Experts warn raft of companies set to be hit by new human rights law in Norway

A new human rights due diligence law in Norway aimed at large Norwegian companies and foreign firms operating in the country will actually impact a whole raft of business in their supply chain, with penalties and fines for non-compliance yet to be set out, experts warn. The Norwegian Transparency Act, which came into force at the beginning of July, requires companies that fall under the scope of the new law to conduct due diligence on human rights and working conditions in their own operations and throughout their entire supply chain. But ethical trade expert Sedex said some crucial elements have yet to be ironed out. “If companies covered by the scope of the law don’t comply with it, they could face fines or injunctions that limit their business activity. These fines and injunctions haven’t been defined yet but we know they will reflect the severity, scope and impact of an issue,” it said in a briefing on the new law. US law firm King & Spalding said the rules apply to companies that pay taxes in Norway if they meet two of three criteria: annual revenues of more than NOK70m, balance sheet total of NOK35m or above, and at least 50 employees. But it warned that many more companies will indirectly feel the effect of the new requirements as part of their supply chain. “Even where a company is not directly caught by the Act, qualifying companies are likely to seek to cascade substantive obligations down their supply chain through contractual obligations,” it said. The law firm added that companies including large oil and gas majors in Norway will start to introduce compliance with international standards on human rights and forced labour within suppliers’ contracts. “We are already seeing in the market examples of large Norwegian companies increasing due diligence on their foreign suppliers (whether they have any connection to Norway or not), and seeking to impose on them obligations to put in place global systems and processes to address the risk of forced labour and human rights impacts in their onward supply chain,” King & Spalding said. Sedex agreed: “If your customers include businesses that will have to comply with this law, you can expect to receive more requests for information from them.” Companies have until 30 June 2023 to publicly publish reports on their human rights due diligence work. Companies will also have to respond to requests from the public about the risks of human rights and working conditions in their operations and supply chains. King & Spalding said companies can take steps now to minimise their legal, commercial and reputational risk from the new rules. It advised companies to stress-test existing policies and procedures on human rights and modern slavery against international standards. They are also advised to identify potential human rights issues from first-tier suppliers right down to extractors of raw materials, and identify human rights in their own operations. Companies will also have to identify human rights issues associated with the disposal of a company’s products or services. There will also be specific risks to some sectors, King & Spalding said. For example, companies in the hydroelectric sector face additional issues such as land rights and indigenous peoples’ rights.

Experts warn raft of companies set to be hit by new human rights law in Norway

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