WR ESG Alert: Norway commits to implement CBAM, while the first penalty under the Transparency Act is imposed

Environment

Commission restricts use of a sub-group of PFAS chemicals

On 19 September 2024, the EU Commission adopted new measures under the REACH Regulation, which is the EU chemicals legislation. Restrictions on the use of undecafluorohexanoic acid ("PFHxA") and PFHxA‑related substances were put in place. These sub-groups of per- and polyfluoroalkyl substances ("PFAS") are highly persistent and mobile in water, posing significant risks to human health and the environment when used in certain products.

The restrictions adopted by the Commission target uses where risks are insufficiently controlled, alternatives are available, and socio-economic costs are relatively low compared to the benefits for human health and the environment.

The restriction will prohibit the sale and use of PFHxA in consumer textiles (e.g., rain jackets), food packaging (e.g., pizza boxes), consumer mixtures (e.g., waterproofing sprays), cosmetics (e.g., skincare products), and certain firefighting foams. However, it does not apply to other uses of PFHxA, such as in semiconductors, batteries, or fuel cells for green hydrogen.

This restriction is an important step forward in reducing PFAS emissions, since PFHxA is often used as a substitution for another already banned PFAS. It is based on the scientific assessment of European Chemicals Agency (ECHA) Committees and has successfully passed the scrutiny of the European Parliament and the Council. The restriction is distinct from the potential restriction on the entire PFAS group which the ECHA is assessing following a 2023 proposal by five European governments. 

Amendments in the Accounting Act to implement the CSRD enters into force (Norwegian)

On 1 November 2024, the amendments in the Norwegian Accounting Act that incorporate the EU Corporate Sustainability Reporting Directive (CSRD) entered into force.  The rules impose new sustainability reporting requirements for Norwegian companies, with the aim of standardising and enhancing the quality of disclosed environmental, social and governance matters. Beginning with the 2024 fiscal year, the reporting requirements will apply to the largest publicly listed companies. 

For more information, please see our newsletter from September.

Norway commits to CBAM (Norwegian)

After some initial uncertainty regarding its position, the Norwegian government has now decided to implement the Carbon Border Adjustment Mechanism (CBAM) in Norway. CBAM is designed to mitigate carbon leakage – where production moves to countries with lower climate ambitions and lower emissions pricing than the EU. Beyond this, CBAM aspires to support global climate objectives, notably the targets set forth in the Paris Agreement, by incentivising other nations to take more rigorous action in curbing their emissions.

In the EU, Articles 5 and 7 of the CBAM regulation are already in force, while the remaining provisions, including the main obligations of the regulation, will be enforced starting 1 January 2026. Norway’s timeline for CBAM adoption, however, remains unspecified. The rollout demands substantial preparatory efforts across various administrative layers, including the relevant ministries, the designated regulatory authority, customs, and potentially other collaborative agencies. Consequently, no definitive schedule has been issued for Norway’s enactment of the mechanism. Moreover, the specific authority that will oversee CBAM implementation within Norway is yet to be determined.

Despite the absence of a precise implementation date, this clarification paves the way for a series of technical preparations to commence, both within Norwegian enterprises and among the relevant authorities.

Greenpeace and Nature and Youth lose injunction appeal (Norwegian)

On 18 January 2024, the Oslo District Court ruled that the Norwegian government’s approval of the Yggdrasil, Tyrving, and Breidablikk oil fields violated both Norwegian and European law. The decision to grant permits was invalidated as the government and oil companies had failed to assess the oil fields' climate impact. Environmental organisations also secured an injunction to prevent development of the fields while the case proceeded through the courts. However, the government appealed both the main ruling and the injunction.

In March, the Borgarting Court of Appeal sided with the government, suspending the enforcement of the injunction until the appeal could be reviewed separately in a written and expedited process.

On 14 October, the Borgarting Court of Appeal reviewed the appeal on the injunction and overturned the District Court’s decision, concluding that the criteria for an injunction were not met. This ruling allows new permits to be issued, enabling continued development of the fields in question.

The main case will now move forward with a referral to the EFTA Court in Luxembourg, for the EFTA Court to provide an advisory opinion on the interpretation of the project directive. This opinion will carry significant weight when the case is revisited by the Borgarting Court of Appeal.

Social 

First infringement penalty for failure to comply with the Transparency Act (Norwegian)

On 25 September 2024, the Norwegian Consumer Authority issued what appears to be the first infringement penalty for a failure to comply with the Norwegian Transparency Act. A retail company has been imposed a penalty of 450,000 NOK for not responding to two information requests on time.

Any person has the right, upon written request, to receive information from companies covered by the Transparency Act about how the company addresses actual and potential adverse impacts on human rights and decent working conditions. Companies must answer the information within a reasonable time, and as a main rule within three weeks after the information request was received.

In case of repeated infringements of the duty to respond to information requests, the Consumer Authority may impose an infringement penalty. The penalty may be up to a maximum of 4 % of the company's annual turnover, or up to NOK 25 million, whichever is higher.

In its decision, the Consumer Authority held as a requirement that the company, i.e. person(s) acting on the company's behalf, must at least have acted negligently with regards to the factual circumstances that form the basis for the infringement penalty. The Consumer Authority found this requirement to be fulfilled. As for the size of the fine, the Consumer Authority did not hold the infringements to be "very limited", either individually and collectively, and found it to be necessary to send a message that failure to comply with the Transparency Act will have consequences. The size of the fine corresponded to 0.2% of the company's turnover.

Although the decision reportedly has been appealed to the Market Council, it highlights the need for companies that are covered by the Transparency Act to have robust procedures in place to handle information requests in a timely manner, including by ensuring that relevant employees receive training.

For more information on the infringement penalty imposed by the Consumer Authority, as well as its implications for companies within the scope of the Transparency Act, please consult our newsletter from October.