Continuing the trend of countries in Europe passing corporate due diligence legislation, the Norwegian Transparency Act (Åpenhetsloven) entered into force in July 2022. It introduces an obligation on certain companies to conduct human rights due diligence, with the notable addition of a right to information. The Act gives anyone, whether it be consumers, civil society, trade unions, or journalists, the right to request information from companies about their impacts on human rights. With the Act in force, companies in scope should be prepared to respond to eventual information requests.
The core obligations under the Transparency Act for companies are:
- To carry out human rights due diligence following the approach within the OECD Guidelines for Multinational Enterprises. Companies will have to identify and assess actual or potential adverse impacts on all fundamental human rights and decent working conditions which a company has caused, contributed to, or is directly linked to across their supply chain. Once risks are identified, companies need to implement measures to stop, prevent, or mitigate adverse impacts, and then track their implementation and results.
- To be transparent by publishing an account of their due diligence, including information on identified actual, or significant risk of, adverse human rights impacts, and measures adopted to stop these identified impacts.
- To grant the public the right to information. As a unique addition to support and promote transparency, the Act also grants the general public a right to request information related to how a company addresses adverse human rights impacts, in accordance with their obligation to carry out due diligence. In turn, the provision creates the duty for companies to provide the requested information.
This duty to respond to requests for information on human rights due diligence and impacts is new territory for companies. Notably, it is not included in other recently enacted corporate due diligence legislation such as in Germany or in the proposed EU Directive on Corporate Sustainability Due Diligence. Companies should be aware that a request relates to both actual and potential adverse human rights impacts and be for both general information or specific information about a certain product or service. If a request is received, companies are required to provide adequate and comprehensible information, generally within three weeks. Such requests can be denied in limited cases, for example, if proprietary information is requested or the request is not sufficiently clear as to what is being asked for. Even if a company denies a request, they are still required to respond within three weeks, and the person making the request may ask for a further detailed explanation of the reasoning behind the refusal. Companies should implement a standardized process to handle requests in a way that meets these requirements.
If a company breaches its duty to provide information, the Norwegian Consumer Authority first may ask either for a written confirmation that the company will respond to the request for information or issue a decision ordering the company to provide the requested information. If this decision is not followed, or in cases of repeat breaches, the Consumer Authority can order an enforcement or infringement penalty. When determining the penalty, considerations are given to an amount which does not make breaching profitable.
The importance for companies to be transparent and communicate externally about their due diligence activities, is emphasized in both the OECD Guidelines and the United Nations Guiding Principles on Business and Human Rights. This is reflected in the Act. The proposal drafting committee outlined that for human rights due diligence information to be impactful it must be publicly available, comprehensive, and include the entire supply chain. Furthermore, the right to information offers benefits to stakeholders and companies alike. For stakeholders, it provides an additional way to check for, or raise concerns of, possible negative impacts. It also enables stakeholders and interested parties, such as researchers and civil society, to gain reliable information which they need for their work on improving supply chains. For companies, transparency can offer a competitive advantage by increasing trust between companies and governments, employees, customers, and local communities. This can help companies build a positive reputation. It may drive other benefits to the business through motivated employees and loyal suppliers and customers. Overall, for companies, the obligation to provide information is simultaneously an excellent opportunity to share further details on their human rights due diligence and a potential benefit to their business.
It will be interesting to see the right to information provision advancing transparency in practice as the public begins to request information and companies produce it. Even companies not falling into scope should take note. With progressively more countries implementing due diligence legislation they might be influenced by the Norwegian Transparency Act and include the right to information.
To learn more about human rights due diligence and how to report on human rights performance, contact the Article One team: hello@articleoneadvisors.com.
This is for informative purposes, and is not, nor should be taken as, legal advice.
