Skip to content

EU Taxonomy

Shortly before the summer of 2021, the European Union adopted new regulations to determine whether investments made by companies and financial institutions are "green. Companies and organizations covered by these regulations will have to explain and justify their investments starting in 2022. With this, sustainability reporting takes a step forward.

The European green deal and new rules for green investment

The EU wants to become the first climate-neutral continent. The European Commission's ambition is that by 2050 Europe will no longer contribute to global warming through CO2 emissions, the European Green Deal prescribes. To make this happen, a roadmap has been drawn up with a whole series of measures and investments are needed in new technologies and other solutions that combat climate change.

Over a 10-year period, it is estimated that at least 260 billion euros of additional investment is needed each year. That is gigantic. Of course, governments will have to bear a large part of this, but companies will also have to contribute. Now it is often unclear whether an investment contributes to a better environment or not. Sometimes there is even 'greenwashing': an investment is presented as green when it is not.

Clear criteria are needed to decide exactly what is sustainable and environmentally friendly, and what is not. Those criteria are in the new EU Taxonomy: a classification system for sustainable activities.

The EU Taxonomy: concrete and measurable standards for sustainable projects

The EU Taxonomy creates clarity. Both companies looking for funding and investors interested in sustainable projects can benefit from clear EU standards. For an activity to qualify for a 'green' label, it must be shown to contribute substantially to one of the EU's six environmental objectives without adversely affecting the other five.

The goals are:
  1. climate change mitigation
  2. climate change adaptation
  3. water and marine resources
  4. circular economy
  5. waste prevention and recycling
  6. pollution and healthy ecosystems

In addition, the economic activity must not compromise social standards, such as human and labor rights. Finally, the economic activity must meet technical assessment criteria to be defined.

With the taxonomy, the European Commission wants to make a multi-interpretable concept like "sustainability" concrete and measurable. A system whose outcome is supported, shared and endorsed by scientists, governments, industrialists and individuals.

Transparency in accountability also for (listed) companies

The new taxonomy applies not only to investors and financial institutions but also to (listed) companies. They have from the existing NFRD Directive already longer the obligation to share information on sustainability. The EU Taxonomy offers them the opportunity in their non-financial report even better and more explicitly how and to what extent their economic activities are environmentally sustainable. How these fit within the strategy, value creation model and policy of the company and how they are related to, for example, the 17 Sustainable Development Goals.

In addition, we expect that smaller and unlisted companies will also use the taxonomy voluntarily. After all, who doesn't like to be seen as 'green'? They can do this by reporting on green activities in their annual report, but also for example with information on environmentally sustainable activities on the website or through social media. After all, those who operate green will become more attractive to sustainable investors and investors, but also to society and the labor market.

Work to do

The taxonomy will be applicable in all European member states. The taxonomy for the first two environmental objectives - climate change mitigation and adaptation - will apply from January 1, 2022. And thus over the reporting year 2021. The taxonomy for the remaining environmental objectives will apply from January 1, 2023. Companies and organizations that want to comply with the taxonomy will therefore need to prepare their data systems and communication lines now.