New Norwegian Human Rights Due Diligence law: What you can expect

The Act marks a turning point in Norway in how companies are expected to do business, with proper human rights due diligence now being a key requirement. For many companies, this will represent a new way of doing things. However, by putting in place the right structures and processes now, companies will be able to future-proof themselves against ever increasing legislation in this area.

The Norwegian Transparency Act

The Act requires companies to ensure human rights and decent working conditions within their own operations and supply chains by conducting human rights due diligence in line with the OECD Guidelines for Multinational Enterprises. Companies this applies to can be Norwegian, or foreign companies offering goods or services in Norway, which exceed two of the following three criteria:

• Sales income: NOK 70 million;
• Balance sheet total: NOK 35 million; or
• On average 50 full-time equivalent employees during the financial year.

The Act also requires companies to produce a statement on their website about their human rights due diligence program. This includes what actions have been taken and their effectiveness. In addition, companies must respond to requests for information from the public about their due diligence programme. 

This final requirement means that should companies fail to implement proper human rights due diligence, members of the public may be able to highlight this, which could bring reputational damage, in addition to possible legal consequences.

6 steps of Human rights due diligence

Human rights due diligence is an ongoing process that, when implemented properly, will reduce the risk a company has of negatively impacting human rights and working conditions. It’s usually seen as consisting of the following six steps:

1. Integrating human rights within business operations
2. Identifying and assessing actual and potential negative human rights impacts connected to the company’s operations
3. Stop, prevent or mitigate any negative impacts identified
4. Track and monitor the effectiveness of the actions taken
5. Communicate internally and externally on what actions have been taken and their effectiveness
6. Remedy any actual negative impacts that have been identified. 

Key to this process is stakeholder engagement. This is because human rights due diligence shifts the assessment of risk from the company to the people impacted by the company. By engaging with stakeholders, a company will better be able to identify risks, the correct actions to take to stop them, and whether those actions have been successful. Should a company not do this, it is likely that its due diligence programme will be lacking.

This ongoing process applies both to a company’s own operations and its supply chains. The extent of how far a company should investigate its supply chain will depend on its own resources and ability to conduct such an endeavour.

Increasing regulation

The Act is part of increasing legislative focus on business and human rights. The UK and Australian Modern Slavery Acts indicate the start of this focus, with Germany and the Netherlands now introducing similar legislation to the Act. The EU is also in the process of developing a Directive that will require companies throughout the EU – or offering products and services within the EU – to conduct human rights and environmental due diligence. There is also a new push for products produced or transported using forced labour to be banned from the EU.

As such, getting the human rights due diligence process right now will ensure you are well-placed to meet this stricter regulatory environment. 

For some companies, this will represent a completely new way of doing things. For others, it will mean adjusting current systems – such as supplier assessments or environmental and social management systems – to incorporate this new human rights framework.

Last but not least. Achieving best practice in human rights due diligence is the only way to identify and act on all of your actual and potential negative human rights impacts. This will reduce any blind spots in your operations and supply chain, placing you in good stead to meet regulatory requirements both in relation to due diligence and more specific laws such as those targeting forced labour.