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Due diligence for the Norwegian Transparency Act - SEB Kort AB Oslofilialen

SEB Kort Bank AB ("SEB Kort") is a financial company established in Sweden and a wholly owned subsidiary of Skandinaviska Enskilda Banken AB (publ) (“SEB”) and part of the SEB Group.  SEB Kort has branches in Norway, Denmark, and Finland; i.e., SEB Kort Bank AB, Oslofilialen NUF (“SEB Kort Oslofilialen”), SEB Kort Bank Danmark, filial av SEB Kort Bank AB, and SEB Kort Bank AB, Helsinki branch. 

SEB Kort is a large issuer of Mastercard credit cards, with focus on the Nordic market. SEB Kort issues cards under its own brand and under Co brands in cooperation with around 20 partners in various industries. SEB Kort provides both Corporate and Private customers with payment solution products and services. SEB Kort’s customers are mostly located in the Nordic countries and are active within several different industries and sectors.

SEB Kort Oslofilialen issues credit cards to Norwegian consumers and to Norwegian companies and public enterprises for use by their employees. SEB Kort is considered a large enterprise, and since SEB Kort conducts business in Norway and has a seat in Norway, it is SEB Kort Oslofilialen that is subject to the Norwegian Transparency Act (the “Act”). 

This due diligence report includes SEB Kort Oslofilialen’ assessment of compliance with human rights and decent working conditions according to the requirements of the Act. 

According to the Act, companies shall perform the due diligence assessment in line with the OECD Guidelines for Multinational Enterprises. As the Act covers SEB Kort Oslofilialen’ business and cooperation with suppliers and business partners in Norway, the due diligence report will only cover suppliers and business partners that have a connection to the SEB Kort’ Norwegian business. Suppliers or business partners that only conduct business with SEB Kort in another country will be excluded from the scope of this report. The report also covers SEB Kort’ guidelines related to human rights and decent working conditions, and how SEB Kort Oslofilialen plans to implement changes as a result of the due diligence risk assessments.

SEB has issued comprehensive instructions and regulations for the organisational structure of the company, as well as guidelines for managing environmental, social and governance aspects of the bank's operations, including routines for ensuring that fundamental human rights and decent working conditions are observed. SEB's work is based on the following global initiatives that SEB Group has undertaken to comply with:

  • Universal Declaration of human rights 
  • ILO Core Conventions on Labour Standards 
  • UN Global Compact 
  • UN Guiding Principles on Business and human rights
  • OECD Guidelines for Multinational Enterprises 
  • UN Convention on the Rights of the Child 
  • Children’s Rights and Business Principles
  • UNEP FI Principles for Responsible Banking

The Board of Directors of SEB has adopted a separate thematic policy related to human rights and social conditions; "Social and human rights policy for the SEB Group" dated 25 April 2023 (the "SHR Policy").

A key element of the due diligence assessment is that a company shall "identify and assess actual and potential negative impacts on fundamental human rights and decent working conditions that the business has either caused or contributed to, or that are directly related to the company's business, products or services through supply chains or business partners." According to the Act, the company shall "implement appropriate measures" to stop, prevent or limit negative consequences based on the entity's priorities and assessments. The company is also required to "monitor the implementation and results of measures. 

As a bank, SEB Group can contribute to human rights, for example through financing social infrastructure and engaging in responsible lending. At the same time, SEB Group acknowledges the social and human rights challenges that the world is facing, and the adverse impact that businesses can have on human rights. SEB Group describes and manages its risks in relation to social and human rights in the SHR Policy.

SEB Kort has customers in several different industries and sectors, where some of them are facing challenges and risks connected to human rights. 

SEB’ due diligence process, which is defined in the SHR Policy consists of 3 steps: Identify, Assess and Address potential or actual impact on human rights. SEB has identified several human rights risk sectors, where each sector also identifies key sector risks. Addressing the risks will, for example, be done through dialogue with the customer and setting expectations on how the risks should be addressed. The expectations are set by sector, and for each human right risk sector, there is a sector policy containing specific expectations on social and human rights. 

The list below states which sectors that SEB has identified as human right risk sectors. 

Identified High Human Right Risk Sectors:

  • Agriculture, Fishing, Aquaculture and Animal Welfare
  • Arms and Defence
  • Forestry
  • Gambling
  • Mining and Metals
  • Renewable energy
  • Shipping
  • Tobacco
  • Transportation

The sectors above are sectors where SEB and SEB Kort have an exposures and impact, and where SEB has implemented specific sector policies. For the time being, these are the sectors which are in focus, even if other sectors are taken into consideration. As the process of identifying and mitigating risks connected to human rights is clarified and becomes more integrated, the scope of sectors will expand.   

SEB Kort provides the following products and services: 

  • corporate credit cards 
  • private credit cards 
  • virtual cards 
  • travel account 
  • expense handling services 

After a risk assessment of SEB Kort’ products and services it can be stated that there is little to no risk of violation of human rights. The financial services above are services of a highly technical nature, and which, to an extremely limited extent, will be able to contribute to direct financing with a negative impact on fundamental human rights and decent working conditions. SEB Kort therefore see no need for any further risk assessment of its product and services.

SEB Kort has suppliers based in all countries where it is present. Most of the suppliers are connected to SEB Kort in Sweden but will provide their products and services to all four branches. Some suppliers are local to each country, and some suppliers are suppliers to SEB, where SEB Kort is a party for example due to shared office space. As SEB Kort is in the banking industry, most of the suppliers are in the service industry, providing their services from within the EU/EEA and most often from the Nordic countries.

The suppliers that are local to another branch than SEB Kort Oslofilialen, and do not have any connection to the SEB Kort Oslofilialen business are excluded from this due diligence assessment. Also, the suppliers which are contracted by SEB are also excluded from this due diligence process. 

SEB Kort’ suppliers have been mapped into three different categories. Most Important, Major, and Non-Critical suppliers. The scope for this due diligence process connected to human rights has been to focus on the most critical suppliers, bringing the largest impact. 

  • There are twelve suppliers that are defined as Most Important, which are thus prioritized. 
  • Furthermore, there are four Major suppliers which are deemed interesting to due diligence and were also included in the scope. These Major suppliers were chosen because the business they are providing is either connected to people in service sectors, or the possibility for a complex supply chain. 

After further investigation into the 16 chosen suppliers, four of them were removed, due to either being an SEB supplier or not supplying products and services to the SEB Kort Oslofilialen business.  SEB Kort Oslofilialen has reviewed the previous due diligence process and mapping of suppliers. There are no significant findings in supplier base. 

The due diligence process

The process for conducting a human rights due diligence assessment on the chosen suppliers have been conducted as follows: 

  • A questionnaire has been created with questions that will give a better understanding for what risks the supplier might encounter connected to human rights.
  • These questions have, to the extent possible, been answered by the contract manager at SEB Kort.
  • The answers lead to a dialogue between the supplier and SEB Kort.

Assessment of the results 

The result from the initial part of the due diligence process was that:

  • Typically, the selected SEB Kort suppliers are in the IT, Payment networks, Insurances, or Marketing Industry. None of these industries are deemed to be high-risk industries for human rights. The biggest risks based on the due diligence process are the complexity of the supplier’s supply chain as well as the location of the suppliers and the fact that some of them are conducting business in countries defined as high-risk by SEB.
  • The Suppliers are typically Nordic, or EU/EEA based, but the payment networks are noteworthy considered to be global actors. Most of the suppliers outside the Nordics have business in high-risk countries of various nature while the Nordic based businesses in general do not have business in high-risk countries. The high-risk country exposure varies from having support centers to decentralized business where all functions are dispersed globally.

The risk with having suppliers that for example are providing support from high-risk countries is that core labour rights may be insufficient, due to lacking standards in those countries. Given that the suppliers that are conducting business in high-risk countries are big and globally dispersed, they are more scrutinized by regulators and are therefore in need of more controlled and transparent processes and ways of working.

SEB Kort will work to mitigate these risks, and an important tool to ensure that the suppliers are adhering to the set expectations is for them to sign SEB’ code of conduct or have their own (if comparable) code of conduct. The result from the due diligence process shows that most suppliers have signed SEB' code of conduct or have their own. Regarding a few of the suppliers the status is unknown or there is a dialogue currently ongoing to modernize the relationship by bringing a code of conduct into the contractual relationship.

SEB Kort’ possibility to influence the supplier varies from case to case. In general, SEB Kort can influence the deliveries to SEB Kort and control in what way the services are performed and from where. However, in some instances, even though SEB Kort sees the suppliers as critical to the daily business, the possibility to influence their way of working and global setup is considered to be extremely small, if non-existent.

How does SEB Kort work to address and mitigate these Supplier risks in the daily work? 

In the onboarding process of a new third party (a supplier) to SEB Kort several steps of evaluation are performed. Already at the RFP (Request for Proposal) stage several mandatory questions are asked on Environmental, Social and Governance (“ESG”) ESG related issues (as “Do you comply with the UK modern slavery act” or “Do you carry out your activities in alignment with core labour standards”). The outcome of these numerous questions impacts the ability to select the third party. Hence there is a selection reducing SEB Kort’ exposure already at this stage.

There are also existing contracts having been in place for a longer or shorter period where the documentation of ESG related issues varies from minor to extensive. The spread is mainly due to 1) that the awareness of ESG related topics has grown over time, and 2) that a risk-based approach has been used.

The awareness has grown at SEB Kort, but even more importantly, also on the supply side, meaning that the supplier market has matured to the extent that larger suppliers now have the competence and resources to respond and discuss SEB Kort’s requests. 

The risk-based approach has focused on the nature of the supply and the location of the supplying party, as well as the value of the supplied goods or service bought. If the supplier is 1) local to the SEB Kort sites and 2) has no abroad branches and 3) the purchased volume is small – then the result is a low risk. When the purchased volume is low, SEB Kort’s buying power would be low as well, thereby the possibility to affect the supply market would be minimal.

Another way of using the risk-based approach is to evaluate the urgency of changing the contractual relationship. When a change is deemed to be urgent, SEB Kort would use all contractual possibilities to re-negotiate a contract in short term. If this is not possible due to legal or contractual reasons, or the urgency is deemed to be medium, the desired changes will need to be addressed when the next possible contract expiry occurs, preferably with an RFP as a tool of selecting a better supplier or influencing the already contracted one.

If the problem could not be changed contractually (due to the actors available in the supplier market, or the nature of the goods or service provided) SEB Kort would need to evaluate if such goods or service could be replaced by another goods or service. This would likely be a medium to long term change. For the already existing contracts (renegotiate contracts, wait for next RFP, continuously measure exposure and progress on identified issues), there should be a balance by not renewing a contract with poor performing suppliers and forcing them to change their behaviour by staying on as a partner for their journey.

SEB Kort has in general long-lasting relationships with its suppliers and would prefer working with existing ones to help both parties evolve in this topic together.

Summary relating to the findings of the supplier due diligence

In general, the most important suppliers at SEB Kort must, due to the nature of their business, low presence in high-risk countries and complexity in the supply chain, be regarded as low risk. However, there are a few noteworthy exemptions:

  • Global/Non-EU/EEA actors in general act on many markets including high-risk countries. Most of these have either signed SEB Group of conduct or are utilizing an own code of conduct. On one occasion, there is an uncertainty if a code of conduct is in use and will require further investigation.
  • The global payment networks are strong players on the global market with a very decentralized organizational presence acting in many markets with a variety of risks. However, SEB Kort’s possibility to influence these actors is extremely small.

SEB Kort has identified one Nordic actor as a potential risk that would be worth looking into more deeply based on the complexity of the supply chain and business in high-risk countries. However, this supplier conducts business in Norway and will therefore need to adhere to the Act and publish a report stating their compliance to the regulation. SEB Kort will monitor the report provided and act on the result in line with SEB’s general process on supplier adherence to SEB Kort policies and instructions.

SEB Kort has several different types of business partners: Loyalty partners; Financial Co brand partners; Distribution partners; Travel agency partners; Expense partners and Procurement partners. As with suppliers and customers, the business partners are in all Nordic countries where SEB Kort is present. Most of the business partners are in the financial, travel or IT-industry, providing products and services from within the EU/EEA and most often from the Nordic countries. The business partners that are local and do not have any connection to the SEB Kort Oslofilialen business are disregarded for the purpose of this due diligence, given that they are not in scope of the Act. 

Given that most of SEB Kort’ business partners are conducting their business within the Nordics or EU/EEA, the risk connecting to business being conducted in high-risk countries is deemed small, or even non-existent. 

Looking to SEB Kort’ largest and most critical partners, almost all of the partners are conducting business in Norway or have business in Norway and therefore need to adhere to the Act. As with the suppliers, SEB Kort will monitor the report provided by the partners and act on the results in line with SEB’ general process on human rights due diligence according to SEB Kort policies and instructions.

Even though some of the larger and more critical business partners are out of scope of this assessment, there are still several that are part of the human rights' due diligence assessment according to the Act. An identified risk from last year was the unclarity regarding if a business partner should be regarded as a supplier or not and that they might fall between the different processes for customers and for suppliers. During the past year, a new due diligence process with focus on ESG and human rights has been set up for SEB Kort’s business partners.  

The due diligence process

The process for conducting an ESG and human rights due diligence assessment on business partners is as follows: 

  • A questionnaire has been created with questions that will give a better understanding how the business partner in question is working with ESG as well as human rights and if a sector policy is applicable.
  • If a sector policy is applicable, then a sector policy assessment is also conducted.
  • If there are any discrepancies to the answers, possible risk factors i.e., connections to high-risk countries, or if the business partner is lacking a code of conduct or human rights policy, a series of follow up questions are required. 
  • The answers lead to a dialogue between the business partner and SEB Kort, to ensure that measures are taken to address and mitigate the potential risks.

The ESG and human rights due diligence assessment is conducted for all new business partners and when an agreement is renegotiated. This way, all SEB Kort’s existing business partners will be subjected to the due diligence process and continuously scrutinized. 

Assessment of the results

One business partner has been on-boarded in accordance with the new process. The result of the assessment did not show any discrepancies or risk factors connected to ESG or human rights. Given that most of SEB Kort’s business partners are big actors within their industry, they will be subject to scrutiny from other regulations and actors and will therefore need to adopt more controlled and transparent processes and ways of working. The risk of a breach against human rights is considered low, but nonetheless, something that needs to be considered by SEB Kort. 

As with the suppliers, SEB Kort’s possibility to influence the business partners varies from case to case.  In general, SEB Kort can influence how the business partner is working with the products and services that are connected to SEB Kort. However, in some instances, even though the relationship between SEB Kort and the business partner is critical to the daily business, the possibility to influence the business partner’s way of working on a global setup is considered to be small.

The human resource department (“HR”) is responsible for working conditions and SEB Kort Oslofilialen's recruitment processes. HR shall ensure that Norwegian working environment legislation is complied with and that relevant internal instructions are followed, including "SEB Code of Conduct" and "SEB Inclusion and Diversity Policy". The Oslo branch has established routines for Health, Safety and Environment (“HSE”), annual employee surveys, annual voluntary and paid health checks, etc. 

All employees have individual written employment contracts. The Oslo branch complies with applicable working hour regulations. Salary and any overtime supplements, supplements for unsociable working hours are paid in accordance with applicable law and employment contracts. Hired personnel are registered with their own codes in the personnel system and agreements with the individual temporary employment agency are stored on the individual's personnel file. HSE training is carried out as for ordinary employees. The agreements with temporary employment agencies regulate relevant matters related to decent working conditions, equal treatment, etc.

During 2023, no cases of discrimination or harassment of employees have been uncovered. SEB Kort Oslofilialen has its own guidelines that are available on the intranet and special courses that are available on the SEB Group's learning platform. SEB Kort Oslofilialen respects employees' right to personal freedom and rights, such as religion, freedom of expression and private and family life, as well as the right to freedom of association. SEB Kort Oslofilialen also has a policy of paying equal pay to employees in the same position and treating employees equally when it comes to other matters regardless of gender, ethnic background, etc. Arrangements have also been established for employee participation in relation to the workplace through representation in the Working Environment Committee (“AMU”).

SEB has established internal and external whistleblowing channels and rules for conducting whistleblowing and investigations of matters that have been reported. Internal whistleblowing is normally handled by SEB's compliance function.

Because SEB Kort Oslofilialen has relatively few employees, all employees are located at the office in Oslo, the branch follows Norwegian working environment legislation and its own policies, the risk of potential violations of human rights and decent working conditions is considered low. Consequently, no action is taken.

Tomm Fr. Olsen Branch Manager, SEB Kort Bank AB, Oslofilialen