What is the EU-taxonomy?
The EU Taxonomy is a classification system developed by the European Union (EU) to identify and define economic activities that are considered environmentally sustainable. The taxonomy provides a framework for assessing the extent to which an economic activity contributes to one or more of the EU’s six environmental objectives:
- climate change mitigation;
- climate change adaptation;
- sustainable use and protection of water and marine resources;
- transition to a circular economy;
- pollution prevention and control;
- protection and restoration of biodiversity and ecosystems.
To qualify as environmentally sustainable according to the taxonomy, a company must fundamentally contribute to one or more of the six established sustainability and environmental objectives while not significantly harming any of the others.
Who is the taxonomy regulation relevant for?
The Taxonomy Regulation requires most large companies to report on the environmental sustainability of their economic activities. The requirement only applies at EU level and not at a national level. The regulation requires companies covered by the Sustainability Reporting Directive to provide information according to the taxonomy. From 1 January 2022, this will apply to large public-interest companies with more than 500 employees.
Why is it important?
As ESG performance and green transition are increasingly on the agendas of companies worldwide, the application of the EU taxonomy is expected to expand beyond Europe in the future. Within the EU alone, the scope of the taxonomy will grow from about 11,000 companies (2022) to more than 50,000 companies in the coming years.
From 1 January 2022, the EU taxonomy regulation will apply to the EU’s first two environmental objectives – climate change mitigation and climate change adaptation. From 1 January 2023, the scope will also include water and marine resources, transition to a circular economy, pollution control and biodiversity.