EU Corporate Sustainability Reporting Directive (CSRD) Implemented into Norwegian Law

In this article, we will explain the background and context of the CSRD, the amendments in Norwegian law made to implement the directive, and how the new requirements will affect companies based in, or doing business in, Norway.

Background and context

The CSRD (Directive 2022/2464/EU), which was adopted by the EU in December 2022, requires a large number of companies to disclose information on risks and opportunities relating to social and environmental matters, and on the social and environmental impact of their activities. The directive amends the existing Non-Financial Reporting Directive (Directive 2014/95/EU), currently implemented through Section 3-3 c of the Norwegian Accounting Act. The CSRD aims, inter alia, to provide investors and other stakeholders with relevant, comparable and reliable sustainability information needed to assess companies' social and environmental impacts, and the financial risks and opportunities arising from sustainability matters. Through increased transparency, the EU seeks to channel capital flows towards sustainable investments.

The CSRD is part of the European Green Deal, which is a set of policy initiatives by the European Commission, with the goal of fostering a green transition to reduce greenhouse gas emissions by at least 55% by 2030, compared to 1990 levels, and to make the EU climate neutral by 2050. Alongside the CSRD, important financial acts implemented as part of the European Green Deal include 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 CSRD is also intrinsically linked with the EU Corporate Sustainability Due Diligence Directive (CS3D), which entered into force on 25 July 2024. While the CS3D requires companies to conduct due diligence relating to human rights and environmental impacts, as well as to adopt a climate transition plan, the CSRD mandates transparency regarding these requirements. Compared to the CS3D, which scope of companies covered was significantly narrowed-down in the course of the negotiations leading to its adoption, the CSRD applies to a much wider set of companies.

Implementation into Norwegian law

On 11 June 2024, the CSRD was formally implemented into Norwegian law through amendments in the Accounting Act. The amendments have not yet formally entered into force. However, the reporting obligations under the CSRD will follow the same timeline in Norway as for EU countries and will be introduced gradually:

• In the report for the financial year 2024 (to be published in 2025), the new requirements will apply for so-called public-interest entities, i.e. listed companies, banks, credit institutions, and insurance undertakings, with more than 500 employees, and that also exceed the requirements for being considered a large company.
• In the report for the financial year 2025 (to be published in 2026), the new requirements will apply for all large companies.
• In the report for the financial year 2026 (to be published in 2027), the new requirements will also apply for small and medium-sized listed companies. However, these companies may choose to omit sustainability reporting in their annual accounts until the financial year 2028 (to be published in 2029).

Who needs to comply?

The amendments in the Accounting Act significantly increase the thresholds companies have to exceed to be considered a large company (see criteria in box 1 below). This is also the case for small companies, which has a specific definition (see criteria in box 2 below). Medium-sized companies are defined as companies which fall between the thresholds for being considered small or large company.

For all categories of companies, parent companies of groups that on a consolidated basis satisfy two of the three conditions, have to fulfil the applicable requirements for the category in question. This means that parents of groups which on a consolidated basis fall within the reporting requirements, must report on behalf of the group, covering all subsidiaries. 

Subsidiaries of groups where the parent company is based outside of the European Economic Area (EEA) must publish a sustainability report covering the whole group, provided that the group has had sales revenues of more than 150 million euros in the EEA in each of the last two financial years. If certain conditions, including the sales revenues thresholds of 150 million euros in the EEA, are met, Norwegian branches of companies based outside the EEA must also publish a sustainability report covering the whole group.

Amended thresholds for determining company size under the Accounting Act

The implementation of the CSRD imposes sustainability reporting requirements on a larger number of Norwegian companies. While the reporting requirements under the current Section 3-3 c of the Accounting Act apply to approximately 350 companies, the Ministry of Finance estimates that around 1200 Norwegian companies will be subject to the new reporting requirements.

At the same time, the amendment in the Accounting Act also significantly raises the thresholds, both as regards larger and small companies. This means that the reporting requirements are simplified for companies which previously were above the thresholds for being considered as small companies, but are now considered as micro companies. The Ministry of Finance estimates that this will be the case for approximately 3000 Norwegian companies. 

What must in-scope companies report on?

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 the NFDR and 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). The ESRS provide a structured framework and methodology for reporting sustainability information, and currently consist of two overarching standards and ten topical standard, covering environmental, social and governance-related matters, including climate change, biodiversity, human rights and anti-bribery and anti-corruption. 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.

Small and medium-sized listed companies will be subject to more simplified reporting requirements compared to larger companies. 

ESG integration into annual reporting

The sustainability reporting must be made available in a digital format, 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. The language of reporting must be Norwegian, Danish, Swedish or English. To ensure the quality of the reporting, the report must be attested by an authorised public accountant, or by an enterprise authorised to attest sustainability reports under the legislation of the country in which the parent company in question is registered.

How will the new requirements affect your business?

In Norway, the rules on sustainability reporting in the Accounting Act are supplemented by the requirement to report on human rights impacts under the Transparency Act and the reporting requirements under the Equality and Anti-Discrimination Act. Moreover, companies that are covered by the new reporting obligations in the Accounting Act implementing the CSRD, are also required to comply with the sustainability reporting requirements under the EU Taxonomy Regulation.

Companies that are likely to fall within the scope of the new reporting requirements should urgently begin preparing to report according to the ESRS standards. The starting point of this preparation is to conduct a double materiality analysis, in order to determine which sustainability topics the sustainability report must cover. The next step to ensure effective compliance will be to conduct a gap analysis, to identify the gaps between the current reporting the companies undertakes, and the reporting that will be necessary under the new requirements. The preparations for the reporting, as well as the efforts to conduct the reporting itself, should be embedded in the company's management and board of directors.