New law on Supply Chain Transparency adopted in Parliament

Over the past years, we have seen fundamental changes in how climate and environmental risks and opportunities are taken into account by the financial sector. The changes are supported by the European Green Deal as well as the EU’s international commitments on climate and sustainability objectives. This development largely relates to the environmental pillar of ESG.

Norway is now demonstrating leadership on the social pillar of ESG by adopting the Supply Chain Transparency Act (Åpenhetsloven)[1]. DNB Asset Management welcomes the law, which enforces our already existing expectations towards companies to understand their responsibility and risks regarding the social consequences of their business operations.

The purpose of the Act is to strengthen respect for fundamental human rights and decent working conditions in connection with the production of goods and services.

The law shall ensure transparency about supply chains and requires companies to carry out and account for due diligence assessments. The public is given access to information on how businesses handle negative consequences for fundamental human rights and decent working conditions.

Large Norwegian companies [2] that offer goods and services in Norway and abroad, and large foreign companies that offer goods and services in Norway and are taxable here, are covered by the law.

The Act builds on requirements for responsible business conduct that we already expect from companies in our portfolio, such as the UN Guiding Principles on Business and Human Rights (UNGPs)[3] and the OECD Guidelines for Multinational Enterprises[4].

We expect companies to understand their responsibility and risks regarding the social consequences of their business operations, including their supply chain and contracts with subcontractors. These expectations, which are outlined in our Group Standard for Responsible Investments[5] and the Expectations Document on Human Rights[6], goes beyond statutory requirements.

Experience nevertheless show that voluntary compliance is not sufficient to raise corporate accountability to the required level. Therefore, human rights constitute a long-term focus area for DNB Asset Management. As part of this, we proactively engage with companies on a range of topics within the human rights area.

One example is a comprehensive engagement that was re-initiated in 2019 with textiles companies covering key topics including living wages and modern slavery. This engagement has, amongst other issues, covered supply chain risks in China, connected to forced labor by the Uighur population in the north-western region of Xinjiang. Transparency on raw materials and production facilities is essential for stakeholders to able to assess where the textiles originate. Similarly, we have engaged with tech companies to promote improved practices for human rights due diligence and audits further down the supply chain. Recruitment agencies may be particularly important to follow up to avoid modern slavery in the supply chain.

Mandatory legislation will provide us with more standardized information from the companies and improve transparency. Yet, we will continue to engage with companies and raise the bar in supply chain workplace standards and respect for human rights beyond the formal requirements.

We believe that the Act, together with the upcoming EU Social Taxonomy, may create the basis for a best practice within social sustainability. It will benefit all parties, including companies and investors. Enterprises will have a common standard for reporting, and investors will more easily receive standardized information to guide the investment decision towards companies that take human rights seriously.

Most importantly, the law contributes to directing attention towards vulnerable groups and is an encouraging signal for the countless individuals working under unacceptable conditions in global supply chains.

[1] Prop. 150 L (2020–2021), Lov om virksomheters åpenhet og arbeid med grunnleggende menneskerettigheter og anstendige arbeidsforhold (åpenhetsloven) https://www.regjeringen.no/no/...
[2] According to the Accounting Act, public limited companies (ASA) and listed enterprises are always considered to be large enterprises. Other businesses which are required to prepare accounts can also be considered to be large enterprises under special provisions.

[3] The UN Guiding Principles on Business and Human Rights:
https://www.ohchr.org/Document...

[4] The OECD Guidelines for Multinational Enterprises: https://www.oecd.org/corporate...

[5] Standard for Responsible Investments: https://www.dnb.no/portalfront...

[6] Human Rights Expectation document: https://www.dnb.no/portalfront...

Disclaimer: The information in this document is not binding. Statements in this document should not be understood as an offer, recommendation or solicitation to invest in or sell UCITS funds, hedge funds, securities or other products offered by DNB Asset Management or any other company within DNB Group or any other financial institution.

All information reflects the current assessment of DNB Asset Management, which is subject to change without notice. DNB Asset Management does not guarantee the accuracy and completeness of the information. This information does not take into account the individual investment objectives, personal financial situation or specific requirements of an investor. DNB Asset Management does not accept any responsibility for losses incurred on investments made on the basis of this information. Our general terms and conditions can be found on our website www.dnbam.com.