EU taxonomy: what does it mean for companies?

What exactly is the EU Taxonomy?

The EU Taxonomy is a system designed to promote sustainable investments by establishing a standardized language for identifying environmentally responsible economic activities..

Starting this year, large publicly traded firms with over 500 employees are required to disclose how their operations align with the sustainability standards of the EU Taxonomy. This framework is continually expanding and expected to become essential for major enterprises covered by the new CSRD in the near future. If you're curious about who will be impacted, what changes to expect, and how to prepare for the EU Taxonomy, we've got you covered.

Defining sustainability can be challenging, but it's vital to building a sustainable economy and achieving the EU Commission's ambitious target of making Europe carbon-neutral by 2050. With the EU Taxonomy framework in place, the Commission has enabled a transparent process for evaluating sustainability choices. Companies will now have to provide information on their economic activities in a transparent and comparable manner, helping to facilitate a swift transition to a sustainable economy. However, sustainability requirements are continuously evolving. To be up to date, check this blog on EU Taxonomy implementation timeline

The EU Taxonomy's content

The EU Taxonomy is a comprehensive system that covers a wide range of economic activities, from agriculture and forestry to manufacturing and transportation. Its content is organized into six environmental objectives, which are: 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.

Each of these objectives is broken down further into specific criteria that must be met for an economic activity to be considered sustainable. For example, the climate change mitigation objective includes criteria such as greenhouse gas emissions reduction, energy efficiency, and renewable energy production.

The EU Taxonomy's content is continually evolving, with ongoing updates and expansions to ensure that it remains relevant and effective in promoting sustainable investments. By providing a clear and standardized language for identifying sustainable economic activities, the EU Taxonomy is helping to build a more sustainable and resilient economy for the future.

Which companies should report according to the EU taxonomy criteria?

At present, the EU Taxonomy affects major publicly listed firms with over 500 employees. These companies must disclose how much of their economic activities align with the EU Taxonomy's sustainability standards. The Non-Financial Reporting Directive (Directive 2013/43/EU) outlines which companies are required to report, and it is currently undergoing revision to become the Corporate Sustainability Reporting Directive (CSRD).

As the CSRD is implemented, all significant organizations, whether listed or unlisted, will gradually be expected to report on sustainability, and eventually, even small and medium-sized listed companies. The EU Taxonomy can be used by businesses of all sizes, including microbusinesses, to demonstrate their conformity with the taxonomy or their commitment to meeting its standards. However, only significant firms subject to the CSRD will be obligated to disclose their sustainability reporting.

Banks are already subject to reporting requirements and must publicly disclose their investment operations, which indirectly impacts businesses that rely on them for financing. Furthermore, banks will increasingly require a broad range of data from their customers to meet their reporting obligations.

How the taxonomy can be applied in the case of a cement manufacturer

The EU Taxonomy can be applied in the case of a cement manufacturer by providing a standardized framework for identifying and categorizing the sustainability of their operations. To apply the taxonomy, the cement manufacturer would need to evaluate their economic activities against the taxonomy's environmental objectives and criteria.

For example, under the climate change mitigation objective, the cement manufacturer would need to assess their greenhouse gas emissions reduction strategies and energy efficiency measures. They could explore options such as transitioning to alternative fuels, improving process efficiency, and investing in renewable energy sources to reduce their carbon footprint.

Under the circular economy objective, the cement manufacturer could consider implementing a closed-loop system for waste management and recycling to reduce waste and promote resource efficiency.

By using the EU Taxonomy, the cement manufacturer can identify areas where they can improve their sustainability and make more informed decisions about their investments and operations. They can also use the taxonomy to communicate their sustainability efforts to stakeholders and investors and demonstrate their commitment to building a more sustainable future.

How can Celsia help you?

Celsia can be a useful tool for companies looking to report on their compliance with the EU Taxonomy. Our solution can automate the collection and analysis of data related to a company's economic activities, making it easier to evaluate their alignment with the taxonomy's sustainability criteria.

The software can also provide guidance on the relevant environmental objectives and criteria, helping companies to identify areas where they can improve their sustainability performance.

Additionally, the software can streamline the reporting process by generating reports that comply with the EU Taxonomy's reporting requirements. It can also help companies to track their progress over time and make adjustments to their sustainability strategies as needed.

Overall, we can help companies to effectively manage and report on their sustainability performance in accordance with the EU Taxonomy. It can reduce the administrative burden and provide valuable insights into a company's sustainability practices, enabling them to make informed decisions and demonstrate their commitment to building a more sustainable future.