CSRD enters into force in Norway

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On Friday, October 11, the King in Council decided that the Norwegian legislation implementing the Corporate Sustainability Reporting Directive (CSRD) will come into effect on November 1st. On the same day, the Ministry of Finance also decided transitional rules that provide a gradual introduction of the new requirements on sustainability reporting the next years, in alignment with the approach of the EU. In this newsletter, we provide a brief update on the new sustainability reporting requirements and their implications for Norwegian companies.

Background

On June 21, 2024, the Norwegian Parliament adopted new legislation on sustainability reporting through amendments to the Accounting Act, the Auditor Act and the Securities Trading Act. The legislative amendments were in line with the proposal from the Ministry of Finance from March 2024.

The aim of the new sustainability reporting legislation is to provide relevant, comparable and reliable information about (i) the sustainability risks that companies are exposed to, and (ii) how the companies affect people, climate and the environment. The legislation also seeks to ensure that the sustainability information is readily accessible across the different EU and EEA member states.

Key takeaways from the Norwegian implementation of the CSRD

The CSRD is not a maximum harmonization directive. This means that EU member states can extend it when they transpose it into national law. The Norwegian transposition is however closely aligned with the CSRD. The only material expansion is the inclusion of the entity form “state-owned enterprises” (Nw: statsforetak) within the scope of application. Furthermore, the Ministry of Finance is given a right to broaden the scope to include other entity forms which are obligated to maintain accounting records.

Other than the above, the Norwegian legislation establishes the same content and scope of reporting, as well as assurance requirements and transitional rules, as under the CSRD.

Which companies are subject to the new reporting requirements?

The new rules on sustainability reporting in the Accounting Act apply to large enterprises/groups and small and medium-sized listed enterprises, excluding micro-enterprises. The reporting obligation will be gradually introduced in Norway, following the same model as in the CSRD:

From the fiscal year 2024 with reporting in 2025: Large enterprises of public interest with more than 500 employees, and which meet one of the following two criteria: (i) balance sheet: MNOK 290, (ii) sales revenue: MNOK 580. Examples of large enterprises of public interest are banks, credit institutions, insurance companies, and listed companies.
From the fiscal year 2025 with reporting in 2026: Other large enterprises that meet two of the following three criteria: (i) balance sheet: MNOK 290, (ii) sales revenue: MNOK 580, and (iii) ≥ 250 employees.
From the fiscal year 2026 with reporting in 2027: Listed small and medium-sized enterprises* (SMEs), and large entities that are “small and non-complex credit institutions” or captive insurance companies.

* Listed SMEs are enterprises that meet at least two of the following three criteria: (i) balance sheet: MNOK 5 – 290, (ii) sales revenue: MNOK 10-580 and (iii) 10 – 250 employees. The SMEs must have securities listed on a regulated market in the EEA. In Norway, Oslo Børs and Euronext Expand are regulated markets.

From the fiscal year 2028 with reporting in 2029: Certain third-country enterprises

The Ministry of Finance has established transitional rules in line with the CSRD that allow listed SMEs to choose not to include sustainability reporting in their annual reports for fiscal years beginning before January 1, 2028. In such cases, the enterprise must provide a brief statement in the annual report detailing the reasons for not providing the sustainability reporting.

Mandatory reporting standards – ESRS

To enhance comparability in reporting across companies, sectors, and countries, enterprises subject to the CSRD are required to use the European Sustainability Reporting Standards (ESRS). The standards are established by the EU Commission with guidance from the European Financial Reporting Advisory Group (EFRAG). They establish specific content requirements for the sustainability reporting, including the goals and indicators companies must use.

The initial set of general (sector agnostic) reporting standards for large enterprises was adopted in July 2023. Additionally, sector-specific standards as well as sector-agnostic standards for SMEs are being developed. These standards will be translated into Norwegian for implementation in national regulations. There is currently no official timeline for when the standards will be translated and implemented into Norwegian law. The preparatory works note however that this should happen as soon as possible after they are adopted in the EU. In the meantime, companies required to report in Norwegian must obtain their own translations. This could have negative effects for the comparability of sustainability reporting. For this reason, companies permitted to report in English frequently opt for this to ensure comparability and streamline the reporting process.

Does the CSRD affect the reporting obligations under the Transparency Act?

Some of the reporting points in the ESRS partially overlap with national reporting requirements in the Transparency Act. The Norwegian Ministry of Finance has noted, however, that the implementation of the CSRD reporting requirements into Norwegian law does not affect the obligations of Norwegian enterprises to conduct due diligence assessments under the Transparency Act. With regards to publication, the Transparency Act has been amended to specify that the statement can be included in the annual report, similarly to sustainability reporting (see § 5 para 3 of the Transparency Act).

It should be noted however that the Ministry of Children and Families has commenced an evaluation of the Transparency Act. This review will specifically assess the relationship between the new provisions on sustainability reporting in the Accounting Act and the reporting obligations under the Transparency Act. It will also assess the relationship between the CSDDD and the Transparency Act.

Implications for Norwegian companies

The implementation of the CSRD into Norwegian law has significantly expanded the scope of sustainability reporting, as well as the number of companies subject to reporting requirements. The sustainability reporting process now requires the use of standardized templates and involves detailed calculations across numerous data points. As a result, the reporting process will demand considerable resources, particularly during the initial implementation phase.
A key effect of the CSRD is that it expands the scope of the EU Taxonomy. This means that companies subject to the CSRD are required to also meet the Taxonomy’s reporting requirements. Therefore, companies subject to the CSRD from fiscal year 2025 should start preparing for both sustainability and Taxonomy reporting.
Companies falling outside the scope of the CSRD will likely become indirectly affected by the new sustainability reporting requirements. The reason is that companies subject to the CSRD are required to obtain sustainability information from their contractual partners to fulfill their obligations.

In light of these developments, companies within the scope of the CSRD should urgently initiate the sustainability reporting process. This should include performing a gap analysis against the CSRD requirements and conducting a double materiality analysis. Furthermore, it is also crucial to integrate the new requirements in governance and internal control systems. Any findings from the process should be addressed at a strategic level by the board of directors as well as the management.

Wiersholm offers legal support to companies in connection with the implementation of the sustainability reporting requirements. Our support includes conducting gap assessments against the CSRD and performing and/or ensuring the quality of double materiality assessments and sustainability reporting. We also provide strategic advice on the implementation of the new requirements in internal control systems and within the broader organisation.