The Norwegian Transparency Act (the Act) will take effect on July 1st, 2022. As a consequence, thousands of companies will be required to carry out human rights due diligence on their own activities and supply chains. They will also be required to assess the adverse impacts of relevant business partners.

The new law will promote transparency and, it is hoped, support fundamental human rights and decent working conditions.

Who needs to prepare for The Act?

It is estimated that 8,830 companies worldwide will be subject to the Act. It will also impact on a vast number of their suppliers.

The Act will target companies registered in Norway that offer goods and services in or outside of the country. These companies must meet at least two of the following criteria to qualify:

•      Sales revenue higher than NOK 70 million (~$8 million)

•      A balance sheet higher than NOK 35 million (~$4 million)

•      An average number of employees (in a given financial year) that is equivalent to at least 50 full-time staff

Importantly, the Act will also target foreign companies that are taxed in Norway or offer goods and services to the Norwegian market. Parent companies will fall under the remit of the Act if the above conditions are met for parent and subsidiary companies seen as a unit. [1]

What requirements will The Act impose?

The Norwegian Transparency Act will require companies to perform human and labour rights due diligence, which will cover their own activities as well as those of their relevant business partners (including their suppliers). This due diligence must be carried out regularly and be proportionate to the size of the business.

Companies will also be expected to identify the ‘actual and potential’ human rights impacts of their operations, and communicate them in turn to stakeholders, investors, and consumers. Companies will be obliged to publish an annual report on their due diligence efforts.

Furthermore, any member of the Norwegian public will have the right to request information from the company on how they address their human rights impact. This will include general information and specific information related to a product or service.

Enforcement

Enforcement penalties will be established in cases of non-compliance.

If a company repeatedly fails to account for their human rights impacts, process requests for information, or to provide this relevant information, an infringement penalty may be imposed. These penalties can be imposed on companies and on individuals acting on behalf of a company.

The Norwegian government will review the severity and scope of an infringement before determining the size of the corresponding fine. [2]

Action

If your company falls within the scope of The Norwegian Transparency Act, you will need to start conducting human rights due diligence on or before July 1st, 2022. Failure to do so will increase legal, reputational, and operational risk.

Please feel free to contact us if you require guidance or support.

References

[1] Bahr

[2] The Norwegian Transparency Act