The Transparency Act entered into force on 1. July 2022. Is your business well-improved and do you have the processes in place? Pursuant to section 4 of the Act, businesses must “anchor responsibility in the company’s guidelines”. In this article you can read more about this topic.
Anchor accountability in the board
The Transparency Act can be said to consist of 4 central steps, the first of which is to anchor accountability in the board. Furthermore, the business must collect all its suppliers and carry out due diligence assessments, this is again a process that consists of several steps. After a due diligence assessment has been carried out, a report must be published on the company’s website. You can read more about due diligence assessments and explanations in the “the Norwegian Transparency Act templates“. Finally, “anyone” can contact the business to gain deeper insight into the business’s enforcement of human rights and decent working conditions through the information requirement.
Anchor accountability in the company’s guidelines
Through strict requirements for transparency and accountability, the purpose of the Transparency Act is to prevent negative consequences on fundamental human rights and decent working conditions. This applies both in the company’s own operations, but also in the company’s business relationships and further down the supply chain. The Norwegian Transparency Act also requires subcontractors to be considered where possible.
What are negative consequences? Read more on the Norwegian Consumer Protection Authority’s website here.
Anchoring responsibility in the due diligence assessments is listed in §4, letter a of the legislation. This concerns that the business must set some overall goals to avoid and prevent damage. Here it is important to elaborate on concrete actions (measures), guidelines and responsibility in the business. To make it easier to understand what this entails, we have created a checklist:
Develop procedures and guidelines
For companies that are obliged to report under the Transparency Act, the board is responsible for following up on the Transparency Act. It is therefore important that the board ensures proper organization of the business, so that the company complies with laws and regulations at all times.
Read also: What is the Transparency Act and what is your duty?
The board must therefore decide how the company will comply with the Transparency Act through procedures, reports and guidelines. It is up to each individual board how detailed such provisions should be and what should be left to the general manager. There are thus no official standards from the OECD, the Norwegian Consumer Protection Authority or others to define accountability in the board. A rule of thumb, however, is that the business must have documents – guidelines, etc., which describe how the business works with human rights and working conditions. Some businesses choose here to define guidelines in the contract with their suppliers, so that the company can easily terminate the agreement if any violations can be defined as a lack of the contract entered into. Certain businesses have zero tolerance for violations of human rights and working conditions, while others do not have the opportunity to completely counter or influence the negative consequences.
Guidelines and documents must be made known to all those affected, such as employees, suppliers and business partners. This could be, for example, publishing the company’s guidelines on its website. It is also important that there is good internal knowledge of who is responsible for following up the various activities.
OECD Guidelines for General Guidelines
The OECD’s guidelines for multinational companies contain several sets of recommendations that companies should follow in the Transparency Act. In the step “anchoring accountability”, the guidelines contain the following points:
- Contribute to economic, social and environmental progress with the aim of creating sustainable development.
- Respect the internationally recognized human rights of those affected by their operations.
- Encourage local capacity-building through close cooperation with the local community, including business interests, and develop the company’s operations on home and foreign markets, in accordance with the need for sound trading practices.
- Encourage the development of human capital, particularly by creating jobs and facilitating training opportunities for workers.
- Refrain from seeking or accepting exemptions that are not mentioned in laws or regulations regarding, among other things, human rights, the environment, health, safety, working conditions, taxation, financial incentives or other matters.
- Support and maintain good principles for corporate governance and prepare and follow good routines for corporate governance, also within groups or groups of companies.
- Develop and follow effective voluntary practices and management systems that promote a relationship built on trust and mutual trust between the companies and the communities where they operate.
- Promote awareness of and compliance with the company’s policy among its employees by properly disseminating this policy, including in training programmes.
- Refrain from discriminatory or disciplinary measures against employees who in good faith provide information to management or to competent public authorities about conditions that are in breach of the law, guidelines or company policy.
- Carry out risk-based due diligence assessments, for example by incorporating them into the company’s risk management systems, in order to map, prevent and limit actual and potential negative consequences as described in points 11 and 12, and to account for how these consequences are handled. The nature and scope of due diligence assessments depends on the specific situation.
- Avoid causing or contributing to negative consequences as a result of your own activities in matters covered by the guidelines, and deal with such consequences when they occur.
- Strive to prevent or limit negative consequences even if they have not contributed to them, when the relevant consequences are nevertheless directly linked to their business, goods or services through a business relationship. The purpose here is not to shift the responsibility from the entity that is the cause of the negative consequences onto the company with which it has a business relationship.
- In addition to dealing with negative consequences in connection with matters covered by the guidelines, where it is practically possible to encourage business partners, including suppliers and subcontractors, to follow principles of responsible business practice in accordance with the guidelines.
- Collaborate with stakeholders so that they have a real opportunity to promote their views and be taken into account in planning and decision-making processes in connection with projects or other activities that may have significant consequences for the local community.
- Refrain from all inappropriate interference in local political activities.
Download guide for the Transparency Act
Get an insight into all the functions and processes that can help you deal with the Transparency Act. We have created a complete guide that takes you from anchoring in the board to due diligence assessments, risk assessment and reporting.
Get the guide in your inbox
The guide is only available in norwegian.
Define roles and responsibilities
Despite the fact that it is the general manager and the board of directors of the business who are responsible for compliance with the Transparency Act, every business should define roles and responsibilities in handling the legislation. This ensures both compliance and streamlining of the processes. In this step, the business should both uncover roles and responsibilities within purchasing practices and during the work with risk assessment, work with explanations and handling of information requirements.
It should also be defined in the guidelines that the employees follow up each individual supplier when entering into new contracts. Good purchasing practice is defined as a good preventive activity against negative consequences, while at the same time saving employees from time-consuming work in due diligence assessments and the implementation of measures after any damage has occurred. A good starting point for good purchasing practice is to use tools such as the “High-risk list” from DFØ and sign the “Code of Conducts” when entering into a contract.
In connection with due diligence assessments, it is important to define guidelines for which businesses are to be examined more thoroughly than others. This can be based on country risk or total transactions with suppliers. It should also be defined who follows up each individual supplier, e.g. a person or department, contact person for each individual supplier or general manager.
Anchor accountability in the company’s agreements
A preventive measure businesses can take in step 1, anchoring accountability, is to implement guidelines in agreements. This involves incorporating guidelines into the agreements with suppliers and business partners that ensure compliance with the company’s expectations for responsible business. This can be achieved through thorough dissemination of the guidelines through formal contracts or other documentation.
The communication of expectations to suppliers and business partners should be in writing and include requirements for compliance with guidelines for responsible business, expectations for transparency, follow-up and reporting, as well as information on the spread of responsibility throughout the supply chain. It should also be made clear that non-compliance with the guidelines can lead to contract termination
When assessing new collaboration partners, criteria relating to responsible business should be included in processes, tender criteria or screening criteria to ensure that the standard is maintained.
Laws around human rights in Europe
The introduction of the Transparency Act can be seen in the context of what is happening in the rest of Europe. In Great Britain, the “UK Modern Slavery Act” was implemented in 2015. In 2017, France received the “Plan of vigilance“, while Germany implemented the law that is so far most similar to the Transparency Act with the name “Law on Corporate Due Diligence in Supply Chains“. Most countries that have implemented similar legislation have set the duty limits considerably higher than Norway, but it is expected that these will gradually level out.
Anchor accountability with a system for the Transparency Act
ShareControl Transparency offers a solution tailored for businesses that want to meet the requirements of the Transparency Act in an efficient and secure way. Built on Microsoft Power Apps, ShareControl Transparency provides an intuitive user experience and enables seamless integration with a variety of platforms, including Microsoft 365, Power BI and Dynamics 365.
Read also: New system for the Transparency Act
With a software for the Transparency Act, businesses can easily store data relating to basic human rights and decent working conditions in accordance with the requirements of the Norwegian Transparency Act. Through tools such as Microsoft Forms and Customer Voice, ShareControl Transparency also provides the opportunity to send out questionnaires in connection with due diligence assessments, as well as generate automated reports based on collected data. With ShareControl Transparency, compliance with legislation and ethical practice becomes a seamless part of the company’s operations.
