Transparent benefits – putting human rights on the radar

ESG in practice

Published: 14 December 2023

The Norwegian Transparency Act may be national legislation, but, according to Vincent Gustavi, Skuld's Chief Compliance Officer, it gives the entire industry "a taste of things to come", shining the regulatory spotlight on the S in ESG and the crucial issue of safeguarding human rights. Vincent helps make things crystal clear here.

"There's a new norm in business. It's no longer possible to have a sole focus on profit. Your stakeholders - from employees to customers, right through to investors - demand more. And rightly so!"

Vincent Gustavi, Skuld's Chief Compliance Officer for the past three and a half years, is discussing the "triple bottom line". He argues that while money talks, it's no longer the only issue on the industry's lips, with an increasing emphasis on "people, planet and profit" instead.

"This is obviously key to our drive towards enhanced environmental standards," he says, "but it's also good for business in a more socially aware, engaged society. Companies that behave ethically will, we believe, have a strong competitive advantage in the future. Furthermore, there'll also be increased regulatory pressure to do 'the right thing'.

"As such, it pays to be ahead of the curve, and that's what makes Norway's Transparency Act so interesting. It gives us a flavour of the future today." So, let's get a taste of what's involved.

Diligent approach

The Act entered into force on 1 July 2022, focusing on requirements for 'larger' businesses to adopt measures aimed at safeguarding human rights, both in their own operations and across value/supply chains.

The three main pillars of the legislation are: a duty to carry out due diligence to assess actual and potential areas of concern; an obligation to provide an annual account of this process (in a report published before 30 June each year); and a 'right to information', whereby companies must respond to questions from the public concerning relevant human rights and working condition issues.

"It sounds relatively straightforward," notes Vincent, "but it is far-reaching in its impact."

Using Skuld as an example, Vincent explains that not only must the company assess and document any actual and potential issues and risks within its own global network of offices, but it also needs to repeat the process for its suppliers. In Skuld's case that amounts to several hundred companies, ranging from IT service suppliers and lawyers, through to surveyors and salvage firms.

"As you can understand, that's a major undertaking," he smiles, "and it requires a methodical approach."

Supporting progress

Skuld's methodology involves "a risk-based approach", whereby businesses are categorised based on factors such as the type of service they provide, their location, their size, and so on, with the highest risk businesses – and these 'risks' can range from health and safety factors, to forced labour, freedom of association, discrimination, potential child labour, etc. – singled out for further action.

A mapping process follows, including assessments, and questionnaires to understand individual company approaches to human rights and the provision of decent working conditions.

Next steps are then considered on a case-by-case basis, with any incidences of non-compliance followed up, often with timescales given to address potential issues.

Given the scale of the task here, he'd be forgiven for displaying some frustration with this new piece of legislation and its requirements. However, nothing could be further from the truth, he is a very ardent supporter.

"This is an excellent initiative," he stresses. "A vital 'hard' law for an area that, unfortunately, is still seen as 'soft' by too many. With so much understandable emphasis on the E of ESG, it's great to see an Act that really puts the S centre stage."

Growing momentum

Getting back to the relevance of the law for companies outside Norway, and the shipping industry in general, Vincent points to an evolving regulatory landscape increasingly defined by those three aforementioned letters.

"We can all see a shift in emphasis," he says, "and it pays to understand the drivers of change. Responsible business practices are key to that."

Norway, Vincent points out, is an early mover rather than an outlier in this regard. The EU is currently working on the Corporate Sustainable Due Diligence Directive, which will expand requirements for transparency and reporting, while in January this year Germany introduced the new Supply Chain Act, with a similar scope to the Norwegian legislation. All these laws share a foundation in OECD guidelines for responsible business and the UN Guiding Principles on Business and Human Rights.

"A standard is being set here," Vincent opines. "There's a clear trend that is moving from a local to a global basis, and our members should be aware of that."

"As a shipping company I think there's a clear incentive to look at your supply chain in a structured way now – to understand it, assess the risks, and adopt risk reducing measures. That will put you in a good position when relevant legalisation does come into force, giving you a competitive advantage over those taking a more 'reactive' approach. Even without the issues of potential non-compliance and fines, it's important to recognise how important this is from an investor-stakeholder perspective now. A factor that is only going to become more relevant as time progresses."

Optimal impact

For its part, Skuld has integrated a human rights and workplace well-being focus into both its internal and external arenas. Internally, the company is committed to offering an optimal work-life balance, with the flexibility individuals need, and a range of training initiatives targeting risk areas such as stress. Externally, in addition to the requirements of the Act, Skuld published a new Supplier Code of Conduct this year, with clear principles and expectations regarding human rights, and updated Correspondent Guidelines with an aligned focus.

"We all have a part to play in raising standards," Vincent says, "and Skuld is committed to contributing to positive change."

In closing, he argues that the more different industry actors do the same – either in compliance with regulations, or simply of their own accord – the greater the benefits, for everybody.

"There's a ripple effect," he states. "The more companies adopt a responsible, accountable and transparent approach to business the more that becomes the 'new norm' we desire. It becomes harder to deviate from, especially with the accessibility of information which empowers consumers to make better, informed choices.

"The result isn't just happier workplaces for people, but greater sustainability for the planet and, we believe, stronger profits for the best businesses. In other words, from a triple bottom line perspective, a clear win-win-win."