Ethical Sourcing in the EU: Safeguarding Human Rights and the Environment through Regulations and Private Initiatives

When can claims such as ‘fair trade’ or ‘made without labour exploitation’ be trusted? In recent years, the demand for ethical sourcing practices has surged across industries. This practice refers to the procurement process for goods and services while ensuring respect for human rights, fair labour practices and compensation, and environmental sustainability. This approach is particularly significant in sectors such as cosmetics, fashion, and food, where the global supply chains often extend across developing nations. In response to this need, the European Union (EU) and various private organisations have developed regulations and initiatives to promote ethical sourcing. This article delves into the ongoing regulatory developments, alongside key voluntary initiatives aimed at safeguarding human rights and the environment.

1-. EU Regulations on Ethical Sourcing
The European Union has recently taken significant steps to implement regulations aimed at safeguarding human rights and environmental standards in global supply chains. Several regulations are now in place or under development, each contributing to the wider goal of promoting responsible business practices.

• Corporate Sustainability Due Diligence Directive (CSDDD)

The Corporate Sustainability Due Diligence Directive (Directive (EU) 2024/1760), which entered into force on 25 July 2024, establishes a mandatory framework to promote responsible business conduct and sustainable practices. It requires large EU and non-EU companies to identify, prevent, and mitigate adverse human rights and environmental impacts within their own operations, subsidiaries, and business relationships along global value chains. In essence, companies must take responsibility not only for their environmental and social impacts but also those of their suppliers.

Who must comply? The new rules apply to:

• EU companies with over 1,000 employees and a net worldwide turnover exceeding €450 million
• Non-EU companies generating over €450 million in turnover within the EU.

Although SMEs are not directly covered, the CSDDD includes support measures for those indirectly affected. Implementation will be phased-in based on Company size, with the first obligations taking effect on 26 July 2025 (for large companies of +5000 employees and 1.5 billion net turnovers.)

Companies must also develop climate transition plans aligned with the 2050 climate neutrality objective. National supervisory authorities will oversee compliance, imposing fines and penalties for violations of the rule. By establishing a harmonised legal framework, the Directive aims to increase corporate accountability, ensure fair competition, and contribute to a just transition towards a sustainable economy.

• Corporate Sustainability Reporting Directive (CSRD)

Alongside the CSDDD, the CSRD (Directive (EU) 2022/2464) enhances transparency in sustainability practices. It requires companies to publish third-party audited reports detailing the social and environmental risks they face and on how their activities impact people and the environment. The directive aims to provide investors, civil society organisations, consumers, and other stakeholders with reliable and comparable sustainability information, aligning corporate reporting with the goals of the European Green Deal.

Who must comply? The Directive applies to EU companies meeting two of the following three conditions:

• $43 million in net revenue,
• $22 million in assets
• 250 or more employees.

It also applies to non-EU companies if they have substantial activity in the EU, including a physical presence.

The first companies covered by the CSRD must apply the new rules starting from the 2024 financial year, with reports published in 2025. These reports must follow the European Sustainability Reporting Standards (ESRS), developed in draft form by EFRAG (European Financial Reporting Advisory Group), an independent body that brings together various stakeholders.

On 26 February 2025, the European Commission adopted a package of proposals to simplify EU sustainability reporting rules. One of the key changes is to remove around 80% of companies[1] from the scope of CSRD, narrowing reporting obligations to the largest companies, which are more likely to have the biggest impacts on people and the environment. Additionally, the proposal aims to reduce the reporting burden on smaller companies in the value chain.

• Regulation on Prohibiting Products Made with Forced Labor on the Union Market (PPMFLR)

Forced labour remains a significant global issue: according to estimates from the International Labour Organization, approximately 27.6 million people worldwide are subjected to forced labour, including 3.3 million children[2]. This widespread exploitation occurs across various industries, from agriculture and manufacturing to mining and textiles, often within complex global supply chains.

In December 2023, the Forced Labour Regulation (PPMFLR) entered into force, applying to all companies operating in the EU, regardless of revenue or country of incorporation. This includes businesses selling products on the internet or thought other channels. The ban will apply from 14 December 2027.

In November 2024, the EU introduced a framework for prohibiting the use of forced labour in the production of EU goods and within supply chains of operators established in the Union. Specifically, the text forbids the placing, distribution, or export from the Union market, of any product made using forced labour.

To ensure compliance, national authorities will be empowered to investigate and remove non-compliant products, reinforcing corporate accountability and ethical trade practices. Additionally, the European Commission will establish a regularly updated database with verifiable information on forced labour risks associated with specific regions and products, aiding in the identification and prevention of violations.

2-. Private initiatives promoting Ethical labelling
While EU legislation plays a crucial role in promoting and regulating aspects of ethical sourcing, several private initiatives complement these efforts. These voluntary schemes focus on certifying companies and products that adhere to ethical standards, ensuring that consumers can make more responsible choices.

• UEBT (Union for Ethical Bio Trade)

The UEBT is a member-based non-profit organisation operating globally that promotes ethical sourcing in the cosmetics, personal care, and food industries. Specifically, the UEBT Standard sets best practices for sourcing botanical ingredients in a way that respects biodiversity and promotes fair trade practices. It focuses on how ingredients are grown, collected, researched, processed and commercialized. The Standard is internationally recognized and developed through a multistakeholder process. In 2023, UEBT members worked to improve practices in more than 1,100 supply chains in over 70 countries. Cultivation or wild collection practices were verified or certified in more than 550 supply chains around the world[3].

• Fairtrade certification

Fairtrade is a globally recognised sustainability label working to promote ethical sourcing by making trade fairer for the farmers and workers who grow our food. The certification focuses on improving the living and working conditions in developing countries by requiring companies to pay fair wages, ensure safe working environments, and support community development initiatives. Fairtrade is particularly common in the food and beverage sector, with products like coffee, cocoa, sugar, rice and bananas being certified under its standards. As of 2023, nearly 2 million farmers and workers were benefiting from the program[4].

• FairWild certification

The FairWild certification ensures the sustainable harvesting of wild plants and protects the rights and livelihoods of local communities and workers involved in their collection. This certification is particularly relevant to industries that use wild ingredients such as bibhitaki, elder, dandelion, juniper or sage. Through a third-party certification scheme, FairWild ensures that wild collection practices do not harm biodiversity and that collectors receive fair compensation for their work. By the end of 2023, FairWild certified 59 plant species and protected over 1.7 million wild hectares trough sustainable wild harvesting[5].

• Fair for Life Certification

Launched in 2006, Fair for Life is a fair trade certification program covering agriculture, manufacturing and trade. It was created in response to a growing demand from the organic farming sector for a holistic, fair-trade approach. Unlike other certifications, Fair for Life applies throughout the chain of custody covering producers, manufacturers, traders and brand holders through third-party certification. Today, over 700 certified companies in more than 70 countries participate in the Fair for Life program[6], ensuring better labour conditions, environmental sustainability, and economic fairness.

• Responsible Mica Initiative (RMI)

Mica, a critical mineral in decorative cosmetics, automotive, construction and electronics, is often mined in hazardous conditions, with many workers subjected to child labour and poor working conditions. India, the world’s largest source of mica, produces approximately 60% of the global supply[7], with thousands of children involved in informal mining operations.

Established in 2017, the Responsible Mica Initiative (RMI) is a global an industry-led effort comprised of multiple organizations committed to establishing a fair, responsible and sustainable mica supply chain. The initiative specifically targets India’s mica sector, aiming to eliminate unacceptable working conditions and eradicate child labour by 2030. RMI collaborates with over 90 member organizations[8] across industries, governments, and civil society.

3-. ISO Standards for Ethical Sourcing
The International Organization for Standardization (ISO), an independent, non-governmental international organisation, has developed a number of standards that address various aspects of ethical sourcing, helping organisations implement effective practices and demonstrate their commitment to sustainability.

One such standard is ISO 20400, which provides comprehensive guidelines for sustainable procurement. This standard encourages companies to consider environmental, social, and economic factors when making purchasing decisions, while offering practical steps for businesses to manage risks associated with unethical practices. Another important series of standards is ISO 14020, which focuses on different aspects of environmental labels and declarations.

In addition to procurement standards, ISO has also been developing frameworks to ensure that organisations align their entire supply chain – from raw material extraction to final product delivery – with international sustainability principles. For example, in August 2019, ISO released ISO/TS 17033, its first technical specification on ethical claims and supporting information. This standard provides principles and requirements for producers, manufacturers, importers, distributors, or any other organization likely to make ethical claims.  In 2020, ISO 22095 on chain of custody terminology and models was released with the aim to standardise the field for products and associated processes with specified characteristics, with the aim of ensuring that associated claims are reliable.

4-. Conclusions
The landscape of ethical sourcing is evolving rapidly, with both regulatory frameworks and private initiatives playing key roles in shaping the future of responsible business practices. The EU’s regulatory efforts are crucial in ensuring that companies operating in Europe adhere to ethical standards and safeguard human rights and the environment. Nevertheless, global supply chains are often complex and involve multistep processes, which can sometimes make transparency a challenge -and without strict controls there remains a risk to accountability and applicability. Consequently, private initiatives may be used to fill any regulatory gaps by third-party certification of companies that uphold ethical sourcing practices. These initiatives, often focused on specific issues, provide consumers with the assurance that the products they purchase have been sourced responsibly and sustainably.

Although proliferation of unsubstantiated labels and the risk for greenwashing and ‘social-washing’ will be regulated through Directive (EU) 2024/825 from late September 2026, certification of ethically sourced products may influence the affordability for consumers and accessibility to companies; so, a clear balance needs to be struck. To this end, modern tools such as AI and blockchain could positively influence the reduction in costs without harming the integrity of the chain of custody.

In the coming years, businesses will need to prioritise transparency, due diligence, and sustainability to stay competitive in a market that demands ethical sourcing. By aligning their practices with EU regulations and backing them up with private certification schemes, companies can contribute to a more ethical and sustainable global economy and world, while also ensuring better care for the environment and considering what’s best for future generations. For consumers, who increasingly value brands that reflect their principles, companies that invest in genuine ethical sourcing—rather than doing it just for compliance—are likely to gain trust and loyalty.  This commitment to transparency and proactive action will not only strengthen their brand but also lead to a positive return on investment.

References:

[1] https://ec.europa.eu/commission/presscorner/detail/en/ip_25_614

[2] https://www.ilo.org/topics-and-sectors/forced-labour-modern-slavery-and-trafficking-persons

[3] https://uebt.org/annual-report-2023

[4] https://www.fairtrade.net/en/why-fairtrade/impact/key-figures-at-a-glance.html

[5] https://static1.squarespace.com/static/5bec424b297114f64cb908d8/t/6696a35c92271e77550d9d3b/1721148265768/FW_IMPACT+REPORT+2023_60339055.pdf

[6] https://www.fairforlife.org/pmws/indexDOM.php?client_id=fairforlife&page_id=home

[7] https://www.dol.gov/sites/dolgov/files/ILAB/Supply-Chain-India-Mica-508.pdf

[8] https://responsible-mica-initiative.com/membership/membership-current-members/

Article written by Dr Mark Smith, NATRUE Director General, and Paula Gómez de Tejada, NATRUE Global Communications and Public Relations Manager. Originally published in Kosmetika magazine (in Italian)