What must be included in a transparency statement?

What Kind of Information Must Be Included in a Transparency Act Statement?

A comprehensive guide to understanding, preparing, and presenting the required documentation

1. Introduction

The Transparency Act (officially titled Act on Business Transparency and Work on Fundamental Human Rights and Decent Working Conditions) came into force in Norway on July 1, 2022. The purpose of the Act is to promote corporate transparency regarding production conditions and to ensure that human rights are respected throughout the entire supply chain. This includes everything from the company’s own operations to external suppliers, partners, and any subcontractors.

As part of the legal requirements, large enterprises (and in some cases medium-sized companies) must prepare a public statement – often referred to as a “Transparency Act statement” or “due diligence report” – which enables customers, authorities, investors, and other stakeholders to understand how the company works to identify, prevent, and address breaches of human rights and decent working conditions.

In this blog post, we will answer the question: “What kind of information must be included in a Transparency Act statement?” We will review both the legal requirements and best practices to ensure your report meets all necessary standards. The goal is to provide you with an overview that will help you and your company be as well-prepared as possible to develop – and continuously improve – a compliant Transparency Act statement.

2. Background of the Transparency Act

To understand the significance of the statement, it is important to have some context about the background of the Transparency Act. This law emerged as a natural continuation of international initiatives such as the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises. These frameworks require businesses to carry out due diligence processes concerning human rights and decent working conditions.

Key milestones in the development of the law:

• UN Guiding Principles (UNGP):
  Adopted by the UN Human Rights Council in 2011. These principles form the foundation for how states and companies should work to respect human rights.

• OECD Guidelines for Multinational Enterprises:
  Provide recommendations for responsible business conduct, including the requirement that companies must identify, prevent, and report on potential human rights violations.

• The Transparency Act in Norway:
  Passed by the Norwegian Parliament to strengthen transparency and accountability in Norwegian business. Came into force on July 1, 2022.

3. What is a Transparency Act Statement?

A Transparency Act statement is, in practice, a public report in which the company provides insight into how it works to ensure fundamental human rights and decent working conditions across all parts of its operations. This includes:

• Risk Identification:
  Description of undesirable conditions or risk factors that may affect human rights and working conditions.

• Risk Management:
  How the company works to prevent, reduce, or eliminate the identified risks.

• Monitoring and Evaluation:
  How the company monitors and assesses the effectiveness of its measures, and how it continuously improves its procedures.

• Stakeholder Involvement:
  The company’s dialogue with trade unions, organizations, suppliers, and other relevant parties to ensure a comprehensive approach.

This statement is not a one-time project; it must be updated regularly so that any changes, improvements, and new insights are clearly reflected. In this way, the company’s commitment to transparency and accountability remains dynamic and aligned with laws, guidelines, and best practices.

4. Why Is the Statement Important?

Beyond the fact that the statement is a legal requirement for a number of companies, there are several reasons why this document is important:

• Legal Requirements and Sanctions:
  Failure to provide a statement that meets the requirements of the Transparency Act may result in fines and other legal consequences.

• Reputation and Brand:
  Companies that are transparent about human rights and working conditions build trust with customers and investors.

• Risk and Crisis Management:
  A thorough mapping of the supply chain and continuous monitoring provides better insight into where problems may arise and reduces the likelihood of major scandals.

• Long-Term Sustainability and Profitability:
  Transparency and accountability are increasingly important competitive advantages in today’s global market. Investing in a robust due diligence process can, over time, also lead to increased profitability.

5. General Requirements and Guidelines

The Transparency Act includes a number of general requirements that companies must meet to ensure the statement is comprehensive, relevant, and timely:

• Public Disclosure:
  The statement must be publicly accessible, often via the company’s website.

• Annual Publication:
  Most companies subject to the Act are required to publish the statement annually (by June 30).

• Updates Following Significant Changes:
  If major structural or organizational changes occur, the statement should be updated accordingly.

• Comprehensive and Verifiable Information:
  The statement should not be a superficial overview. It must include concrete descriptions of how the company identifies, manages, and reports on risks.

• Objectivity and Transparency:
  Companies are expected to be open about their findings, challenges, and how they are working to address the issues.

6. What Kind of Information Should Be Included in the Statement?

The core of the question “What kind of information must be included in a Transparency Act statement?” lies in demonstrating that the company has actually implemented the necessary measures to identify and prevent breaches of human rights and decent working conditions. Below, we outline the key elements that should be included.

6.1 The Company’s Organization, Operations, and Allocation of Responsibility

The first step in the statement is to describe how the company is structured, how responsibilities related to the Transparency Act are distributed, and what internal policies are in place. This section should include:

• Company Structure: Does the company have branch offices abroad? Is it a parent company with multiple subsidiaries?

• Governance Systems and Executive Commitment: How is human rights work anchored at the executive level? What internal forums or committees are responsible?

• Resources and Competence: Which team or roles have specific responsibility for the Transparency Act and due diligence processes? Have they received training and the necessary support?

• Internal Governance Documents: Policies and guidelines related to ethics, sustainability, anti-corruption, whistleblowing, etc.

This information demonstrates that the company takes the Transparency Act seriously and that its efforts are embedded in a solid internal structure.

6.2 Mapping and Risk Assessment in the Supply Chain

The next – and perhaps most important – aspect of the statement is to describe how the company maps and assesses risk in the supply chain. To do this, you should answer the following:

• Scope of the Supply Chain: How many suppliers do you have? Are there suppliers in countries or industries with a high risk of human rights violations?

• Risk Assessment Methods: Do you use recognized tools or standards (e.g., TransparencyGate)? Are audits, supplier visits, or interviews conducted?

• Identified Risk Areas: Has the company found concrete instances of human rights violations or indecent working conditions? How were these uncovered?

• Risk Prioritization: Describe which risk areas you consider the most serious and why they are prioritized.

A solid risk assessment is crucial to ensuring that subsequent measures are targeted and effective. By showing that the company has a thorough methodology for identifying and prioritizing risks, you provide stakeholders with a clear picture of the challenges you face – and, most importantly, how you plan to address them.

6.3 Routines, Policies, and Measures to Prevent Breaches of Human Rights and Decent Working Conditions

After risks have been mapped, the next step is to describe the routines, policies, and measures the company has established to prevent or mitigate undesirable conditions. This may include:

• Supplier Guidelines: Do you have ethical guidelines or a “Supplier Code of Conduct” that suppliers must sign?

• Supplier Follow-up: How do you ensure that suppliers actually comply with the guidelines? For example, are spot checks, factory visits, or third-party audits conducted?

• Actions in Case of Breaches: What do you do if irregularities or violations are uncovered with a supplier? Do you have an action plan outlining specific responses (e.g., temporary suspension of collaboration, requirement for corrective actions, or termination of contract)?

• Internal Training and Awareness: How do you ensure that employees within your organization are aware of and understand the company’s obligations and routines?

The purpose of this section is to demonstrate that the company has a proactive and systematic approach to preventing human rights violations and ensuring decent working conditions.

6.4 Results and Improvement Measures

In a Transparency Act statement, it is not sufficient to merely reference policies and procedures. To clarify how these practices are functioning, it is important to present concrete results and examples:

• Status of Completed Audits:
  How many suppliers have been audited or reviewed over the past year? Were any deviations found, and if so, what were they?

• Concrete Improvement Measures:
  If deviations were identified, what corrective actions were implemented to address the issues?

• Impact Measurement:
  How do you measure the effectiveness of the actions over time? Has there been a decrease in the number of recorded violations?

By quantifying and qualifying the results, you provide a picture of whether your efforts are actually yielding results. An open and honest account of both challenges and progress builds trust and credibility.

6.5 Stakeholder Involvement and Dialogue

Another important aspect is how the company involves various stakeholders in its work with the Transparency Act:

• Stakeholder Mapping:
  Who do you consider your key stakeholders (customers, employees, local communities, suppliers, NGOs, investors)?

• Dialogue and Collaboration Methods:
  How do you communicate with these stakeholders, and how are they involved in risk assessments and the follow-up of measures?

• Whistleblowing Channels and Grievance Mechanisms:
  Does the company have an open, anonymous, and accessible channel for reporting concerns and submitting tips?

The aim is to show that the company does not operate in a vacuum, but actively collaborates with external actors to identify and address issues in a constructive way.

7. Consequences of an Inadequate Statement

If a company fails to comply with the content and disclosure requirements of the Transparency Act, it may face several negative consequences:

• Sanctions from Authorities:
  The Consumer Authority and other regulatory bodies have the power to impose administrative fines if companies fail to meet the requirements.

• Loss of Trust and Negative Publicity:
  Lack of transparency can damage the company’s reputation among customers, partners, and investors.

• Increased Business Risks:
  Without a solid due diligence process, the company may face unforeseen supplier scandals, lawsuits, or other adverse situations that impact profitability.

• Internal Disruption:
  Employees and management may experience increased stress and conflict if there are no clear guidelines for how to handle undesirable conditions.

8. How to Write a Credible and Transparent Statement

Once you have familiarized yourself with the content and structure requirements, the next step is to actually write the statement. Here are some helpful tips:

• Use Accessible Language:
  Avoid unnecessary bureaucratic jargon and technical abbreviations. Instead, explain terms and processes in a way that is easy for everyone to understand.

• Be Specific and Concrete:
  Provide examples and figures where possible. Instead of saying “We conducted several audits,” say “We conducted 10 audits in China and 5 in Vietnam during the period January–June 2024, in which we identified the following deviations…”

• Acknowledge Mistakes and Shortcomings:
  Credibility is built by being open about what isn’t perfect. If serious issues have been discovered, they should be described along with the corrective actions taken.

• Structure Content Logically:
  A Transparency Act statement benefits from following a chronological process:

  1. Mapping

  2. Risk assessment

  3. Actions and follow-up

  4. Results

  5. Areas for improvement

• Design and Formatting:
  Make the document easy to navigate – use headings, paragraphs, and bullet points. Consider including charts or graphs to illustrate findings.

• Links to External Sources:
  If you refer to external guidelines or regulations, include clickable links.

9. Tips for Further Improvement and Follow-Up

A Transparency Act statement is not just a static report – it is part of a continuous improvement process. To ensure your company keeps pace with new requirements and best practices, consider the following:

• Automation and Digital Tools:
  There are several digital solutions that can simplify data collection, risk assessment, and reporting. Especially within supplier monitoring and procurement processes, these can save considerable time
  (e.g., TransparencyGate)

• External Audits:
  Consider hiring a third-party auditor to verify the quality of the statement and assess whether your measures are effective.

• Benchmarking:
  Look to competitors and industry leaders to compare reports. Draw inspiration from best practices and identify how your company can improve.

• Training and Capacity Building:
  Offer regular training on human rights and labor law to employees, especially those responsible for procurement and supplier engagement.

• Annual Review and Updates:
  Schedule fixed times each year to review goals, measures, and policies. Update the statement to ensure it reflects current practices.

10. Summary and Next Steps

Writing a Transparency Act statement is a process that requires both overview and in-depth understanding. You must be able to demonstrate what risks the company faces, what measures have been implemented, and how the results are followed up. This is not a formality, but an integral part of the company’s corporate responsibility and risk management.

Let’s take a final look at the key points to remember:

• Executive Commitment:
  Ensure top management is engaged and that responsibility for the Transparency Act is clearly anchored within the organization.

• Comprehensive Risk Assessment:
  Identify risks throughout the entire supply chain and be transparent about the methodology used.

• Clear and Measurable Actions:
  Have specific plans and procedures for managing risk, and point to documented outcomes.

• Continuous Improvement:
  Update the statement regularly and ensure it reflects current practices and challenges.

• Open Communication:
  Make the statement easily accessible to all stakeholders, and use language and structure that make it simple to read and understand.

The goal is not only to meet legal requirements but also to foster an ongoing, transparent dialogue with all stakeholders about how your company continuously improves its practices. The Transparency Act is about more than avoiding penalties; it is a tool for building healthier business processes and a more sustainable societal commitment.

Next steps may include:

• Conduct a GAP Analysis:
  Map out where the company currently stands and what remains to be done to meet all requirements under the Transparency Act.

• Implement Digital Tools:
  Consider adopting dedicated platforms for supplier monitoring and reporting (e.g., TransparencyGate).

• Engage Experts or Industry Associations:
  If internal expertise is limited, external professional knowledge can be critical to advancing your efforts.

• Involve the Whole Organization:
  Ensure that all relevant departments – procurement, sales, HR, communications – contribute their perspectives.

By doing so, you will not only comply with the Transparency Act but also ensure that your business emerges stronger from the process. Being transparent and demonstrating genuine commitment to human rights and decent working conditions benefits all parties: the company, customers, employees, suppliers, and society as a whole.

Final Remarks

In a time when stakeholders, authorities, and society at large are placing increasing demands on sustainability, ethics, and transparency, the Transparency Act statement is a golden opportunity to demonstrate a genuine commitment to corporate social responsibility. A solid and thorough statement is not just about “checking off” a legal requirement – it’s an opportunity to build a stronger internal culture, enhance trust among customers and partners, and avoid costly scandals and conflicts in the future.

Hopefully, this guide has provided you with a solid foundation for understanding what kind of information must be included in a Transparency Act statement. By following the points and recommendations above, you are well on your way to creating a well-developed report that can withstand scrutiny from both the public and authorities – while also contributing to your company’s long-term success.

With the right understanding and the right process, your Transparency Act statement can become a tool for improvement, openness, and trust-building – setting a new standard within your industry and inspiring others to follow suit. Best of luck with the work ahead!

(This is translated with AI)