Navigating the Norwegian Transparency Act (Åpenhetsloven)
In 2022, Norway introduced Åpenhetsloven, also known as the Norwegian Transparency Act, which mandates companies to disclose information regarding their efforts to address human rights and labor rights within their operations and value chains. While the act aims to enhance transparency, many companies are still grappling with the practical aspects of compliance — particularly when it comes to Human Rights Due Diligence (HRDD).
The Challenge: HRDD and Transparency Reporting
The Transparency Act requires businesses to conduct human rights due diligence to identify, assess, and mitigate potential risks to human rights and labor rights within their operations and supply chains. Common struggles companies face when implementing Åpenhetsloven include:
- Underdeveloped HRDD Processes
Many organizations have HRDD processes in place, but they are often underdeveloped, lacking the depth and thoroughness required by the act. For instance, while companies may have a general understanding of human rights risks, they may lack detailed procedures for regularly conducting risk assessments and assessing and mitigating these risks across all levels of their operations.
- Non-Compliance with Information Requirements
Many transparency reports fall short of basic compliance, often missing critical information on identified potential and actual impacts, not being readily accessible on company websites, or lacking sign-off from the supervisory bodies (board and management), which is essential for ensuring accountability. The Transparency Act also uniquely includes a "right to information" provision, allowing anyone to request additional details about a company's due diligence efforts. This creates a challenge for some companies, especially those without established processes or structures for responding in a timely manner within the required three-week period.
- Vague Mitigation Actions
Åpenhetsloven requires companies to disclose specific actions taken to mitigate human and labor right risks. However, many businesses report mitigation actions in vague terms, often lacking concrete, measurable steps or clear timelines. Without clear action plans, it becomes difficult for companies to demonstrate their commitment to human rights, and they may fail to convince stakeholders that their efforts are genuinely addressing the identified risks.
How Companies Can Overcome These Challenges
So, how can companies navigate the complexities of Åpenhetsloven and improve their HRDD efforts? Here are some practical steps:
- Develop a Comprehensive HRDD Framework
Companies should invest time in developing a robust HRDD process that goes beyond simply identifying risks. This framework should involve regular risk assessments, clear procedures for mitigating risks, and a commitment to transparency. A structured approach to HRDD helps ensure that human rights risks are consistently monitored and addressed.
- Improve Transparency and Compliance with Reporting Requirements
Ensuring full compliance with Åpenhetsloven’s information requirements is critical. Companies should make sure their transparency reports are easily accessible on their websites and include all necessary information, including identified impacts and the mitigation actions taken. Reports should also be signed off by the appropriate supervisory bodies to ensure accountability and demonstrate a commitment to due diligence.
- Set Clear and Measurable KPIs
Companies should define clear and measurable KPIs for their HRDD efforts. These could include metrics related to the number of risk assessments conducted, mitigation actions implemented, and improvements in human rights practices within the supply chain. Establishing measurable goals helps companies assess the effectiveness of their actions and build a stronger case for compliance with the Transparency Act.
- Regularly Report on Progress
Compliance with Åpenhetsloven isn’t a one-time event; it’s an ongoing process. Companies must annually update their Transparency report by June 30th as well as regularly update their reports to reflect any new findings, updated risk assessments, and the effectiveness of mitigation actions. These reports should not only detail what has been done but also demonstrate how the company has responded to evolving risks and challenges.
- Engage Stakeholders and Experts
Engaging with stakeholders, including employees, NGOs, and experts in human rights, provides valuable insights into potential risks and help shape effective mitigation strategies. It also demonstrates a company’s commitment to engaging with the broader community in its HRDD efforts.
Conclusion
While Åpenhetsloven represents a positive step toward improving corporate accountability for human rights and labor rights, many companies still face significant challenges in fully complying with its provisions, especially when it comes to human rights due diligence. By developing robust HRDD processes, improving transparency and compliance with reporting requirements, setting measurable KPIs, and engaging with stakeholders, businesses can navigate the complexities of the Transparency Act and demonstrate their genuine commitment to respecting human rights.
Ultimately, companies that take the time to conduct meaningful due diligence — not just report on it — will be better positioned to mitigate risks, improve their operations, and build trust with consumers, investors, and other stakeholders.
Do you want some help with the Norwegian Transparency Act?
Feel free to reach out for a quick call!
Contact Susanne Winge, Senior Advisor and Director of Corporate Sustainability, at susanne.winge@ethos.se.
