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Norway has always been a leader in the world of commerce. With their new Supply Chain Act, they continue to pave the way for efficient practices and responsible supply chain management. But what does this mean for businesses? What does this mean for procurement professionals? And how can we apply these lessons in our own organizations? Stay tuned as we explore the ins and outs of Norway's latest legislative move.

Norwegian Transparency Act entered into force on 1 July 2022, requiring large domestic (Norwegian) companies and foreign companies doing business in Norway to account for human rights due diligence in their operations, supply chain, including the products and services used by the company. The Norwegian Transparency Act is inspired by the UK's Modern Slavery Act (MSA), but goes beyond the MSA in several important respects. It applies to companies with more than 500 employees worldwide, or with revenues exceeding NOK 5 billion (approx. EUR 500 million). These companies must publish an annual report on their efforts to address human rights risks in their operations and supply chains. The reports must be published on the company's website, and must be easily accessible and understandable.

The Act contains a number of important provisions that are designed to ensure that companies take human rights due diligence seriously. For example, companies that do not comply with the Act may be subject to fines or other sanctions. In addition, the Norwegian Government has made it clear that it expects companies to report on their efforts to address human rights risks in their supply chains, and to take steps to prevent and mitigate such risks. Qualifying companies have until 30 June 2023 to publish their inaugural reports. 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. The Norwegian Transparency Act will have significant impacts for companies doing business in Norway, their suppliers, and others in their supply chain. All companies should be aware of these requirements and the risks associated with non-compliance.

What does this mean for your company?

The Norwegian Transparency Act requires companies to take reasonable steps to identify and address any potentially adverse impacts their business activities may have on society and the environment. This includes identifying and assessing risks, implementing measures to mitigate those risks, and reporting annually on progress made. It also requires companies to disclose their supply chain policies and practices, as well as any due diligence processes they have in place to assess and manage risks related to their supply chains. Companies will need to review their policies and practices in light of the new requirements, and put in place any necessary changes to ensure compliance. They will also need to make sure they have adequate systems and processes in place to gather the required information and report on it accurately. Failure to comply with the Norwegian Transparency Act could result in fines of up to NOK 20 million (approx. EUR 2 million).

This transparency act is part of a broader global trend towards increased supply chain transparency around environmental, social and governance (ESG) issues. In recent years, there has been growing pressure on companies to disclose more information about their ESG impacts, both from investors and regulators. With the Norwegian Transparency Act now in force, companies need to be prepared for increased scrutiny of their ESG disclosures and supply chain transparency.

Here are a few things your company can do to comply with law:
1. Conduct a risk assessment of your supply chain to identify potential ESG risks. This includes sub-suppliers. FRDM uses your company's basic spend data to map your entire supply chain without requiring participation from your suppliers.
2. Put in place systems and processes to monitor and report on ESG risks in your supply chain. FRDM will constantly (as in every day) monitor you supply chain for risk up the n-th tier of your supplier's supply chain.
3. Disclose information about your company's ESG risks and impacts in a clear and concise manner. FRDM provides reporting tools to easily create best in class reports.
4. Engage with your stakeholders on ESG issues and keep them updated on your progress. FRDM will work with your suppliers on corrective action and track all progress for you.

While the Supply Chain Act is still new, it’s important for businesses to start preparing now. FRDM understands the ins and outs of compliance can help you stay ahead of the curve and ensure that your organization is ready for when the act goes into full effect. We encourage all procurement professionals to learn more about this groundbreaking piece of legislation and how it will impact their work. The future of responsible supply chain management is looking bright, and Norway is leading the way.

Norwegian companies have long been at the forefront of responsible supply chain management, and the Norwegian Transparency Act will further strengthen Norway's position as a leader in this area. The Act will require companies to carry out human rights due diligence throughout their supply chains, and to report publicly on their efforts. This will create greater transparency and accountability, and help to ensure that Norwegian companies are not complicit in human rights abuses.

FRDM is a leader in supply chain transparency helping global brands like Boeing and Coca Cola with supply chain regulations.

Our software as a service (SaaS) platform is used by some of the world's largest companies to manage their supply chains and ensure compliance.

Let's discuss how we can help your company buy better.

Justin Dillon

Justin Dillon is the founder and CEO of FRDM, a responsible supply chain company.