Background
In June 2021, Norway adopted the Transparency Act ("Åpenhetsloven") – also referred to as Norway's Supply Chain Transparency Act. The purpose of the supply chain transparency act is to increase transparency and encourage companies to respect human rights and decent working conditions throughout all business relationships in their value chain. To ensure this, the law requires companies to perform due diligence assessments, and to document how they work to prevent or limit these risks. The Transparency Act is enforced since July 1st, 2022.
It is oriented towards the UN Guiding Principles on Business and Human Rights, OECD Guidelines for Multinational Enterprises, as well as the UN Sustainability Development Goals and aims to impose legal obligations for firms to comply with these guidelines. While the act is limited to fundamental human rights and decent working conditions, the OECD Guidelines for Multinational Enterprises include more than this, such as environmental damage, which also should be taken into account in order to fully comply. The Norwegian Parliament may also reassess this point in the upcoming evaluation of the law, to include environmental risks.
Who is impacted?
The act applies to large and mid-size companies that are public limited companies, listed companies and other accounting entities. The companies must be based in Norway or offer goods and services in Norway, hence be taxable there. Also, incumbents which meet at least two of the following three conditions:
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over 70 million NOK in sales revenue
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over 35 million NOK in balance sheet total
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over 50 average number of employees in the financial year (or equivalent annual man-hours)
Requirements
The companies subject to Norway's Transparency Act are obliged to:
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Carry out regular due diligence assessments related to human rights and decent working conditions in accordance with the OECD’s guidelines for multinational companies.
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Get an overview of the consequences their business, supply chains and business partners have on human rights and working conditions, including severe risks and harmful incidents.
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Investigate and manage risks related to human rights and working conditions.
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Provide compliance information at the request of the general public (such as consumers and investors) within 3 weeks, or if necessary, within two months.
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Publish the due diligence assessments digitally on the company’s website.
Consequences
The Norwegian Consumer Authority provides guidance for companies, and supervises compliance with the Transparency Act. In case of violations, the Norwegian Consumer Authority has the authority to impose fines for non-compliance with orders or decisions, as well as a violation fee. Fines can both be imposed on companies and responsible individuals within a company.
However, victims of human rights abuses will not have the right to seek remedy in court, and the law does not provide for civil liability for harm.
Risk Mitigation
Companies are advised to start the work of integrating and conducting due diligence assessments, and to document these processes. Most importantly, in order to identify risks in the value chain, companies must get an overview of their supply chains and understand them in as much detail as possible. Mapping all of your suppliers, including their locations, the nature of their businesses and their workers, as well as communicating with them regarding the new regulations can be a difficult and time-consuming process.
Here is where TrusTrace comes in
TrusTrace provides actionable transparency of your entire supply chain and makes it easier to manage compliance, supply chain risk and communicate product origin easily and credibly. Contact us for more information on how we can help your company.
The text was last updated on June 4th, 2024 with corrections to the name of the Norwegian Consumer Authority, formatting and also removing outdated language as the law is now enforced.
