This information does not quite gel with the standard bullshit about Iceland being so clean and fresh but a look at the Blue Flag website shows that only three local beaches here get the gold-standard for being clean and healthy to wander around without a worry.
It also raises questions about the local fish you might be getting at the nearest restaurant. Many offer fresh or newly-frozen salmon as a main course but how less tasty it must be to wolf down fish that´s been swimming in excrement for a while. It certainly calls for some questions before you order doesn´t it?
Now, the reason human waste exits into rivers and the sea is a lack of real infrastructure on behalf of most places in Iceland. Only Reykjavik city really has first class disposal methods for human waste shuttling it way out in the ocean. Not so much for the rest of places here.