According to the Transparency Act, companies have three central duties that must be followed up. This article describes the three duties, before we give a more thorough description of what a due diligence assessment is.
The company's duties in connection with the Openness Act
1. The duty to carry out due diligence assessments
Companies are obliged to carry out regular (at least annual) in line with the OECD's guidelines for multinational companies (link to guide), and must be adapted in relation to:
Company size
The context of operational activities that the company carries out
The likelihood and severity of negative consequences for human rights and decent working conditions
2. The duty to account for due diligence assessments:
Companies must annually publish a report that refers to completed due diligence assessments and must contain at least:
A description of how the company is organized and operating areas
Guidelines and routines for handling negative consequences
Uncovered risk of, and actual, negative consequences for human rights and decent working conditions
Plans or implemented measures, and preliminary results of these to avoid or stop negative consequences
3. The right to information
Upon written request, everyone has the right to information about how the business handles actual and potential negative consequences, both in general or related to a specific product or service the company offers, within 3 weeks.
There are certain exceptions related to this, more information can be found directly in the legal text
What is a due diligence assessment?
Due diligence assessments are a process where the company must map, prevent, limit and account for how they handle existing and potential negative consequences for human rights and decent working conditions in their operations, supply chain and via business partners. Principles for responsible business should be integrated into internal policies and management systems in order for them to be effective and help companies avoid and possibly recover from damage.
The circumstances and scope of due diligence assessments will vary from company to company, but in general you can follow some principles set by the OECD:
Due diligence assessments are preventive: The purpose is primarily to avoid causing or contributing to harm to people, the environment and society
Due diligence assessments are risk-based: it is not possible to uncover absolutely all negative consequences, the efforts and measures must be in accordance with the degree of severity and the probability of negative consequences
Due diligence assessments can involve priorities: If it is not possible for the company to address all known impacts, the company should again prioritize based on the severity and probability of damage
Due diligence assessments are dynamic: it is an ongoing and continuous process, one should also reflect on what can be improved so that the process (systems and routines) for uncovering and managing risks improves over time
Due diligence assessments do not shift responsibility: Each individual company has an independent responsibility for mapping and dealing with negative impacts, due diligence assessments do not imply that responsibility is shifted from governments to companies or from companies that cause damage to another business relationship. Everyone has an independent responsibility for their own negative influence
Due diligence assessments comply with international standards for responsible business: The process surrounding a due diligence assessment should help the company align itself with national and international legislation
Due diligence assessments and the scope depend on the circumstances: All companies have a duty to try to identify and stop negative impacts, but the scope of the work will depend on the company's size, where the business takes place, the business model, the company's position in the supply chain and types of products and services
Due diligence assessments are eliminated by involving stakeholders: The dialogue with persons or groups who may be affected by the company's operations should be a two-way communication. This should enable stakeholders to make informed choices (e.g. employees, employee representatives, trade unions, people from local communities, community organisations, investors, etc...)
Due diligence assessments involve continuous communication and dissemination: Part of the due diligence assessment process itself is to say something about assessments, findings and further plans. This helps build trust in the business and shows that you act in transparency and good faith.