New Transparency Act

| Insight

The Act relating to enterprises’ transparency and work on basic human rights and decent working conditions (the Transparency Act) was passed on 18 June 2021. The Transparency Act will enter into force on 1 July 2022. This entails a number of new obligations for enterprises that are affected by the law.

The Transparency Act requires that enterprises covered by the Act shall carry out and account for due diligence assessments in accordance with Section 4 and Section 5 and answer specific requests for information pursuant to Section 6 and Section 7. The purpose of the Transparency Act is to promote enterprises’ 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 how enterprises address adverse impacts on basic human rights and decent working conditions.

The Transparency Act applies to larger enterprises that are resident in Norway, and that offer goods and services in or outside Norway. The Act also applies to larger foreign enterprises that offer goods and services in Norway and are liable to taxation to Norway pursuant to Norwegian internal legislation. Larger enterprises primarily mean enterprises covered by Sections 1 to 5 of the Norwegian Accounting Act – in practice public limited companies and listed companies in general. Secondly, an enterprise falls within the scope of the Transparency Act if the enterprise exceeds two of the following three conditions in accordance with the Transparency Act, Section 3, first paragraph, letter (a):

  1. sales revenue: NOK 70 million
  2. balance sheet total: NOK 35 million
  3. average number of employees in the financial year: 50 full-time equivalents

The obligations imposed on enterprises in the Transparency Act are enshrined in international guidelines and principles for responsible business, including the UN Guiding Principles on Business and Human Rights (UNGP) and the OECD’s Guidelines for Multinational Enterprises. The legislator has emphasised that the Transparency Act does not replace international principles and guidelines. Enterprises are still expected to know and follow UNGP and OECD guidelines. This expectation applies to those who are covered by the scope of the Transparency Act as well as those who fall outside of it. This means that all enterprises should carry out due diligence assessments in line with UNGP and OECD guidelines, even though the Transparency Act will only apply to larger enterprises. In the same way, enterprises are still expected to carry out due diligence assessments for corruption and environmental impact, even though the Transparency Act is limited to basic human rights and decent working conditions. The fact that the Transparency Act has a narrower scope than the UNGP and OECD guidelines must not be interpreted as a signal of a narrower expectation relating to the UNGP and OECD guidelines. On the contrary, the purpose of the Transparency Act is to uphold international principles and guidelines and ensure that they are better known and complied with.

Larger enterprises to which the Transparency Act applies have a duty to carry out due diligence assessments as described in Section 4 of the Transparency Act. Section 4 lays down detailed requirements for the due diligence assessments in line with OECD guidelines. In practice, smaller enterprises that are subcontractors to enterprises directly covered by the Transparency Act will have to be prepared to be met with the same expectations in order that larger enterprises will want to make use of them as subcontractors.

In accordance with Section 5, the enterprises shall publish an account of these due diligence assessments. The account shall be made easily accessible on the enterprise’s website and may form part of the account on social responsibility pursuant to Section 3-3 (c) of the Norwegian Accounting Act. In their annual report, enterprises shall inform of where the account may be accessed. The report must be updated and published by 30 June each year and again in the event of any significant changes in the enterprises’ risk assessments.

Pursuant to Sections 6 and 7 of the Transparency Act, enterprises have a duty to respond to individual requests for information regarding how the enterprise addresses adverse impacts on basic human rights and decent working conditions.

Pursuant to Section 8 of the Transparency Act, the Norwegian Consumer Authority shall provide guidance and, in accordance with Section 9, monitor compliance with the provisions of the Act. The Consumer

Authority may issue decisions on prohibitions and orders to ensure that Sections 4 to 7 of the Transparency Act are observed. The Consumer Authority may impose a enforcement penalty pursuant to Section 13 for breach of any obligation under the Transparency Act. Section 14 of the Transparency Act does not authorise the imposition of infringement penalties in the event of a breach of the duty to carry out due diligence assessments pursuant to Section 4. On the other hand, Section 14 of the Transparency Act authorises the Norwegian Consumer Authority to impose infringement penalties for breaches of the duty to provide information pursuant to Section 5 and 6 and deadlines for providing information in Section 7. The duty to provide information under the Transparency Act is recognisable with the duty to provide information that Norwegian enterprises have under Section 16 of the Norwegian Environmental Information Act (environmental information) and Section 10 of the Norwegian Product Control Act (product-specific information), however there are differences in how these duties are formulated and regulated.

Section 15 of the Transparency Act allows for the individual provisions of the Act to be entered into force at different times. In Proposition to the Storting 150 L (2020-2021), the Ministry mentions the option of putting the substantive rules of the law into force ahead of the enforcement rules so that the enterprises that are imposed obligations under the law, in such a case would be granted a period of familiarisation with the rules of the law and create internal guidelines without risking reactions from the public authorities. By resolution of 1 October 2021 no. 2929, the Transparency Act was nevertheless enacted in its entirety with effect as of 1 July 2022, and all enterprises covered by the Transparency Act must thus comply with the obligations arising from the Act from this date. With this in mind, it may be a good idea to engage external legal assistance in advance to ensure that your enterprise is compliant with the requirements of the Transparency Act from day 1.