The first deadline for disclosure obligations in compliance with the Transparency Act is approaching

Brief overview of the Transparency Act

The Business Transparency and Work on Fundamental Human Rights and Decent Working Conditions Act (Transparency Act) was adopted in 2022. Its purpose is to promote respect for fundamental human rights and decent working conditions by businesses in connection with the production of goods and provision of services. Additionally, it is to ensure public access to information on how businesses address negative impacts on fundamental human rights and decent working conditions.

The Transparency Act applies to all “larger enterprises” domiciled in Norway. The law sets specific thresholds for what constitutes a major business. In order to ensure that the public is provided with information about such companies’ handling of negative consequences for fundamental human rights, businesses are required to provide an annual disclosure of their due diligence assessments.

What is the disclosure obligation under the Transparency Act?

All businesses covered by the Transparency Act are required to conduct due diligence assessments of risks and negative consequences regarding fundamental human rights and decent working conditions. Based on this, a statement must also be prepared, which should be easily accessible on the company’s website. The disclosure may also be included (voluntarily) in the corporate social responsibility report under Section 3-3 c of the Accounting Act.

In addition, the business must state in the annual report where the report is available. If the disclosure is included as part of another document, the specific part pertaining to the Transparency Act must be indicated. The obligation to publish reports pursuant to the Transparency Act begins in the calendar year following the balance sheet date on which the business becomes subject to the Transparency Act.

What should be included?

The Transparency Act sets out some minimum requirements for what must be included in the report. Firstly, a number of practical matters relating to the organisational structure of the enterprise and its work pursuant to the Transparency Act must be described; § 5 a. After this, an account must be given of the due diligence assessments that have been carried out. The minimum requirement is to report actual negative consequences, as well as “significant” risks, that have been identified. If the business wishes to report on risk that is not significant, it may do so, but in that case, a distinction must be made between the different types of risk being reported.

The business must also provide information on measures implemented or planned based on the findings, as well as the results of these measures. At a minimum, it should be described how the business expects these measures to mitigate risks or actual negative impacts. Beyond these minimum requirements, there is flexibility in how disclosure should be formulated.

Remember the June 30 deadline

The report must be published annually “and otherwise in case of significant changes in the business’s risk assessments,” according to Section 5 of the Transparency Act. The deadline for publishing the disclosure is June 30th. By this date, the assessments must be completed, and the reportmust be prepared.

In addition, the statement must be signed. Here, the same requirements apply for signature as pursuant to Section 3-5 of the Norwegian Accounting Act regarding the signing of annual accounts and annual reports. In most cases, this means that before the report can be published, it must be presented at a board meeting and signed by the board and the general manager. Businesses that have not already done so must ensure that a board meeting is held before June 30th this year, where the report is signed.