Norwegian "Transparency Act": towards greater corporate accountability on human rights topics

Legislative process

The Transparency Act is the result of the works conducted by a government-appointed committee known as the "Ethic Information Committee". This Committee was assigned the mission to explore the possibility of introducing an ethics information law in Norway and to determine whether it was practicable to impose a duty on companies to provide information on their responsible behavior and supply chains' management. The Committee concluded that there was room for such a law, and suggested a bill, which was eventually adopted by the Parliament on 10 June 2021.

Scope

Pursuant to Section 2 of the Transparency Act, it shall apply to:

• large companies residing in Norway and offering goods and services in or outside Norway;
• large foreign companies offering goods and services in Norway and subject to taxation in Norway pursuant to national Norwegian legislations.

The Transparency Act further provides that "large companies" are either listed companies or companies which exceed at least 2 of the 3 following thresholds:

• Sales revenues: NOK 70 million (i.e. EUR 6,7 million)
• Balance sheet total: NOK 35 million (i.e. EUR 3,5 million)
• Average number of employees in the financial year: 50 full time equivalent

Key measures

The Transparency Act imposes several duties on companies, and especially:

• The duty to carry out due diligence on a regular basis using a risk‑based approach: companies will have to conduct human rights due diligence, notably across their supply chains. They will thus have to identify adverse impacts on human rights caused by the company and implement measures to stop, prevent or mitigate such adverse impacts, as well as to communicate with impacted stakeholders;
• The duty to account for due diligence: the Act creates a duty for companies to publish on an annual basis, on their websites, a due diligence report. This report aims at ensuring public access to information relating to the company’s due diligence strategy and the internal procedures and programs implemented to identify, tackle and/or mitigate actual or potential adverse human rights impacts;
• The duty to provide information to the public: At anyone’s request (i.e. consumers, trade unions, organisations), companies will have to provide information as to how they handle actual and potential adverse human rights impacts caused by their operations. The Transparency Act also provides for a process to be followed to request such information. Companies may reject the request for information in specific circumstances laid down in the Transparency Act.

It is noteworthy that environmental issues are excluded from the definition of human rights topics to be covered under the Transparency Act due diligence duties.

Sanctions

Under the Transparency Act, the Norwegian Consumer Authority makes sure that companies comply with its provisions. A fine, which maximum amount is yet to be determined according to the seriousness, scope and effect of the infringement, may be ordered in the event of reiterated breaches.

The Norwegian Consumer Authority might also issue orders and prohibition decisions, and/or order coercive fines in the event such orders and/or prohibition decisions fail to be complied with.

Conclusion

With the Transparency Act, Norway joins the club of countries which have already enacted regulations providing for mandatory human rights due diligence by corporations. We expect this trend to continue developing, especially with the EU plan to impose a duty of vigilance with a directive under preparation following the stakeholders consultation on which we reported previously.

Please contact a member of Hogan Lovells’ Business and Human Rights group or your usual Hogan Lovells contact if you wish to discuss this development. We stand ready to assist companies from all industry sectors to assess how to adjust their processes and operations in this context.

Authored by Christelle Coslin and Margaux Renard.