The Transparency Act

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Newsletter

Published 05 July 2021
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Act concerning Enterprises’ Transparency and Work on Fundamental Human Rights and Decent Working Conditions (the Transparency Act) was adopted by the Storting (the Norwegian Parliament) on 18 June 2021. The Act enters into force at the date determined by the King. The Act is a consequence of the Ethics Information Committee’s report Transparency relating to supply chains and the Committee’s proposal for an act on enterprises’ transparency relating to supply chains, duty of knowledge and due diligence assessments.

The Act shall promote enterprises’ respect for fundamental human rights and decent working conditions in connection with the production of goods and the provision of services, and shall ensure that the public has access to information on how the enterprise impacts fundamental human rights and decent working conditions. The Act applies to larger enterprises that offer goods or services in or outside Norway, both Norwegian and foreign
enterprises, provided that the enterprise meets two of the following criteria: (i) turnover exceeding NNOK 70 (ii) balance sheet total exceeding MNOK 35 and (iii) an average number of employees in the financial year exceeding 50
man-years.

The key measures taken in the Act are orders to the enterprises covered by the Act on the duty to carry out due diligence assessments. This includes the duty to map and assess negative consequences, assess and implement
measures to stop, prevent or limit negative consequences, ongoing monitoring, communication with affected interests and the duty to recover and compensate where required.

The enterprise shall publish a report of its due diligence assessment. The report shall be made available on the enterprise’s website, and be included in a statement pursuant to the Norwegian Accounting Act, Section 3-3 letter c. A completely new measure is that everyone is entitled to receive written information from the enterprise about how the enterprise handles actual and potential negative consequences. It can be expected that there will be very
tangible reactions. The Transparency Act imposes sanctions in the form of fees if the enterprise does not meet the requirements of the law.
There is no direct ban on trade, for example with suppliers violating human rights, etc.

Rules on the determination of coercive fines and fines for violations have not yet been established. Both the enterprise and natural persons may be fined.

A potentially far greater consequence of the Act, which has not been discussed in the preparatory works, is that enterprises with a duty to inspect will and shall acquire knowledge of activities throughout the supply chain. This means that it will be easier for authorities other than the Norwegian Consumer Agency or the Norwegian Market Council to have a basis for establishing criminal guilt and contributory negligence related to a number of different violations, including forced labour. Indirectly, the Act introduces a new era that hampers a defence based on lack of subjective guilt.

Enterprises covered by the Act shall implement measures to meet the requirements for due diligence assessments and plans for measures to stop, prevent or limit negative consequences, as well as for publication of implemented measures.

This requires:
- Declaration of transparency and transparency policy
- Compliance management system which includes
(i) Routines for due diligence assessments
(ii) Mapping of potential negative consequences to fundamental human rights and working conditions, including ongoing follow-up
(iii) A system for reaction against identified violations
(iv) A system for market communication about measures.