Navigating EU Taxonomy

Quite often companies focus on the workload and complexity brought by the upcoming EU Corporate Sustainability Reporting Directive (CSRD) and tend to forget - or put aside - the EU Taxonomy reporting process.

The EU Taxonomy requires companies in scope to assess the degree of sustainability of their economic activities against pre-determined environmental objectives and report on specific KPIs (turnover, Capex, and Opex). Alternative KPIs also exist for financial services entities.

Companies should be mindful of the fact that, if they become subject to CSRD reporting, they will simultaneously also need to report certain information under the EU Taxonomy Regulation. As is the case under CSRD, EU Taxonomy disclosures will be subjected to a limited assurance process, therefore the company auditor will look into it.

So where to start from? How are companies disclosing on EU Taxonomy and what are the prevailing market practices?

We are pleased to share our report Navigating EU Taxonomy progress and pathways to compliance, with insights into the EU Taxonomy disclosures of 291 European non-financial undertakings for the financial year 2023.

Since the beginning of 2024, most large public-interest entities have published their EU Taxonomy reports for the third time and since the first year of application, reporting requirements have gradually increased.

Companies went from only having to disclose ‘potentially sustainable’ (taxonomy-eligible) activities in their annual reports published in 2022, to now having to assess taxonomy-alignment for the first two environmental objectives, as well as eligibility for four more objectives defined by the EU Taxonomy. This not only changed the general amount of effort required for the analysis, but also led to more companies and business activities being covered, potentially providing enhanced insights into the sustainability efforts of a larger number of industries.

This year’s study provides valuable insights in the EU Taxonomy disclosures of 291 European large public-interest entities. We analyzed which numbers of eligibility and alignment were reported on average in different sectors and whether those, as well as the accompanying qualitative disclosures, have improved compared to the previous reporting cycle. We also analyzed how overall eligibility has changed with new activities for the four remaining environmental objectives being introduced.

If you are hesitating on how to pragmatically tackle the EU Taxonomy disclosures – reach out to us so you can get started with confidence.