EU Taxonomy

The Taxonomy Regulation plays a central role in the European strategy to finance the transition to a sustainable economy. From 2024 onwards, the EU taxonomy is strongly integrated with the Corporate Sustainability Reporting Directive (CSRD), meaning that the requirements for corporate sustainability reporting are extended.

The EU taxonomy has two main purposes. First, it encourages companies to assess their position in relation to the EU’s sustainable transition. Second, it enables financial actors to prioritise investments in projects and assets that best contribute to this transition. Even companies not subject to formal reporting requirements often choose to follow the taxonomy. This strengthens a company's competitiveness, facilitates access to capital, and makes the company more attractive to investors who prioritise sustainable investments.

To this end, the regulation introduces a classification (taxonomy) of economic activities based on their potential to contribute to the six environmental objectives set by the EU:

• Mitigation of climate change
• Adaptation to climate change
• Protection and sustainable use of water resources and marine ecosystems
• Transition to a circular economy
• Prevention and control of pollution
• Protection and restoration of biodiversity and ecosystems

The EU Taxonomy Mechanism and Its Impact on Companies

The taxonomy is based on a three-step process that all relevant companies must follow:

• Eligibility Analysis: An activity is considered "eligible" if it is explicitly listed in the taxonomy. Currently, the taxonomy includes around 80 activities within 13 macro-sectors, selected because they account for over 90% of greenhouse gas emissions. The eligibility analysis requires companies to identify which of their activities are included in the taxonomy’s list.
• Alignment Analysis: An eligible activity becomes "aligned" with the taxonomy, and thus with the EU’s environmental goals, if it meets the following three criteria:
  • Contributes significantly to at least one of the six environmental objectives.
  • Does not cause significant harm to any of the other environmental objectives.
  • Complies with minimum safeguards for human rights, as outlined by OECD, UN, and ILO guidelines.

For each criterion, specific analysis criteria are provided within the taxonomy.

• Contribution Analysis: Once the aligned activities have been identified, the company must calculate and disclose the proportion of its total operations represented by these activities. This shows to what extent the company aligns with the EU’s sustainable transition.

Implementing the EU taxonomy is a resource-intensive process. Our experts will support you from the initial understanding of the requirements to project planning, analysis of relevant activities, and the calculation and reporting of taxonomy KPIs.