WR ESG Alert: EU Corporate Sustainability Reporting Directive implemented into Norwegian law, while other EU sustainability acts enter into force

Environment

EU Corporate Sustainability Reporting Directive (CSRD) implemented into Norwegian law

On 11 June 2024, the Norwegian Parliament implemented the EU Corporate Sustainability Reporting Directive ("CSRD", Directive (EU) 2022/2464) into Norwegian law, through amendments of the Accounting Act. The new rules impose new sustainability reporting requirements for Norwegian companies, aiming to standardise and enhance the quality of disclosed environmental, social and governance matters. 

The CSRD is part of the European Green Deal, which aims to foster a green transition and reduce greenhouse gas emissions in the EU, and which also includes the EU Taxonomy Regulation and the EU Sustainable Finance Disclosure Regulation, both of which are implemented into Norwegian law through the Sustainable Finance Act (Lov om bærekraftig finans).

The reporting must follow the principle of double materiality, meaning that companies must report on:

• The material actual or potential impacts of the companies' activities on people and the environment across value chains.
• How sustainability matters can affect the company financially over the short-, medium- and long-term 

The reporting requirements are more detailed, and cover a larger range of sustainability topics, compared to the existing reporting under Section 3-3 c of the Accounting Act. To ensure accurate, consistent and comparable reporting across various companies, sectors and countries, the European Commission has adopted a common set of reporting standards, referred to as the European Sustainability Reporting Standards (ESRS). Through a double materiality analysis, companies must determine which ESRS are material in relation to their activities, and report in line with the applicable standards. With the aim of making the sustainable reporting framework more accessible for companies, the European Commission published a set of Frequently Asked Questions (FAQs) on 7 August 2024.

The requirements will be phased-in gradually for different categories of enterprises, and the first group of companies must report in 2025 for the financial year 2024. Along with implementing the CSRD, the amendments of the Accounting Act also significantly increase the thresholds for being considered small, medium-sized and large enterprises. This means that more companies than before will be subject to sustainability reporting requirements, while, at the same time, many enterprises will faced more simplified reporting requirements than before.

The sustainability reporting shall be included in the company's annual report under the Accounting Act, and must be made easily available in a digital format on the company's website.

EU Nature Restoration Law entered into force

On 17 June 2024, the Council formally adopted the new Nature Restoration Law, which entered into force on 18 August 2024. The law is a key element in the EU Biodiversity Strategy, which is critical in setting binding targets to restore degraded eco-systems, especially those that can capture and store carbon and help reduce the impact of natural disasters. 

The Nature Restoration Law aims to restore ecosystems, habitats and species across land and sea in the EU. This will enable a long-term recovery of biodiversity and resilience of nature, contribute to achieving the EU's climate mitigation and climate adaptation objectives, and meet international commitments. 

The regulation sets a comprehensive restoration objective for the long-term recovery of nature and includes binding restoration targets for specific habitats and species. These measures aim to cover at least 20% of the EU’s land and sea areas by 2030, and all ecosystems requiring restoration by 2050.

The regulation contains several specific targets, including:

• Improving biodiverse habitats on a large scale for e.g. wetlands, forests, grasslands, river and lakes, rocky habitats and dunes. 
• Reversing the decline of pollinator populations by 2030 and achieving an increasing trend for pollinator populations.
• Achieving a trend towards more standing and lying deadwood, uneven aged forests, and forest connectivity in forest ecosystems.
• Restoring marine habitats such as seagrass beds or sediment bottoms that deliver significant benefits, e.g., for climate change mitigation, and restoring the habitats of marine species such as dolphins, sharks and seabirds. 

EU countries must submit National Restoration Plans to the Commission within two years of the Regulation coming into force, by mid-2026. These plans should detail how they will meet the targets. They are also required to monitor and report on their progress. In Norway, the regulation is currently being assessed by Norwegian authorities. 

Revised Industrial Emissions Directive entered into force

On 15 July 2024, the revised industrial Emissions Directive (Directive EU 2024/1785, “IED”) was published in the Official Journal of the EU, and it entered into force on 4 August 2024. Directive EU 2024/1785 amends Directive EU 2010/75 on industrial emissions and Directive EU 1999/31 on the landfill of waste. 

The previous IED has been the main EU instrument regulating pollutant emissions of Europe’s large-scale industrial installations, as well as of livestock farms. It requires industrial installations such as power plants, refineries, waste treatment, production of metals, cement, glass and chemicals to have integrated permits, granted by the authorities and which include, among others, emission limits and the use of best available technologies (BAT). 

The revised IED includes industrial emissions from intensive poultry and pig farms, ore mines, and large battery factories, mandating stricter emission levels and environmental performance targets for these sectors. Moreover, it requires Member States to impose penalties of up to at least 3% of an operator's annual EU turnover for the most serious breaches. According to the new environmental legislation, citizens have the right to claim compensation for health damages. 

The European Commission conducted an evaluation of the previous IED in 2020. The evaluation concluded that the previous IED did not effectively promote new techniques or ensure uniform practices among Member States. In addition, the EU's Green Deal and the goals of zero pollution, a non-toxic environment and a more circular economy also triggered the need for a revision of the IED.

The current IED is implemented in Norwegian law in the Pollution regulations and the Waste regulations. According to the Norwegian authorities, implementation of the revised IED will require amendments to these regulations and in the Pollution Act. 

Hydrogen and gas decarbonisation package

On 4 August 2024, the hydrogen and gas decarbonisation package entered into force in the EU. The package consists of Directive (EU) 2024/1788 on common rules for the internal markets for renewable gas, natural gas and hydrogen and Regulation (EU) 2024/1789 regarding the same. They repeal the Gas Directive 2009/73/EC and the Gas Regulation 715/2009. 

These regulations are components of the “Fit for 55” package, aimed at reducing net greenhouse gas emissions by at least 55% by 2030. The main objective of the hydrogen and gas decarbonisation package is to enable and facilitate a transition towards climate neutrality by ensuring the ramp-up of a market for hydrogen and an efficient market for natural gas.

Key deliveries are:

• Creating a market for hydrogen.
• Integrating renewable and low-carbon gases into the gas grid.
• Engaging and protecting consumers.
• Increasing security of supply and cooperation.

The reform provides a framework to decrease the share of unabated natural gas by enabling the integration of renewable and low-carbon gases into the energy system. It aims to avoid lock-in effects and stranded assets, while at the same time incentivising the use of renewable and low-carbon gases. The package also aims at reducing barriers to the development of a cost-effective, cross-border hydrogen infrastructure and a competitive hydrogen market. The European Network of Network Operators for Hydrogen (ENNOH) is introduced, an entity that will ensure focus on developing a dedicated hydrogen infrastructure in the EU and the efficient transport of hydrogen across EU borders. 

Low-carbon hydrogen and low-carbon gases are defined as producing 70% or less greenhouse gas emissions than fossil natural gas throughout their lifecycle. A certification system is also implemented. The new definitions complement the definition of renewable fuels of non-biological origin (RFNBO) under the Renewable Energy Directive II/III-legislation. 

The Norwegian Ministry of Energy released a public consultation on the package on 26 August and will host a public meeting on 10 October. According to the Norwegian EEA Factsheet, the legislation is considered EEA-relevant and acceptable with certain modifications.

One step closer to adoption of the Green Claims Directive

In June 17 the Council adopted its position (general approach) on the Green Claims Directive. The Directive aims to address green washing and help consumers make truly greener decisions when buying a product or using a service. It also seeks to ensure reliable, comparable and verifiable environmental claims from products and service providers, by setting minimum requirements for the substantiation, communication and verification of explicit environmental claims. 

The directive targets explicit environmental claims and labels—both written and oral—that companies voluntarily use to market their environmental impact, aspects, or performance. It also applies to existing and future public and private environmental labelling schemes. The approach distinguishes between explicit environmental claims and labels to clarify the obligations and requirements for each. The Green Claims Directive complements the Directive on Empowering Consumers for the Green Transition, adopted in March 2024, and the Ecodesign for Sustainable Products Regulation, which entered into force July 2024.

The Council's negotiating stance is more lenient than that of the European Parliament, especially when it comes to claims about carbon neutrality and claims based on carbon credits.

The amended Unfair Commercial Practices Directive bans claims that a product has a neutral, reduced, or positive environmental impact based on carbon credits. However, climate-related claims by traders based on offsetting are allowed if they meet the Green Claims Directive's criteria. The European Parliament supports a stricter approach, limiting compensation claims to "residual emissions," while the Council emphasises broader substantiation requirements for such claims, which requires traders to specify details about the carbon credits, including emission reductions or removals, permanence, and certification. The Council recommends that the Commission adopt implementing acts specifying the requirements for traders' assessments when making climate-related claims.

The Council's approach also differs in terms of third-party verification and the simplified procedure, and it has relaxed the Commission's proposal on compliance and penalties.

Both the Council and the Parliament are prepared to begin negotiations, known as “trilogues”, to finalise the text. A final agreement is anticipated by late 2024 or early 2025. The Council suggests that the Directive should be implemented at the national level within 36 months from its entry into force, extending the original 24-month transition period proposed by the Commission.