Companies subject to the European Reporting Requirement (NFRD or CSRD) have to disclose how much of their turnover, capital expenditure (CapEx) and operational expenditure (OpEx) is related to sustainable activities. You make those calculations based on the EU Taxonomy. This summer, a new set of criteria was approved for four environmental targets, called Taxo4. Read the latest here!
The underlying purpose of the EU Taxonomy is to encourage companies to take on sustainable projects or to make current projects more sustainable. To this end, the EU Taxonomy describes how to calculate exactly what percentage of your activities are sustainable. An economic activity can only be included in the EU Taxonomy if it contributes to at least one of the six environmental goals.
The two climate targets have already been described by the European Commission in the climate delegated act in 2021. This describes the activities and technical screening criteria to be Taxonomy-aligned for the climate adaptation and climate mitigation targets.
This delegated act covers activities in thirteen sectors:
We described the groundwork for the EU Taxonomy in a previous article. There you will find a useful step-by-step plan to assess your activities according to the classification system!
This summer, the European Commission adopted a new set of criteria for activities that contribute to the four other objectives, known as Taxo4. They comprise biodiversity and ecosystems, circular economy, pollution and water.
The Taxo4 economic activities cover 35 activities in 8 sectors. While the first five sectors also featured in the delegated act related to climate mitigation and adaptation, the final three sectors are new:
How do you go about this as an organization? Let’s take a company operating in the service sector as an example. Suppose you sell second-hand goods: that activity is part of the ‘circular economy’ objective. If you do not harm any of the other five environmental objectives with that activity (the ‘do no significant harm’ principle), then that activity qualifies as sustainable according to the EU Taxonomy.
It also refined the technical criteria for the two climate targets. Twelve new activities were added, related to the six sectors listed below. New activities include air passenger and cargo transport (transport sector) and emergency services (disaster risk management sector).
The EU Taxonomy will then enter into force in several phases, following this timeline:
Listed companies and companies of public interest covered by the NFRD are required to report their alignment with the climate targets, and eligibility for the other four targets (Taxo4), starting this financial year. More information on alignment and eligibility can be found in this article.
From 2024 onwards, non-financial companies covered by the NFRD will also have to report their alignment. Financial companies may still report eligibility for Taxo4 for fiscal year 2024, their alignment for the climate targets should already be completed.
Large companies covered by the CSRD will have to report on all KPIs from fiscal year 2025 onwards.
Listed SMEs receive another year’s grace: they will have to report from fiscal year 2026 onwards.
To conclude, the EU Taxonomy remains a living document, so the criteria will be regularly refined. Pantarein is closely monitoring all developments.
Listing your EU Taxonomy activities is a huge task. Would you like guidance? Contact Pantarein via mail@pantarein.be.
