Note that there are numerous taxonomies, each with its own function. The ESEF will feature as many as three taxonomy packages: the ESRS XBRL taxonomies, the IFRS Accounting Taxonomy and the XBRL Taxonomy belonging to the EU Taxonomy (also known as Article 8 XBRL Taxonomy).
The XBRL Taxonomies are not to be confused with the EU Taxonomy. These are the essential differences:
XBRL Taxonomy
= A system that provides tags for digital reporting, such as the ESRS XBRL Taxonomy or the ISSB Taxonomy.
How? An XBRL Taxonomy defines the tags and associated labels for key concepts associated with a reporting standard. In the case of the European Sustainability Reporting Standards (ESRS) it is the ESRS XBRL Taxonomy; in the case of IFRS standards, it is the ISSB Taxonomy (IFRS Sustainability Disclosure Taxonomy). The EU Taxonomy also has its own XBRL Taxonomy, often referred to as the Article 8 XBRL Taxonomy.
EU Taxonomy
= A classification system that categorizes economic activities according to their impact on EU environmental objectives.
How? Companies must report on the proportions of their turnover, capital expenditure and operational expenditure that are considered sustainable. To define what is sustainable, the EU Taxonomy defines several conditions. For example, a business activity must make a substantial contribution to at least one environmental objective, without harming other environmental objectives (the ‘do no significant harm’ principle).
Read our insight on the EU Taxonomy for an overview of all conditions and environmental objectives.
The taxonomies are not yet all finalized. As all the rules are finalized, more and more connections between the different taxonomies will emerge. For instance, elements from accounting around revenue, turnover and assets are also relevant to the sustainability taxonomy. Those links will therefore be more explicitly integrated in the coming years.
