The Norwegian Transparency Act: Essential guidelines for foreign companies operating in Norway

1. Introduction to the Transparency Act

Norway's Transparency Act, effective from July 1, 2022, mandates that larger companies uphold fundamental human rights and decent working conditions throughout their supply chains and business partnerships. This includes performing due diligence, public reporting, and providing information on compliance practices. The Act affects entities with a significant presence in Norway and is particularly relevant for companies with potential human rights or labour-related impacts.

2. Which companies are covered?

The Act applies to larger companies connected to Norway that are obligated to keep accounts under the Norwegian Accounting Act (§ 1-2). To determine if your company is subject to the Transparency Act, consider the following criteria:

a. Accounting obligations
Only companies required to keep accounts under the Norwegian Accounting Act are subject to the Transparency Act. This typically includes entities like limited companies, public limited companies, foundations, and associations.

b. Size thresholds
A company is subject to the Transparency Act if it either qualifies as a large enterprise under the Norwegian Accounting Act § 1-5, which includes banks, financial institutions, and public limited companies (ASA), or exceeds at least two of the following thresholds on the balance sheet date:

• Annual revenue: Over NOK 70 million.
• Balance sheet total: Over NOK 35 million.
• Average number of employees: At least 50 full-time equivalents (FTEs) over the financial year.

Note: A company must exceed or fall below these thresholds for two consecutive years to alter its status under the Act. Additionally, please be aware that these thresholds are currently under revision.

c. Connection to Norway
A company has a connection to Norway if it is either a Norwegian company, meaning a business domiciled in Norway that offers goods or services domestically or internationally, or a foreign company, meaning a business domiciled abroad that offers goods or services in Norway and is taxable in Norway under Norwegian internal legislation.

d. Offering Goods or Services
The company must be actively offering goods or services. Passive entities without such activities are excluded.

e. Consolidation rule for parent companies
For Norwegian parent companies, thresholds are assessed on a consolidated basis, including both the parent company and its subsidiaries. However, the consolidation rule does not apply to foreign companies.

3. Key requirements under the act

3.1. Due diligence obligations
Companies must conduct risk-based due diligence to identify and mitigate actual or potential adverse impacts on human rights and working conditions within their operations and supply chains. This assessment should follow a six-step OECD-based framework to ensure dynamic and continuous oversight.

3.2. Public reporting and documentation
The Act requires annual public disclosures of due diligence assessments by June 30 each year. Reports must be easily accessible on the company's website, include detailed information on identified risks and implemented or planned actions, and address the company's impact assessments in line with legal requirements.

3.3. Responding to public inquiries
Companies must be prepared to respond to information requests from the public regarding their compliance efforts. The Act specifies that responses should be in clear and understandable language, must be provided within three weeks, and may only be refused on limited grounds, such as protecting trade secrets, with justification required.

4. Challenges for international corporations

Companies operating in multiple jurisdictions may have overarching policies addressing human rights and working conditions, but compliance with Norway’s specific requirements is crucial. Adhering to foreign regulations does not guarantee compliance under the Transparency Act, and general policies may not meet Norwegian standards. Foreign businesses must closely integrate local requirements into their broader corporate practices to avoid reputational and financial risks.

5. Consequences of non-compliance

The Norwegian Consumer Authority (Forbrukertilsynet) oversees enforcement, which may include fines of up to 4% of annual revenue or NOK 25 million, whichever is higher, mandatory corrective actions, and additional penalties for continued non-compliance. Failure to comply can lead to reputational risks and administrative sanctions, highlighting the need for robust compliance measures.