ESG lookahead 2026 – Impact on the Retail and F&B Sectors

The EU Deforestation Regulation (EUDR) begins to apply:

Get ready for application

EUDR will apply from 30 December 2026 for medium and large operators, and from 30 June 2027 for micro and small operators.

What the EUDR targets

The EUDR targets seven commodities and certain of their derived products. The seven commodities are cattle, cocoa, coffee, oil palm, rubber, soya and wood. Examples of derived products include meat, chocolate and wood tableware. (Note that printed books, newspapers, pictures and other products of the printing industry made of paper were recently removed from scope of the EUDR.)

What the EUDR does

The EUDR will prohibit placing the covered commodities and making available the derived products on the EU market, or exporting either from the EU, unless: (i) they are 'deforestation-free'; (ii) they were produced in accordance with the laws of the country of production (including laws on labour and human rights); and (iii) the operator to first place the in-scope product on the EU market submits a due diligence statement indicating no more than a negligible risk of non-compliance.

What else must companies do

Operators responsible for submitting a due diligence statement must: (i) collect detailed information that demonstrates the products comply with the EUDR, including geolocation data; (ii) carry out a risk assessment in relation to each relevant commodity/product to ascertain the risk of non-compliance with the EUDR; and (iii) mitigate risks by carrying out independent surveys and audits, gathering additional documentation, or working with suppliers through capacity building and investments.

What are the penalties?

Operators will not be able to complete import paperwork/processes unless compliant, causing a significant disruptive effect on operations and trading. In addition, Member State authorities will be able to carry out compliance checks; where relevant commodities/products are non-compliant, Member State authorities will require corrective action (e.g., a ban on the item being sold in the EU or withdrawing/recalling the product). Additional penalties for non-compliance may include fines proportionate to the environmental damage and value of the commodities/products concerned (up to a maximum of at least 4% of the company's EU turnover in the preceding year), confiscation of the relevant products or of the revenues generated from transactions involving those products.

Getting ready for the EU Forced Labour Regulation (FLR):

Be ready ahead of time

In 2026, businesses should start preparing for the EU’s Forced Labour Regulation (FLR), which starts to apply from 14 December 2027.

What the FLR does

The FLR will prohibit products made using forced labour being placed on, made available in, or exported from the EU market. It covers (i) all products, including their components and raw materials; (ii) all companies, regardless of size, sector or location; and (iii) the use of forced labour at any point in the supply chain, including extraction, harvesting, production or manufacturing.

What happens if there’s a breach?

If Member State authorities conclude that forced labour was used at any point in a product's supply chain, they can block its sale in or export from the EU, and order that it be withdrawn from the market and disposed of.

Why due diligence matters

The FLR does not impose any obligations on companies to carry out due diligence on their supply chains. In practice, however, good due diligence will be critical to spot and address risks of forced labour in the upstream supply chain well before products are brought into the EU. It will also put a business on the front foot if investigated, as Member State authorities will consider a company's approach to due diligence as part of their decision making.

New statutory guidance on the Modern Slavery Act 2015 and proposed legislation:

What’s happened?

In March 2025, the UK Government released new statutory guidance for businesses in respect of their obligations under section 54 – the transparency in supply chains provision – of the Modern Slavery Act 2015. The new guidance significantly raises the bar on what’s expected to be disclosed in a Modern Slavery Statement (MSS) and the policies, processes, risk assessments, supplier/worker engagement and training that is expected to underpin those disclosures.

What does the new guidance say?

The new guidance seeks to better explain how businesses should “comply with the letter and spirit” of the MSS provision, and provides advice on “good” and “best” practice. Specifically, for each of the six voluntary reporting areas, the guidance demonstrates the type of content companies can disclose. These areas are: (i) the company’s structure, its business and supply chains; (ii) its policies in relation to modern slavery; (iii) its due diligence processes in relation to modern slavery in its business and supply chains; (iv) assessment and management of risk of modern slavery in its business and supply chains; (v) effectiveness in ensuring modern slavery is not taking place in its business or supply chains; and (vi) relevant staff training.

What is the broader context?

Though the guidance does not change the legal requirements of the Act, it has been viewed by many as an attempt to bring company behaviour under the Act more in line with international standards and best practice, as well as a stepping stone toward a future amended, more robust Modern Slavery Act. To that end, in December 2025 the UK Independent Anti-Slavery Commissioner released model legislation for a new law to protect human rights, including by introducing mandatory human rights due diligence. This is against the backdrop of the UK Government having previously launched a review of its approach to responsible business conduct, focusing on the global supply chains of businesses operating in the UK.

What does the model legislation contain?

Among others, the proposed law would have a “failure to prevent” model seen in other UK legislation whereby when a serious human rights harm occurs, and a company is involved in the harm, it would be responsible for the harm unless it can prove it conducted reasonable due diligence. The proposed law would also provide for a general ban on exporting, importing or making available on the UK market products made with, or transported with, forced labour. In addition, companies would be required to publish an annual human rights statement, replacing the existing Modern Slavery Statement requirement.

What can companies do now?

In light of the new guidance and indications of moving toward new legislation, there will be good reason for companies to update their modern slavery statements. Key stakeholders, including investors, lenders, and corporate customers, are likely to look for increased disclosures which give more detail into the actions a company is taking in the fight against modern slavery in its business and supply chains rather than a tick box. Any company with a valuable brand or that makes claims to strong ESG credentials should pay particular attention.