The European Union recently passed new regulations on sustainable finance. As a result of the new regulations, companies in all industries are forced to be more sustainable to obtain financial funding. The regulation was implemented in Norwegian law starting 2023. Following reporting requirements will be in effect as of 1 January 2024. The implementation is of great importance for companies operating in Norway.
As a result of the EU regulation on sustainable financing, Norwegian and European companies will experience more stringent requirements from the financial industry when it comes to documenting their actions to become sustainable.
Businesses that satisfy the requirements for sustainability will have improved access to loans and financing. In addition, they will receive better terms and conditions from the financing institutions.
The green shift is already upon us, and sustainability should therefore be on your company`s action plan.
More information: EU Taxonomy screening criteria
What is the EU taxonomy?
To determine whether an activity is sustainable or not, the EU has developed a framework for identifying “green” activities(?), the so-called EU Taxonomy on sustainable finance. The Taxonomy currently applies to 13 different industries:
- Forestry
- Environmental protection and restoration activities
- Manufacturing
- Energy
- Water supply, sewerage, waste management and remediation
- Transport
- Construction and real estate activities
- Information and communication
- Professional, scientific, and technical activities
- Financial and insurance activities
- Education
- Human health and social work activities
- Art, entertainment, and recreation
Guide: Environmental Certifications in Norway
Download guide and get an overview of Norwegian Environmental Certifications and how to apply.
However, it is expected that, gradually, more sectors will be regulated. The taxonomy includes technical screening criteria that businesses in different industries must use to determine how sustainable their activities are. Examples of technical screening criteria for construction and real estate are:
“It is ensured that building components and materials do not contain asbestos nor substances of very high concern as identified on the basis of the “Authorisation List” of the REACH Regulation”.
and
“The new construction must not be built on arable or greenfield land of recognised high biodiversity value and land that serves as habitat of endangered”.
Also read: Doing business in Norway - subsidies for businesses looking to go green
Reporting requirements
The taxonomy also requires companies to report and document in accordance with the technical screening criteria for their relevant sectors. This reporting obligation will take effect 31 December 2023 and account for the fiscal year of 2023. Reporting on sustainability will bring clarity as to whether the company is in accordance with the taxonomy, and thus considered to be a sustainable investment object.
Sustainability is of importance for the company's future finances
Companies already operating in Norway or planning to start up business activities here, should be aware that with the implementation of the new regulations, Norwegian banks and other financial institutions will evaluate their customers in accordance with the taxonomy. Our recommendation is therefore that companies already now familiarize themselves with sector-relevant screening criteria. The European market for sustainable finance has already exploded, and the Norwegian market is following.
Also read: The Norwegian Transparency Act
Start now - avoid future penalties
By mapping your company´s sustainability, and establishing reporting routines at an early stage, you will be able to follow the developments in the market, and benefit from it. It is also expected that a penal system for companies that do not meet the taxonomy requirements will be introduced. By being prepared before the requirements are implemented in Norway, such penalties could be avoided.
The taxonomy is comprehensive but will be highly relevant going forward. In order to start your preparations, an effective tool is to incorporate environmental certifications. Read more about this in our guide.
Guide: Environmental Certifications in Norway
Download guide and get an overview of Norwegian Environmental Certifications and how to apply.
