Responsible business practice on the rise

Globalisation and international finance have given rise to multinational corporations and international supply chains, but the legal accountability of corporations towards human rights and the environment has not developed accordingly. An international regulatory response has proven challenging due to countries' varying perception of corporations’ social responsibility. The legal shortcomings are an impairment of the universal protection of human rights.

However, times are changing and nations' pressure on companies to do business responsibly is increasing. In Norway, as in other European countries, the Government is now considering a new Anti Slavery Act based on international experience with such Acts.

Regulatory changes and increased transparency

One of the earliest efforts to protect workers in global supply chains was California’s Transparency in Supply Chains Act of 2010. The Act was enacted as an attempt to push retailers and manufacturers to be transparent about their efforts to eradicate slavery and human trafficking from their supply chains. It was also passed to educate consumers to make it easier for them to make informed decision when purchasing goods and services. Further legal developments came in 2015 with the UK Modern Slavery Act, which was inspired by the California Act. The UK government was determined to fight slavery in international supply chains. The UK Act raised further awareness, and the Australian government followed suit by passing its own Modern Slavery Act in 2018. France too has been recognized for its regulatory changes by introducing the Duty of Vigilance Act (“Devoir de vigilance des sociétés mères et des entreprises donneuses d’ordre”) in 2017. The Act requires corporations to consider environmental impacts in addition to human rights violations through their chain of production.

One thing these Acts have in common is that they require corporations to be transparent about the risk of violations in their operations and supply chains, and their efforts to assess and address those risks. The importance of transparency as a tool to ensure accountability has also been highlighted both at the EU level and internationally, e.g. in The UN Sustainable Development Goal 12 target 6:

“Encourage companies, especially large and transnational companies, to adopt sustainable practices and to integrate sustainability information into their reporting cycle”.

The EU’s Directive 2014/95/EU on disclosure of non-financial and diversity information demands certain companies to include the following information in their management report:  

“a non-financial statement containing information to the extent necessary for an understanding of the undertaking's development, performance, position and impact of its activity, relating to, as a minimum, environmental, social and employee matters, respect for human rights, anti-corruption and bribery matters.”

With increased international awareness, the demand for transparency is only expected to continue.

The Norwegian story

The Norwegian Government established the Norwegian Ethics Information Committee in 2018 after several petitions from the Parliament. The mandate of the Committee is to “examine whether it is possible and advisable to require businesses to disclose information to consumers and organisations about production sites used in manufacturing, responsible business conduct and supply chain management”, and the consequences of a potential disclosure requirement. The mandate recognizes the need to protect basic rights and decent working conditions in businesses' supply chains, and suggests that access to information will enable consumers to make an informed decision. By encouraging such a debate, the Norwegian Government reinforces the need for increased transparency to ensure responsible business practices.

Moreover, the guidance on responsible business developed by the OECD’s National Contact Point in Norway helps businesses understand what they should do to ensure that they conduct themselves in a responsible manner. The Guidance, which was published in January 2019, was highly recommended by the Norwegian Minister of Foreign Affairs, Ine Eriksen Søreide, and the Norwegian Minister of Trade and Industry, Torbjørn Røe Isaksen. Both Ministers highlighted the Guidance’s importance in avoiding adverse impacts by businesses.

The Guidance suggests that companies do the following:

1. Embed responsible business conduct into policies and management systems
2. Identify and assess actual and potential adverse impacts associated with the enterprise’s operations, products or services
3. Cease, prevent and mitigate adverse impacts
4. Track implementation and results
5. Communicate how impacts are addressed
6. Provide for or cooperate in remediation when appropriate

With the harmonized message from governments and clear guidelines from the OECD, businesses should prepare to polish their practices or implement new measures if that is needed.