Businesses must respect fundamental human rights - the Transparency Act

On 1 July 2022, the Transparency Act entered into force. The Act shall promote business respect for fundamental human rights and decent working conditions in connection with the production of goods and the provision of services, and ensure the general public access to information regarding these conditions.

The Act is supposed to, among other things, make it easier for consumers to make informed purchase choices, provide the media with information that can help to uncover, influence and pass on socially important information, and provide investors with information to make ethical investments.

Supervisor on the Transparency Act's requirements for businesses

The Act sets in particular two requirements for enterprises.

  1. First, businesses are required to carry out due diligence assessments in order to stop, prevent or limit negative consequences for basic human rights and decent working conditions to which the business is associated with.
  2. Second, businesses are required to share information. This includes the duty to publish reports on the due diligence assessments and the duty to provide information to the general public and the supervisory authorities upon request.

The Norwegian consumer Agency (Forbrukertilsynet) has been given the responsibility to supervise the Act and provide guidance to the businesses. The Norwegian Market Council processes complaints about the Consumer Agency's decisions. The Consumer Agency and the Market Council (independent, but subordinate to the Ministry of Children and Equality) can make decisions on bans, injunctions, compulsory fines or infringement fees.

The Transparency Act is based on the recommendations that follow from the UN's Guiding Principles on Business and Human Rights (UNGP) and the OECD's guidelines for multinational companies. The Transparency Act shall work in conjunction with these. Businesses should therefore also look to these documents in their work to comply with the Transparency Act.

Who is subject to duties under the Transparency Act?

The Act applies to larger Norwegian enterprises that offer goods and services in Norway, as well as larger foreign enterprises that offer goods and services in Norway and which are taxable here. The term "larger enterprises" include enterprises that are covered by the Norwegian Accounting Act Section 1-5 (mainly public limited companies and listed companies), and which on the balance sheet date exceed the limits of two of the following three conditions:

  • Sales revenue of NOK 70 million
  • Balance sheet total of NOK 35 million
  • Average number of employees in the financial year corresponding to a minimum of 50 full-time equivalents

Businesses covered by the Act may make demands on their subcontractors and business partners. It can therefore be beneficial for smaller businesses to take measures to ensure fundamental human rights and decent working conditions.

Furthermore, there may be reason to note that the Transparency Act must be evaluated after it has been in force for a period, and that it may be relevant to expand both the group of enterprises covered and the requirements imposed on the enterprises.

The duty to carry out due diligence assessments

The Transparency Act requires businesses that are covered by the Act to carry out due diligence assessments. Section 4 of the Transparency Act stipulates that businesses must:

  • Anchor accountability in the company's guidelines.
  • Map and assess actual and potential negative consequences for fundamental human rights and decent working conditions that the business has either caused or contributed to, or that are directly linked to the company's business operations, products or services through supply chains or business partners.
  • Implement appropriate measures to stop, prevent or limit negative consequences.
  • Monitor the implementation and results of measures.
  • Communicate with affected stakeholders and licensees about how negative consequences have been handled.
  • Provide or collaborate on recovery and compensation where this is required.

The due diligence assessments must be carried out regularly and be in proportion to;

  • the size and nature of the business,
  • the context in which the business takes place (such as the size of the company, the company's operational context, business model, position in the supply chain and type of product and services), and
  • the severity of and the likelihood of negative consequences for fundamental human rights and decent working conditions.

The duty to provide information

Businesses covered by the Transparency Act are also obliged to share information to ensure transparency. This means, firstly, that businesses must publish their account of the due diligence assessments that have been carried out. The statement must be made easily available on the company's website and updated and published by 30 June each year, and otherwise in the event of significant changes in the company's risk assessments.

Furthermore, the businesses covered by the Act are obliged to inform anyone who requests it in writing about how the business handles actual and potential negative consequences identified in the due diligence assessments. As a general rule, such information must be given to the person who requests it within three weeks after the request for information has been received. There are some narrow exceptions to the obligation to provide information.

The businesses are also obliged to provide information to the Norwegian Consumer Authority and the Market Council, to the extent required for the authorities to perform their tasks.