EU taxonomy: Standard for sustainable economic activities

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The EU Taxonomy Regulation (EU) 2020/852 is a key tool of the European Union to support companies and investors in transitioning to a more sustainable economy. It defines clear criteria for sustainable economic activities. Since 2022, companies have been required to meet the EU Taxonomy criteria in their reporting. Planet Now can assist you with this.

 

What is the EU Taxonomy?

 

The EU Taxonomy is a classification system that labels economic activities as "environmentally sustainable" if they make a significant contribution to at least one of the six environmental objectives without significantly harming the others (the so-called "Do No Significant Harm" principle). The six environmental objectives are:

 

1. Climate Change Mitigation

2. Climate Change Adaptation

3. Sustainable Use and Protection of Water and Marine Resources

4. Transition to a Circular Economy

5. Pollution Prevention and Control

6. Protection and Restoration of Biodiversity and Ecosystems

 

Companies must demonstrate that their activities meet these criteria without jeopardizing other environmental objectives, while also adhering to minimum social safeguards.

 

Example: Climate Change Mitigation

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Let's consider the first environmental objective of the EU Taxonomy: Climate Change Mitigation. Companies aiming to contribute to this objective must demonstrate that their economic activities significantly reduce greenhouse gas emissions. Examples include climate-friendly heat supply or the production of renewable energy.

 

First, the economic activities of the obligated company are analyzed to determine the share of revenue, capital expenditures, and operating expenditures that can be assigned to the Taxonomy and then assessed for Taxonomy alignment.

 

• Taxonomy eligibility means that a company's economic activity is listed in the EU Taxonomy and can potentially contribute to one of the environmental objectives. This assignment is made using specific NACE codes, which systematically classify economic activities. An example of this is NACE code D 35.30 for heat and cold supply.

• Taxonomy alignment means that the activity is not only listed but also meets the strict technical screening criteria. This includes that the activity makes a significant contribution to an environmental objective without harming other environmental objectives and that minimum social safeguards are respected.

 

The distinction is crucial: Taxonomy-eligible activities alone do not bring benefits like better financing terms or an improved reputation in financial markets. Only Taxonomy-aligned activities are considered sustainable and offer such opportunities.

 

Example: Heat Pumps

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A practical example of a Taxonomy-aligned measure in climate change mitigation is the installation and operation of electric heat pumps, particularly in heat and cold supply (NACE code D 35.30). To achieve Taxonomy alignment, the following technical selection criteria must be met for heat pumps:

 

1. Significant contribution to an environmental objective, in this case, climate change mitigation.
   For heat pumps, the following conditions must be met:

   • The global warming potential (GWP) of the refrigerant used must not exceed 675.

   • The heat pump must meet energy efficiency requirements, measured by the Coefficient of Performance (COP).

2. Do No Significant Harm
   The activity must not significantly harm any of the other environmental objectives.

3. Compliance with minimum social safeguards
   The activity must comply with international labor standards (e.g., ILO) as well as human rights and occupational safety standards.

 

Regulatory Requirements and Transparency

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For reporting companies in the European Union, compliance with the EU Taxonomy is a central component of sustainability reporting. Since January 1, 2022, companies must disclose how their revenues, capital expenditures, and operating expenditures align with the goals of the EU Taxonomy.

 

The technical screening criteria and disclosure requirements, set out in the delegated acts of the EU Taxonomy, particularly Delegated Regulation (EU) 2021/2139, govern the specific requirements for each economic activity.

 

Why the EU Taxonomy is Critical

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Many companies face challenges in meeting the Taxonomy requirements:

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• Reporting complexity: The EU Taxonomy requires detailed information on all business activities and their environmental impacts, which presents organizational challenges for many companies.

• Data requirements: To meet the Taxonomy criteria, extensive data on environmental, social, and governance aspects such as CO2 emissions, water consumption, and energy efficiency must be collected and evaluated.

• Reputation risks: Companies that do not transparently report on their Taxonomy alignment risk losing the trust of investors and customers.

• Cost risks: Failure to comply with the Taxonomy can lead to sanctions or difficulties accessing sustainable financing.

 

Our Services for Supporting EU Taxonomy Implementation

 

We assist your company in meeting the EU Taxonomy requirements, optimising your sustainability strategy, and complying with regulatory demands.

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• Taxonomy Analysis and Data Preparation: We support you in analysing your business activities in relation to the EU Taxonomy and help you collect and structure the necessary data. At the same time, we identify potential data gaps and help you detect risks associated with incomplete data early on.
   

• Reporting, Compliance, and Strategic Communication: We assist you not only in fulfilling your reporting obligations under the EU Taxonomy, CSRD, and SFDR but also in strategically aligning your sustainability reporting. This includes targeted communication with investors and stakeholders to build trust and transparency.
   

• Strategic Consulting for Sustainable Alignment and Innovation: We offer comprehensive strategic consulting to align your business model and investments sustainably. In addition to meeting the Taxonomy criteria, we focus on ESG risk management, innovation in the supply chain, and promoting sustainable business models that create competitive advantages.
   

• Optimizing Financing Strategy and Capital Market Orientation: We help you develop a capital market-oriented financing strategy aligned with the goals of the EU Taxonomy. This includes structuring sustainable financing instruments, such as Green Bonds or sustainable loans, tailored to your long-term goals.

 

Get in touch with us

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Would you like to learn more about how your company can benefit from our consulting services on the EU Taxonomy? Contact us to discover how you can meet regulatory requirements while strengthening your competitiveness!

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