The financial industry has been in the spotlight in terms of responsibility and sustainability, and on March 10, new reporting requirements were implemented for the financial sector. The Disclosure Regulation includes requirements for disclosure of information on how companies' investments and operations contribute to sustainable development, and requirements for information to be provided when selling financial products. The taxonomy is a navigation tool based on clear criteria to help investors and relevant stakeholders in the transition to a low-carbon, sustainable and resource-efficient economy. If a company is to be considered sustainable, it must also comply with human rights.
Initially, it is Norwegian financial institutions, large companies and listed companies that will be affected by this, but later the plan is that all businesses that depend on investments will have to comply with the reporting requirements. For Norwegian companies, this means that the pricing of companies, access to capital and the price of loans will be affected. Being good at sustainability will act as a prerequisite for operations and growth.
What consequences will the requirements set out in the taxonomy have for businesses in Norway?
For economic activities to be labeled as sustainable, they must, according to the criteria, contribute strongly to at least one of six environmental goals. What is equally important are the minimum social criteria that are included in being labeled sustainable. Companies that are not aware of the social aspect run a significant risk in relation to the authorities, customers and investors. For the market, the regulations will be perceived as significantly more invasive than they appear from a purely legal perspective, because they will affect the flow of capital towards sustainable investments.
There are now also clear expectations of how a responsible business sector should meet its human rights responsibilities, the core of which lies in conducting due diligence assessments. 50% of Norwegian companies find it challenging to monitor their supply chain, according to a survey conducted by Amnesty. Despite this, confidence is high that they themselves do not run the risk of violating human rights, while the fact is that only 15% have carried out risk mapping in this area. Due diligence involves assessing and incorporating risk management systems, and identifying, preventing and mitigating negative impacts, both internally and down the value chain, and accounting for how these impacts are managed.
See the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Responsible Business Conduct.
By following the UNGPs and the OECD Guidelines and Principles, your business will be well prepared to meet the requirements of the taxonomy and strengthen your competitiveness in the face of stricter regulations.
Wikborg & Rein has prepared a good Q&A in this area, see here .
