Measures under the Transparency Act

At a time when corporate social responsibility and human rights are receiving increasing attention, governments around the world are taking steps to ensure that companies maintain ethical standards. The Norwegian Transparency Act is one such piece of legislation that aims to hold companies accountable for their actions and promote transparency in their operations.

In this article, you can explore concrete actions against companies that violate basic human rights and decent working conditions under the Transparency Act.

Adopt measures to the Transparency Act

The Transparency Act requires companies to carry out due diligence on their suppliers to identify negative impacts on fundamental human rights and decent work. Furthermore, companies must implement measures to prevent, limit or stop the negative consequences associated with the activity.

The Norwegian Transparency Act – an overview

The Norwegian Transparency Act was adopted in 2021. The law applies to large companies operating in Norway and requires them to provide information about their efforts to prevent human rights violations and working conditions in their operations and supply chains. This also applies to foreign businesses that sell goods or services in Norway.

The law requires that more than 9,000 companies carry out due diligence assessments of their suppliers. Furthermore, the results must be explained on the company’s website, no later than 30 June each year. Measures according to the Transparency Act must be implemented to prevent, limit or stop negative consequences. The purpose of this is to direct focus and minimize companies’ influence on the negative consequences for basic human rights and decent working conditions.

Handling the Transparency Act

We at Share Control were early on in offering solutions for handling the data in the Transparency Act in one system. ShareControl Transparency is built on the Microsoft Power Platform, which ensures good user-friendliness and at the same time secure handling of the data and compliance with the legislation.

The system makes it easy to collect information from your suppliers through our integration with Customer Voice and Microsoft Forms. The solution also maintains a complete history of previous due diligence assessments and reportswhich is a great advantage if there is a demand for access. After completed due diligence assessments, you can easily generate a report to PDF, based on your data in the system. If you need templates for an investigation, ethical guidelines, a document for anchoring in the board or something else, we can arrange this in the system.

Read also: Risk assessment by country.

Measures under the Transparency Act

Taking action when companies violate human rights is essential to ensure that individuals and communities are protected from harm. By holding companies accountable for their actions, governments can send a strong message that human rights violations will not be tolerated. This helps to create a culture of respect for human rights and encourages companies to adopt responsible practices. Which measures are implemented depends on the degree of severity, involvement and consequences.

The Norwegian Consumer Protection Authority provides the basis for three levels of measures under the Transparency Act:

Preventive measures
Restrictive measures
Stopping measures

Further in the article, you can see which specific measures you can take in the event of a violation of basic human rights and decent working conditions.

“implement suitable measures to stop, prevent or limit negative consequences based on the business’s priorities and assessments according to letter b”
– Åpenhetsloven §4, bokstav c.

Preventive measures under the Transparency Act

As is the purpose of the Transparency Act, the preventive measures are something that is initiated before the damage has actually occurred. This may be on the basis of the risk assessments carried out by the business in the due diligence assessments, whereby a more thorough check is carried out if the probability or consequence is high.

As a preventive measure, the business can adapt activities, e.g. by changing ingredients, substances or chemicals that may be harmful to people or the environment. If there is a risk of negative consequences that can be replaced by upgrading the plant or purchasing new machines, this is a preventive measure. Other effective measures are employee training, qualifying suppliers, creating long-term and close supplier relationships.

Encourage responsible supply chains

Many companies operate in complex global supply chains, where human rights violations can occur at various stages. By taking action against companies that violate human rights, businesses can encourage responsible practices throughout the supply chain. This includes conducting due diligence assessments, implementing robust monitoring mechanisms and working with suppliers to resolve any breaches promptly.

We recommend encouraging responsible supply chains if the severity or probability of the human rights violation is high, regardless of how involved the business is in the damage.

Restrictive measures

If damage has already occurred and negative consequences have led to damage/violation of basic human rights and decent working conditions, the next step is to limit the damage.

To limit damage and negative consequences after they have occurred, preventive measures can be used as additional measures to ensure that the damage does not happen again in the future. In most cases, adapting the activity, changing the production process, ingredients etc. be a very effective limiting measure. In some cases this will not be enough, and other activities such as upgrading machines and facilities, creating long-term connections and collaborating across industries to create improvement at suppliers. Collaborating across industries, and in some cases with authorities, will put pressure on the supplier, so that limiting measures are put in place.

Identify and link to existing measures

In several industries, there are many suppliers and providers who offer the same products or services, an example is the construction industry, which you can read an example of below. The Norwegian Consumer Protection Authority has itself supported the idea of sharing and collaboration across companies, in order to achieve better human rights and working conditions at suppliers. Cooperation on measures and sharing of information is therefore recommended as far as possible.

Example: The fictitious supplier Bygg Share AS supplies equipment to outlets throughout Norway. The supplier has production and offices in a number of countries, including Norway and China. As we can see in the country risk table, China is defined as a high-risk country based on violations of human rights. As a result, retailers conduct risk analyses and due diligence to verify human rights and labor violations, but find that female employees in China are paid far less than men for the work they do. As the UN explains, equal pay for equal work is a human right, and in this case a violation of human rights. Measures must therefore be initiated, but the small company that buys for NOK 50,000 a year has little or no influence. All outlets with Bygg Share AS as a supplier can therefore join together and have much greater influence.

Stopping measures

In some cases, it will not be possible to prevent or limit damage or the risk of human rights violations, in which case only stopping measures will work effectively. Examples of this are for small suppliers who have little or no influence on the supplier. In some cases, cross-industry cooperation (as we showed an example above) may not be enough to persuade the supplier to change its practice, in which case stopping measures are often the only way out.

Examples of stopping measures under the Transparency Act are ending cooperation and/or contracts with suppliers, so that companies have no connection to the human rights violations. The company should therefore look for new suppliers with similar or equivalent products or services. There may also be cases where human rights are violated in a specific department or product, and certain activities are therefore cut. Severity, scope and probability of breach are the most important parameters the company should consider in such cases.

Involvement in violations of human rights

Where the business itself partially or fully causes a negative consequence for human rights or decent working conditions, the activity must be stopped immediately. This can be in cases where substances harmful to health are discovered in production, discrimination against women or torture of miners.

It is the senior management’s responsibility to stop activities and implement measures that stop and prevent negative consequences. The management is also responsible for any compensation to the persons who have suffered from the negative consequence, if there is a direct or indirect involvement in the breach.

Responsible purchasing practices

In many cases, a concrete contract or collaboration between the business and the supplier has not been defined, e.g. when purchasing office equipment, telephones and PCs. Influence and involvement are therefore difficult to define and often impossible for medium-sized companies. Responsible purchasing practices can therefore be regarded as a preventive measure under the Transparency Act, in that the business at all times assesses suppliers and outlets according to respect for basic human rights and decent working conditions.

The Directorate for Administration and Financial Management (DFØ) has created an overview with the “High Risk List“, where you can see the level of risk for human rights violations in the supply chain of a number of products, including mobile phones, computers and computer screens. We recommend all our customers to use this in the evaluation phase to ensure responsible purchasing practices.

What are the consequences of violations or deficiencies?

It is Forbrukertilsynet that guides businesses and supervises the provisions of the legislation. In order to avoid violations or deficiencies under the Transparency Act, it is important that the business complies with the deadline for reporting each year on 30 June.

The Norwegian Consumer Protection Agency (Forbrukertilsynet) prioritized guidance in the first year of the Transparency Act. They further warn that they will continue to prioritize work with guidance, but that they would start checks after the summer of 2023.

Violation of the provisions of the Transparency Act can lead to sanctions.

Although the Norwegian Consumer Protection Authority has mainly emphasized guidance in the first year since the law came into force, it is nevertheless important to stress that we will crack down on extensive and obvious breaches of the law’s provisions. Businesses that have not proven their responsibility, and do not comply with the law, risk sanctions.
– Trond Rønningen, director of the Norwegian Consumer Protection Authority