The Norwegian Transparency Act requires over 9,000 Norwegian companies to monitor human rights in their own operations and supply chain. Foreign businesses may also be covered. In this article you can read more about the requirements required under the Transparency Act for non-Norwegian companies.
The Transparency Act for foreign businesses
The Transparency Act is one of several Norwegian measures to meet the UN’s sustainability goal no. 8 on decent work and economic growth, and goal no. 12 on responsible consumption and production.
The requirements of the Transparency Act
The Transparency Act requires businesses to carry out due diligence assessments in accordance with the OECD’s guidelines for multinational companies. Furthermore, the businesses must give an account of their findings in connection with actual and potential negative consequences for basic human rights and decent working conditions. The legislation also refers to the information requirement, which means that the business must answer any questions about the company’s handling of basic human rights in its supply chain. There are also requirements for anchoring responsibility in the board ahead of the above-mentioned requirements.
Read more about basic human rights and decent working conditions here.
The deadline for reporting is set for 30. June each year.
Implement, monitor and evaluate measures
In accordance with the Transparency Act, companies must implement routines and processes to identify risks and implement measures to prevent, reduce and rectify any negative consequences. A system for handling the data is therefore recommended for businesses with a larger group of suppliers.
Companies themselves must monitor and evaluate the effectiveness of the measures implemented and make the necessary adjustments to ensure continuous improvement.
Find out more about our solution ShareControl Transparency here!
Why is the Transparency Act important?
The purpose of the act is to eliminate and follow up actual and potential risks related to violations of general human rights and decent working conditions in the company’s own business and in the supply chain. Where it exists risk or discovery of a violation of human rights, measures must be taken to prevent, reduce consequences or stop activity. It must also be assessed whether compensation claims or the like are necessary in cases where the damage has led to disadvantages for society or people.
The Transparency Act is intended to help reduce the risk of human rights violations and poor working conditions in Norwegian and foreign businesses and supply chains. At the same time, the Act must ensure the general public access to information about how businesses handle actual and potential negative consequences linked to their business. This can contribute to increased awareness and commitment from both customers, investors and other stakeholders.
Which foreign companies are covered?
The Transparency Act requires all businesses that exceed two of the following criteria:
- Revenue: NOK 70 million
- Balance amount: NOK 35 million
- Average number of employees in the financial year: 50 man-years
For foreign businesses that are not domiciled in Norway or that have their head office in another country, they will have the same reporting obligation as Norwegian businesses if the above criteria are met. One of the prerequisites, however, is that the business is liable to tax in Norway according to internal Norwegian legislation and supplies goods or services in Norway. The business must also have income as a result of it being operated or managed from/in Norway in accordance with Section 2-3 of the Tax Act. The Act thus makes no requirement that the business must have a geographical connection to Norway, in the form of a branch, office or other fixed place of business in order to be covered by the Transparency Act.
Foreign enterprises that are defined as large enterprises, including. public limited companies, listed companies, banks, credit companies, financing companies, etc. and who sell goods or services in Norway are defined by the legislation. Furthermore, Sections 1-2 of the Accounting Act form the framework for duty subjects.
Read also: Templates for the Transparency Act – a procedure for enforcing the law’s requirements
Creation of subsidiaries
For businesses that establish subsidiaries in Norway, the provision given above does not apply. The business can thus often fail to report according to the Transparency Act if a subsidiary is established in Norway, which is defined as a separate tax subject, and which cannot tick off two of the criteria mentioned above. The accounting figures for the parent company may, however, be covered by the legislation, if the accounting figures for the subsidiary and parent company together exceed the criteria above. The parent company can also be covered by the legislation if it is defined as a large company (public limited company, listed company, bank, credit company, financing company, etc.) or meets the criteria above, but requires that the company supplies goods or services in Norway.
Foreign companies are also free to report according to the Transparency Act, even if the business is not covered by the requirements of the Act. This may be based on the company’s own guidelines for social responsibility and human rights in its own operations and supply chain.
Corporate Sustainability Due Diligence Directive (CSDDD)
More and more countries are now introducing legislation in the hope of improving human rights and helping to solve the environmental problems facing the world. The Corporate Sustainability Due Diligence Directive (CSDDD) is a new EU directive which aims to promote sustainable and responsible business practices among large companies within and outside the EU.
The directive requires companies to carry out thorough due diligence assessments to identify, prevent, reduce and account for negative impacts on human rights and the environment throughout their value chain. By harmonizing these requirements across the EU, CSDDD seeks to ensure a level playing field and to avoid legal fragmentation between member states.
Differences between the Norwegian Transparency Act and the CSDDD
The Transparency Act and the Corporate Sustainability Due Diligence Directive (CSDDD) share many similarities, but also have significant differences that are important to understand. Both laws aim to ensure responsible business practices by requiring companies to carry out due diligence assessments to identify and address negative impacts on human rights and the working environment.
The Transparency Act is specific to Norwegian and foreign companies operating in Norway, with a particular focus on human rights and working conditions. It provides clear guidelines for how these assessments are to be carried out and reported, and gives the Norwegian Consumer Protection Authority the authority to supervise and impose sanctions in the event of a breach.
On the other hand, CSDDD has a wider scope that includes large EU-based companies and non-EU companies with significant turnover in the EU. This directive also includes environmental impacts and requires companies to draw up climate action plans in line with the Paris Agreement. CSDDD seeks to harmonize regulations across the EU to avoid legal fragmentation and ensure a level playing field. The implementation of the CSDDD requires member states to establish national supervisory authorities to monitor compliance and deal with sanctions. Furthermore, the CSDDD allows for compensation claims from victims who suffer damage due to a lack of due diligence assessment.
Who is covered by CSDDD?
The Corporate Sustainability Due Diligence Directive (CSDDD) applies to large companies within the EU and certain non-EU companies that have significant activity within the EU. More specifically, the directive covers EU-based companies with more than 1,000 employees and an annual turnover of more than 450 million euros globally. In addition, it includes non-EU companies that have an annual turnover of over €450 million within the EU. As EY explains on its website, small and medium-sized enterprises (SMEs) are not directly covered by the directive, but may be indirectly affected as suppliers in the value chains of the larger companies covered.
CSDDD may lead to changes in the Norwegian Transparency Act, and Norwegian businesses should be prepared to have to strengthen their processes for additional due diligence requirements.
Solution for the Transparency Act
ShareControl Transparency makes it easier for companies to collect data from the company’s supply chain in one system, both with regard to the implementation and assessment of due diligence assessments and the generation of reports. By collecting all data related to the Transparency Act in one system, you avoid the risk of non-compliance and can have full confidence that you are complying with them. With ShareControl Transparency you can easily regain control over your suppliers.
Collect information from your suppliers and enter data and documentation, so that you can more easily carry out risk analyses, due diligence assessments and take measures. Send out surveys with questions about the supplier’s handling of human rights and decent working conditions, either through Forms or Customer Voice. In this way, you ensure compliance with the Transparency Act, while streamlining several of the processes.
