ESG

ESG stands for Environmental, Social and Governance. It is the market's and the financial sector's umbrella term for how a company handles sustainability. Procurement law rarely uses the word. In the EU, the same ideas appear as environmental and social criteria and contract conditions, and in Norway the law calls them societal considerations. For a supplier, ESG means three things in practice: requirements in tenders, due diligence duties such as those in the Norwegian Transparency Act, and, for the largest companies, sustainability reporting.

How does ESG work in public procurement?

The EU framework is set by Directive 2014/24/EU:

• Article 18(2): Member states must ensure that suppliers comply with applicable environmental, social and labour law.
• Article 67: Award criteria may include environmental and social aspects, as long as they are linked to the subject matter of the contract.
• Article 70: Contracting authorities may set special contract performance conditions on environmental, social and employment matters.

Many buyers ask for documented due diligence assessments of the supply chain. Norway has gone further than the directive and made much of this mandatory. Since 1 July 2026, Sections 5a–5p of the Norwegian Public Procurement Act require climate and environment to be weighted at least 30 percent when award criteria are weighted (§ 5b), set pay and supply chain rules known as the Norway Model (§§ 5e–5k), cover human rights (§ 5m) and require sanctions in the contract for breaches of terms under §§ 5b to 5m (§ 5p). Together with tax certificates and other labour integrity requirements, this is the governance part. The Norwegian Agency for Public and Financial Management (DFØ) publishes a high-risk list of products with a high risk of human rights violations.

Outside the tender itself, two layers of company law apply. The EU Corporate Sustainability Reporting Directive (CSRD) requires reporting under the European Sustainability Reporting Standards (ESRS), phased in from financial year 2024 for the largest companies. The Omnibus I simplification package, adopted in 2026, limits CSRD to companies with more than 1,000 employees and over €450 million in turnover. The Corporate Sustainability Due Diligence Directive (CSDDD) now only covers companies with more than 5,000 employees and over €1.5 billion in turnover, from July 2029. In Norway, the Transparency Act already requires larger enterprises to carry out due diligence and publish an annual statement by 30 June.

An example: A textile supplier bids to deliver workwear to a Norwegian hospital trust. Textiles are on the high-risk list, so the supplier must document due diligence for its factories. The contract includes ethical trade terms with a right to audit and sanctions for breaches. Climate and environmental considerations are also an award criterion weighted at 30 percent.

Why does ESG matter for suppliers?

Even if your company is too small for CSRD or due diligence laws, ESG reaches you through your customers. Large companies and public buyers must map their supply chains, so the questions end up with you. If your environmental data, pay terms and due diligence are ready, you can reuse the same material in many bids. If not, you risk lower scores on award criteria, or sanctions after the contract is signed. Tools like Cobrief help you see which environmental and social requirements a tender sets before you spend time on the bid.

Frequently asked questions

Can a contracting authority require an ESG report as a selection criterion?

Selection criteria must be linked and proportionate to the contract. A general demand for a company-wide ESG report or rating is hard to justify, and the directive's recitals rule out criteria based on general corporate policy. Specific evidence, such as environmental management or due diligence relevant to the contract, is a different matter.

Do due diligence laws apply to small companies?

Not directly. CSDDD and the Norwegian Transparency Act target larger enterprises. But your customers must assess their suppliers, so you will often meet the same questions in contracts and self-declarations.

Is ESG the same as social and environmental procurement?

Almost. ESG is the market's term and covers the whole company. Green and social procurement is the legal term and covers what a buyer can and must require in a specific contract.

In short: ESG is sustainability in financial language, while procurement law speaks of environmental and social requirements. In a public tender you meet ESG as concrete criteria and contract conditions, and in Norway as Sections 5a–5p of the Public Procurement Act.