EU Taxonomy

What is the EU Taxonomy?

The EU Taxonomy is a cornerstone of the EU's sustainable finance package, which works towards the goal of making the EU the first climate-neutral economy in 2050 as per the European Green Deal. At the same time, the initiative revolves around creating a common language for what sustainable economic activities are in an effort to avoid dissimilar sustainability reporting and minimize greenwashing.

These legal requirements means that far more companies than before are obliged to report their sustainability initiatives on an activity basis.

The EU Taxonomy contains a number of criteria for more than 100 activities spread over 7 sectors; including agriculture, forestry and fishing, production, supply, water supply, construction, transport and information. With the EU Taxonomy, investments within the 7 sectors can be documented as sustainable and thereby achieve a financial gain.

Who is it relevant for?

As of now, the EU Taxonomy includes listed companies with more than 500 employees. But with the EU's sustainability reporting directive (CSRD), the EU Taxonomy will include large non-listed companies and listed SMEs by 2026.

Therefore, it is wise to begin the process of gathering information on your activities now, so that it can be used in the necessary annual ESG reporting. The EU Taxonomy also includes financial market participants such as banks, pension companies and insurance companies.

Where is it implemented?

As a part of the legal requirements, companies must publish their ESG key figures (Environmental, Social & Governance) in tandem with their annual report. The ESG section in the annual report contains, among other things, an assessment of how many of the company's activities meet the sustainability requirements cf. the EU Taxonomy.

The EU Taxonomy's focus areas

The EU Taxonomy is divided into 6 focus areas within environmental sustainability; climate impact, climate adaptation, water and sea resources, circular economy, pollution, and biodiversity.

In addition, the company must comply with the following guidelines in social and management areas; human rights, corruption, taxation, and fair competition.

A company is required to work towards complying with all areas of the EU taxonomy. The underlying idea is that the sustainability focus in one area must not have a harmful spillover impact on other areas.

How do we advise?

At NIRAS, we have a number of sustainability experts who are ready to advise customers in the EU Taxonomy. Our experts provide various services from screenings and GAP analyzes to documentation and compliance with the EU Taxonomy at a company level as well as on projects where the necessary process is followed.

In order for an economic activity to comply with the EU Taxonomy, there are some steps the company must follow. First, the company's activities are screened in order to clarify which activities are affected by the EU Taxonomy reporting.

After this clarification, one of the mentioned environmental areas is selected as the company’s chosen area of action – as previously mentioned, this activity must not cause any significant damage to the remainder of the environmental goals.

Finally, the social criteria must be in compliance with the minimum standards. Once all this is documented, the company can present the result in its annual report.