The Norwegian Transparency Act: Key Insights for Business

June 30, 2022
Authors
  • Kia Kyhl portrait

    Kia Kyhl

    Associate

  • Alice Pease portrait

    Alice Pease

    Manager

  • Francesca Manta portrait

    Francesca Manta

    Associate Director, Global Membership

Majestic fjords, Nobel Peace prizes, and cheese slicers are not the only special features of Norway—there is also an important culture of trust and transparency among peers. So much so that everyone’s income and taxes are made public for everyone to see. It is therefore not surprising that one of the most ambitious national laws on human rights due diligence to date, which takes effect on July 1, 2022, is called Åpenhetsloven—literally, the Transparency Act.

While the business and human rights field has been buzzing with talk of the EU Proposal for a Directive on Corporate Sustainability Due Diligence (CSDD), the imminent entry into force of the Norwegian Transparency Act follows a broader trend by national legislatures across Europe—including in France and Germany—to turn human rights due diligence into law.

Following France’s trailblazing Corporate Duty of Vigilance Law in 2017, the German Supply Chain Due Diligence Act is set to come into force in early 2023. At a regional level, the EU Corporate Sustainability Due Diligence (CSDD) Draft Directive will introduce due diligence obligations on thousands of large companies based and operating in Europe—albeit not before 2025-28.

As the Norwegian Transparency Act becomes the newest human rights due diligence law to enter into force, what does it mean for business with operations in Norway? How should they best prepare?

Below are key insights and recommendations based on work we conducted with our members on assessing their preparedness for the Transparency Act.

  • Scope

    The size and volume threshold for in-scope companies is substantially lower than for other human rights due diligence laws across Europe. Large companies are defined as companies that meet at least two out of the three following criteria:

    (1) at least 50 full time employees during the fiscal year (or equivalent man hours)

    (2) An annual turnover of at least NOK 70 million (EUR€6.9 million or US$7.94 million)

    (3) A balance sheet of at least 35 million NOK (EUR€3.5 million, or US$3.97 million)  

     The Act requires companies to promote respect for human rights and decent working conditions (including the provision of a living wage) across their operations and supply chains. It covers companies in Norway and foreign companies that sell products and services in Norway.

  • The Right to Request Information

    The right to request information is a unique aspect of the Norwegian Transparency Act and a first in the broader armory of human rights due diligence instruments (there is no such right in the German or French due diligence laws nor in the EU CSDD proposals). The requirement enables any individual to request information from a company on how it addresses actual and potential human rights impacts.

    In practice, it means that any member of the public, including investors, NGOs, and trade unions, can ask for information about a company’s due diligence efforts. How this right will play out in practice—including the level of information that companies need to provide—remains to be seen.

  • Due Diligence in Line with the OECD Guidelines

    The Act does not deviate substantially from internationally recognized standards in terms of due diligence requirements, although it is more demanding in terms of supply chain coverage. This means all companies should conduct due diligence, in a manner proportionate to their type, size, sector, and operational context, and follow a risk-based approach.

  • Human Rights Reporting Requirements

    The Act also establishes a human rights reporting obligation for companies. A company must publish an annual human rights statement by June 30 that is publicly available on the company’s website. It requires sign-off by all Board members.

  • Oversight and Enforcement

    The Norwegian Consumer Authority will be the public enforcement authority responsible for overseeing the Act’s implementation. It is responsible for publishing appropriate guidance and enforcement in the case of non-compliance by businesses, including by issuing orders and fines (amount is unspecified). So far, there has been limited guidance from the Consumer Authority on key elements of the Act.

Recommendations for Business

Based on its work on the Norway Transparency Act and UNGPs and OECD Guidelines, BSR has three recommendations for in-scope companies:

1. Conduct Due Diligence in Line with Internationally Recognized Standards

The Norway Transparency Act is one of several emerging mandatory due diligence obligations to come into effect across Europe. To future-proof their work, companies can build a human rights due diligence approach that is consistent with the standards set out in the OECD Guidelines and the UNGPs.

2. Prepare for the Right to Request Information

The Right to Request Information is a novel feature in the human rights due diligence legislative landscape and requires the development of a clear process for responding to requests.

  • Define a process and procedure for responding to requests: Determine appropriate tool, function(s), and process for receiving, assessing, and addressing human rights request and criteria for instances when request may be refused. Mobilize stakeholders and resources internally to ensure they are prepared to respond to requests for information on how they address potential and actual human rights impacts. Key functions for examples would be Sustainability, Compliance, and Public Affairs.
  • Enhance visibility over human rights due diligence efforts: Map human rights due diligence efforts and relevant stakeholders across the company to enable a prompt and comprehensive response within the timeframe. Anticipate through stakeholder engagement what issues could be of interest to the public and prepare internal reports accordingly.
  • Build capacity on human rights due diligence across the company: Engage with all relevant functions (e.g., Legal, Compliance, Procurement, Public Affairs and Communications) to help them understand the philosophy of the Act and the benefits of a more proactive and detailed transparency about the company’s human rights due diligence efforts.

3. Monitor Implementation and Engage with Regulatory Bodies

Lack of certainty remains around the scope of several of the Act’s key elements, including the Right to Request Information, the inclusion of living wage in the definition of decent working conditions, and requirements for downstream due diligence. The Norwegian Consumer Authority has indicated that producing clear guidance will be a key focus when the law enters into force and that it encourages businesses to come forward with any questions.

Human Rights and Sustainability functions can also work with colleagues in their regulatory teams to engage with the Norwegian Consumer Agency to keep abreast of the latest developments.

The construction of a risk-based human rights due diligence approach and transparency with external stakeholders on human rights efforts are foundational elements of the Norway Transparency Act. We encourage companies and members to follow the requirements above, not only to respond to the Act but to start building a robust architecture for human rights due diligence obligations to come across Europe. And who knows, full transparency may soon become the norm way beyond the beautiful Norwegian fjords.

Let’s talk about how BSR can help you to transform your business and achieve your sustainability goals.

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