The EU's sustainable finance rating system, taxonomy, was introduced earlier this year. It is a new way of classifying economic activities through the EU's environmental objectives and obliges large companies' reporting. We studied these first taxonomy reports of big companies to support our customers in the upcoming second phase of taxonomy.
EU taxonomy aims to identify the proportion of the company’s activities that correspond to the EU’s six climate objectives. The company’s activities are viewed through these objectives, and taxonomy reveals what proportion of the company's activities support the achievement of environmental objectives. Taxonomy is part of the EU’s Sustainable Finance Action Plan, alongside the Sustainable Financing Regulation for Financial Institutions, the SFDR, which took effect in 2021. SFDR, the regulation of duty to notify, will indirectly affect all companies that raise or pursue funding. It requires financial institutions to determine the taxonomy eligibility of the things they fund.
Taxonomy is an entirely new way of classifying economic activities and is currently completed only for two of the EU’s climate targets. Next, the EU will define technical criteria for the remaining objectives: circular economy, biodiversity, pollution, and water protection. Although the taxonomy regulation currently applies only to large listed companies, it will affect all business activities under these regulations in the future.
Taxonomy classification (EU’s environmental objectives):
- Climate change mitigation
- Climate change adaptation
- The sustainable use and protection of water and marine resources (criteria undefined)
- The transition to a circular economy (criteria undefined)
- Pollution prevention and control (criteria undefined)
- The protection and restoration of biodiversity and ecosystems (criteria undefined)
Stakeholders are demanding more sustainable business activities, and taxonomy will increase the transparency of the company’s operations. Therefore, investors and financiers are especially interested in whether the company’s activities align with taxonomy. In the future, obtaining funding and continuing business will only be possible if the company is taxonomy eligible.
We help our clients understand taxonomy by:
- Providing an overview of EU taxonomy
- Opening the taxonomy’s relationship with other reporting obligations
- Clarify the way a company can tell about its activities concerning taxonomy
- By helping the company determine their products and document their taxonomic compliance
Greenstep's team has experience supporting several listed companies in determining taxonomy eligibility and reporting. We also implement LCA and carbon footprint calculations to verify taxonomy eligibility. The taxonomy service may be packaged as a workshop or continuous service according to customer needs. Book an appointmento learn more!