, commissioning and financing milestones. That means a forced labour investigation could trigger consequences well beyond a probe by regulators.

If battery cells, modules, inverters, solar modules or grid equipment cannot be imported, used, sold or exported as planned, the impact may flow through engineering, procurement and construction obligations, procurement commitments, financing conditions, availability warranties, delay liquidated damages, insurance notifications and exit processes.

Hood said battery and BESS businesses should align FLR readiness with the separate due diligence obligations under the EU Batteries Regulation.

Those obligations, due to apply from August 18, 2027, require relevant economic operators placing batteries on the EU market or putting them into service to operate battery due diligence policies covering the sourcing, processing and trading of cobalt, natural graphite, lithium and nickel used in battery manufacturing. They include management systems, supply chain risk identification and mitigation, third-party verification by notified bodies and public reporting.

The two regimes are different. The Batteries Regulation imposes a positive, battery-specific due diligence obligation for specified raw materials, while the FLR creates a market access prohibition for products made with forced labour.

“In practice, however, the evidence base will overlap,” Hood said.

He has urged business to use the period before December 2027 to move from policy-level commitments to product-level evidence.

Contractual exposure

Those that can demonstrate credible traceability and risk-based due diligence will be better placed to respond to regulatory scrutiny, protect project timelines and manage contractual exposure.

“Businesses should avoid building separate compliance silos and instead create one evidence-ready supply chain programme for priority battery products and materials.”

Global advocacy group Human Rights Watch (HRW) and 12 civil society organisations and trade unions said in a September 2 joint letter to the European Commission that its guidelines are an important step toward rights-respecting supply chains, but need further strengthening to eliminate forced labour from the EU market.

Hélène de Rengervé, senior advocate for corporate accountability at HRW, said: “The guidelines should caution against any overreliance on the audits many companies use to assess forced labour risks at their factories or suppliers. These often fail to accurately represent workers’ real experience.

‘Misleading testimony’

“Conflicts of interest between the auditors and the company in question and the risk that factories hide evidence or coerce workers to provide misleading testimony often undermine these audits.”

According to a case study published earlier this year by UK BESS developer Field, in conjunction with supply chain risk platform Inosys, a typical LFP battery supply chain “spans six or more discrete industrial stages”, through which critical materials (lithium, graphite, copper, iron, and phosphate) pass through successive rounds of processing, refining, manufacturing, and cross-border logistics before reaching a BESS project site.

Field’s approach to procuring BESS systems includes making time-critical decisions that sit alongside preferred-bidder approvals and lender requirements. The company said it needs confidence that ESG risks are understood before it commits.

“The challenge is that the highest-impact risks often sit upstream, and suppliers don’t always publicly disclose the detail we need. Our approach starts with a structured screen, asking targeted follow-up questions, testing ‘red line’ issues, and then building material requirements into the contract, with ongoing reporting to maintain lender confidence and track impact.”

CEO Amit Gudka said ethical sourcing enhances bankability, reduces risk, and strengthens the integrity of the industry.