Who should report and when?
Reporting is mandatory for large enterprises and listed small and medium-sized enterprises (SMEs). The reporting obligation will be phased in, with large public interest entities starting for the fiscal year 2024.
The phased reporting obligation is as follows:
- Reporting for the fiscal year 2024: Large public interest entities with more than 500 employees.
- Reporting for the fiscal year 2025: Large enterprises.
- Reporting for the fiscal year 2026: Listed SMEs, and large enterprises that are less complex financial institutions or self-insurance companies.
The effective date of the legislative changes is still unclear, but it is expected to occur in 2024. The Ministry may establish transitional rules.
Large enterprises are defined as those exceeding at least two of the following three thresholds:
- Sales revenue > NOK 580 million
- Balance sheet total > NOK 290 million
- Number of employees > 250 FTEs
A listed enterprise refers to accounting entities that have issued transferable securities listed on a regulated market in the EEA.
To fall under a size category, the threshold values must be met for two consecutive years.
Thresholds in Groups
In a group, threshold values must also be assessed at the group level, and there is a choice of how to calculate these thresholds. Either the balance sheet total, sales revenue, and the average number of employees can be calculated on a consolidated basis and compared to the mentioned thresholds, or the balance sheet total, sales revenue, and the number of employees can simply be summed without any eliminations (including no elimination of shares in subsidiaries). In the latter calculation method, the limits for balance sheet total and sales revenue can be increased by 20 percent.
A parent company in a large group is considered a large enterprise even if the parent company alone does not exceed the threshold values. The parent company’s sustainability report must cover all companies included in the group (i.e., all companies consolidated line by line in the consolidated financial statements).
Whether a subsidiary in the group has an independent reporting obligation depends on whether the subsidiary (with any subsidiaries) exceeds the mentioned thresholds. There are exceptions for reporting if the subsidiary (with its subsidiaries) is included in the parent company’s attested sustainability reporting. This exception from preparing its own sustainability report does not apply if the subsidiary is a large enterprise listed on a regulated market.
Definitions of different categories of enterprises and groups, threshold values, and calculation methods are introduced through amendments to the Accounting Act. The Accounting Act also defines the content of sustainability reporting and how the reporting should be done.
Obligation to Report on Sustainability Implies Obligation to Report on Taxonomy
Some enterprises were required to prepare taxonomy reporting for the fiscal year 2023. Now, all those obligated to report on sustainability must include reporting according to the EU taxonomy.
Therefore, for the fiscal year 2025, many more enterprises will need to report on taxonomy than in 2023. The taxonomy reporting will be part of the sustainability reporting and will also be subject to auditor attestation. The fiscal year the company is required to prepare sustainability reporting is also the year the company must prepare taxonomy reporting.
Sustainability Report Included in the Board of Directors’ Annual Report
The sustainability reporting must be included in the board’s annual report. The sustainability reporting must be clearly identifiable and provided in a separate part of the annual report. A set of standards that reporting companies must follow has been established; European Sustainability Reporting Standards (ESRS). These will be translated and established as regulations to the Accounting Act.
Sustainability Reporting must be attested
To strengthen trust in the information, the sustainability reporting must be attested by an approved auditor. The attestation should express whether the sustainability reporting is:
- In accordance with the requirements in the Accounting Act Chapter 2 (a new chapter that sets out the requirements for what the sustainability report must contain), including the standards for sustainability reporting
- In accordance with the reporting requirements in the Taxonomy Regulation Article 8
- About the process the enterprise has conducted to identify the information reported according to the standards (double materiality analysis)
- And compliance with the requirement to mark the sustainability reporting according to the requirements for electronic reporting format according to the Accounting Act § 2-7.
Currently, the requirement is that the attestation is given with moderate assurance, which is a lower level of assurance than that provided for the annual financial statements.
The attestation can be carried out either by the company’s elected auditor or another audit firm. The auditor must be approved as a sustainability auditor.
The Transparency Act and larger enterprises
There has previously been a correlation between the thresholds for small enterprises under the Accounting Act and the thresholds for the reporting obligation under the Transparency Act. Now, the thresholds for small enterprises under the Accounting Act are significantly increased without affecting the thresholds under the Transparency Act. Therefore, there is no change in which enterprises are required to report under the Transparency Act.