The European Union (EU) is committed to achieving a low-carbon, resource-efficient, and sustainable economy. To this end, the EU has introduced the EU Taxonomy Regulation, which aims to classify and report sustainable economic activities. The EU Taxonomy Reporting is a process that allows companies to disclose their sustainability activities and investments that contribute to achieving the EU’s environmental objectives. This article provides an in-depth guide to EU Taxonomy Reporting, including its benefits, how to comply with its requirements, and its impact on sustainable investments.

What is EU Taxonomy Reporting?

EU Taxonomy Reporting is a process of disclosing a company’s sustainability activities and investments that contribute to achieving the EU’s environmental objectives. The EU Taxonomy regulation is a classification system that identifies environmentally sustainable economic activities. The taxonomy covers 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, and protection and restoration of biodiversity and ecosystems.

The EU Taxonomy Reporting enables investors to compare and assess different companies’ environmental performances based on a common standard. The reporting requirements are intended to increase transparency and help investors make informed decisions about their investments in environmentally sustainable economic activities.

Why is EU Taxonomy Reporting Important?

EU Taxonomy Reporting is important because it provides companies with a framework to demonstrate their commitment to sustainable practices. The reporting requirements apply to all large companies operating in the EU that are subject to the Non-Financial Reporting Directive (NFRD). The NFRD requires large companies to disclose information about their environmental, social, and governance (ESG) performance in their annual reports.

By complying with the EU Taxonomy requirements, companies can increase their transparency, credibility, and reputation. Investors are increasingly interested in companies with strong sustainability performance, which can result in higher investment and better access to capital. Companies that fail to disclose their sustainability activities and investments may face reputational risks and may be at a disadvantage when seeking investment.

Who is Affected by EU Taxonomy Reporting?

The EU Taxonomy Reporting applies to all large companies operating in the EU that are subject to the NFRD. The NFRD applies to companies that exceed the following criteria:

• More than 500 employees
• Annual turnover of more than 40 million euros
• Balance sheet total of more than 20 million euros.

The EU Taxonomy Reporting is an additional requirement that applies to companies that claim to have environmentally sustainable economic activities or investments. Companies that do not have environmentally sustainable economic activities or investments are not required to report under the EU Taxonomy Regulation.

How to Comply with EU Taxonomy Reporting Requirements?

Complying with EU Taxonomy Reporting requirements involves four main steps:

Step 1: Identify the economic activities and investments that are covered by the EU Taxonomy Regulation.

The first step is to identify the economic activities and investments that are covered by the EU Taxonomy Regulation. The taxonomy covers economic activities and investments that make a substantial contribution to one or more of the six environmental objectives mentioned above. Companies should identify the economic activities and investments that are relevant to their business operations and determine whether they meet the EU Taxonomy criteria for environmental sustainability.

Step 2: Assess whether the economic activities and investments meet the EU Taxonomy criteria for environmental sustainability.

The second step is to assess whether the economic activities and investments meet the EU Taxonomy criteria for environmental sustainability. The criteria are based on technical screening criteria that are developed by the EU Technical Expert Group on Sustainable Finance. The screening criteria provide a set of performance thresholds that economic activities and investments must meet to be considered environmentally sustainable.

Step 3: Disclose the proportion of the company’s economic activities and investments that meet the EU Taxonomy criteria for environmental sustainability.

The third step is to disclose the proportion of the company’s economic activities and investments that meet the EU Taxonomy criteria for environmental sustainability. Companies must report the proportion of their turnover, capital expenditure, and operating expenditure that is generated by environmentally sustainable economic activities and investments. The disclosure should be made in the annual report or in a separate sustainability report.

Step 4: Provide additional information on how the economic activities and investments contribute to the EU’s environmental objectives.

The fourth step is to provide additional information on how the economic activities and investments contribute to the EU’s environmental objectives. Companies should provide information on the environmental impact of their economic activities and investments, the measures they have taken to reduce their environmental impact, and the expected future environmental benefits. Companies should also disclose any potential adverse impacts on the environment and explain how they plan to mitigate them.

Conclusion

EU Taxonomy Reporting is an important step towards achieving a low-carbon, resource-efficient, and sustainable economy. By complying with the reporting requirements, companies can increase their transparency, credibility, and reputation, and investors can make informed decisions about their investments in environmentally sustainable economic activities. To comply with the EU Taxonomy requirements, companies need to identify the economic activities and investments that are covered by the regulation, assess whether they meet the EU Taxonomy criteria for environmental sustainability, disclose the proportion of their economic activities and investments that meet the criteria, and provide additional information on how they contribute to the EU’s environmental objectives. By following these steps, companies can demonstrate their commitment to sustainability and contribute to a more sustainable future.

How to do EU Taxonomy efficiently?

Using Celsia for EU Taxonomy reporting can greatly simplify the reporting process and help companies ensure compliance with the regulation. This dedicated software can automate data collection and analysis, provide real-time insights and alerts, and generate accurate and consistent reports. It can also help companies identify gaps and opportunities for improvement and track progress towards their sustainability goals. By using Celsia software for EU Taxonomy reporting, companies can save time and resources, reduce the risk of errors and inconsistencies, and enhance the quality and credibility of their reporting.