Reporting according to the Transparency Act and companies’ obligations – Guidance

Reporting according to the Transparency Act and companies’ obligations – Guidance

The Transparency Act has three main duties, the first is to carry out due diligence assessments of suppliers in order to promote businesses’ respect for basic human rights and decent working conditions, as well as ensure the public’s access to information. The next is the duty to provide information if someone requests information and finally the duty to provide an explanation. In this article, you can find out more about reporting under the Transparency Act.

Due diligence report according to the Transparency Act

What is an due diligence report according to the Transparency Act?

The purpose of the Transparency Act is that businesses must carry out due diligence assessments of their suppliers, before the results are made available to “anyone”. In this way, the general public will gain insight into the company’s key findings in the due diligence assessments and see which measures have been implemented

A report according to the Transparency Act is a report that must be made available to the public through the company’s website. Reporting according to the Transparency Act is based on step 5 (communication) in the OECD’s guidelines.

The reporting obligation is one of the steps in the due diligence assessments, and can be described as the last thing that happens in the process of the Transparency Act. However, the Transparency Act requires more than what appears in the OECD’s guidelines, because you must report by 30 June each year.

The obligation to “explain according to the Transparency Act” is set for 30 June each year.

The businesses must publish an account of the due diligence assessments pursuant to §4.

The Transparency Act §5
Minstekravet i redegjørelse av åpenhetsloven

Minimum requirements in the report

In order to comply with the requirements of the Transparency Act, there are several points that must be included in the report. As this is the companies’ way of presenting the results of the due diligence assessments, the reporting obligation is based on the guidelines from the OECD. This means that there are some minimum requirements that must be followed. In the Transparency Act § 5 letter a, b and c, the required requirements appear.

  • After letter a, the business must describe:
    • General description of the company’s organization (overall)
    • Goods and services offered by the business.
    • Markets in which the business operates.
    • Internal guidelines and routines around negative consequences (Enshrining accountability)
  • According to letter b, businesses must disclose:
    • Carried out due diligence assessments
    • Actual and potential negative consequences that the business has uncovered through its due diligence assessments.
  • After letter c, the following must be disclosed:
    • Measures that are or will be initiated
    • The results of the measures

As long as the minimum requirement in the reports is met, the companies are free to design the reports at their discretion. However, it will always be advantageous to describe and cover more than the minimum requirement covers.

What is defined as negative consequences?

According to the Transparency Act, businesses must assess whether they are directly linked to actual negative consequences through the supply chain and business partners. The negative consequences are defined in the Transparency Act as breaches or risk elements linked to basic human rights and decent working conditions. You can read more about human rights and decent working conditions here.

Example – violation of basic human rights and decent working conditions

Example: You find out that your supplier has refused the employees to organize in trade unions. When you delve into the topic, you find that this is to keep the salaries of the employees at a minimum in order to price themselves below the competition. In this case, your company may be directly or indirectly linked to the negative consequences regarding violations of basic human rights and decent working conditions (human rights violations: freedom of association, and potentially “living wages”) if you have helped to push prices at the supplier.

What measures or investigations would you initiate here?

Information on personal information and trade secrets

In accordance with the Act’s section 5, second paragraph, it appears that personal information and information such as competitive procedures or information can be kept out of the report. The same applies to information that is classified under the Security Act or protected by the Copyright Act. The exception is if there are actual or potential negative consequences in personal relationships or trade secrets.

Styret og daglig leder diskuterer virksomhetens redegjørelse etter åpenhetsloven
The board and general manager discuss the company’s account in accordance with the Transparency Act.

Reference to other businesses’ due diligence assessments

In many cases, it can be difficult to find information about subcontractors, this may be due to trade secrets or little available information. In these cases, you can refer to other people’s due diligence assessments to form a picture of the subcontractors’ risk. This can be from other retailers who use the same supplier, or go directly to the supplier and refer to their statement. The business to which reference is made must be covered by the Transparency Act for references to be valid, in addition to the explanation having to cover the minimum requirements in the reporting obligation.

The Norwegian Consumer Protection Authority, which itself must carry out supervision and guidance, says that reference to other people’s due diligence assessments is legal, as long as the business itself is covered by the Transparency Act. The responsibility for validity always lies with the business itself, and not the report to which reference is made.

In many cases, a group will be able to refer to the different due diligence assessments, rather than carrying out due diligence assessments of the same company many times. However, this should be considered in each individual case, as some companies have more influence on suppliers than others. It is also the business itself, which is responsible for the result of the due diligence assessment and the report, so be absolutely sure that other people’s reports are valid and correct before referring to them.

When referring to other companies’ due diligence assessments, we recommend always linking directly to the source, and describing why the information is sufficient for your company’s account.

Publication of report

Pursuant to Section 5 of the Transparency Act, businesses must publish the report once a year, on 30 June. It must then be made “easily accessible” on the company’s website, for example in the “footer” at the bottom of the page or, as we recommend, within a maximum of 4 clicks.

If the explanation according to the Transparency Act is included in the annual report or other report on sustainability, it must be stated which parts relate to the Transparency Act. This lies in making the report “easily accessible”.

However, there are exceptions to how often the report must be published. If the business discovers that there are significant changes in the level of risk with certain suppliers, a new statement must be published as quickly as possible. To assess the significant risk of negative consequences with your suppliers, a country or industry risk assessment can provide a good clue. Previous reports should be available, even after a new assessment, to ensure traceability.

Looking for a system for handling the Transparency Act? Explore ShareControl Transparency here!

“…the due diligence report is made easily available on the company’s website… The obligation to publish the report on the website applies regardless of whether the business also chooses to include the report in the annual report as part of the report on social responsibility according to Section 3-3 c of the Accounting Act.

-“Due diligence report “, Forbrukertilsynet

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