5 tips for impactful EU Taxonomy reporting

The EU Taxonomy is a ‘dictionary’ that sets out criteria that business activities need to meet to be considered environmentally sustainable’. Drawing on our experience supporting companies with its implementation, we’ve identified five impactful strategies to simplify the process, boost efficiency, and unlock meaningful strategic value for your business.

Paving the way for sustainable investments

Together with the Sustainable Finance Disclosure Regulation (SFDR) and the Corporate Sustainability Reporting Directive (CSRD), the EU Taxonomy make up the EU’s regulatory push for sustainable investments.

The EU Taxonomy establishes standard definitions of what constitutes sustainable business activities. It is a clear and impactful signal to investors and other stakeholders of your company’s sustainability efforts and ambitions. However, implementing the EU Taxonomy is a comprehensive exercise that involves data collection and strategic decisions from across the business. Based on our experience working with companies on the EU Taxonomy, we’ve outlined key recommendations to help companies navigate the reporting process efficiently and strategically.

Five tips for impactful EU Taxonomy Reporting

1. Set your ambition level

Once you’ve evaluated your baseline eligibility and alignment, decide on your ambition level with the EU Taxonomy. Identify areas for improvement based on your environmental objectives and integrate the relevant criteria into new project processes to maximise future alignment.

2. Be clever with your assessment order

Start your analysis with revenue, followed by CapEx and OpEx. In cases where a revenue-generating activity is taxonomy-aligned, the CapEx and OpEx associated with the activity are also aligned. This approach eliminates the need to independently assess the alignment of all eligible CapEx or OpEx activities, thereby saving time and resources.

3. Find the synergies

Identify overlapping EU Taxonomy criteria to streamline implementation. For example, multiple eligible business activities require climate risk assessments. Adopting a standard approach to climate risk assessments can, therefore, help improve efficiency.

4. Establish a minimum safeguards policy

A top-down company policy approach to alignment with the minimum safeguards can ease the assessment compared to assessing due diligence for each eligible business activity individually. However, companies must ensure they have the necessary data to demonstrate that the minimum safeguards are being met at the activity level.

5. Get tagging

Tagging individual revenue streams, CapEx, and OpEx to individual eligible business activities on a monthly basis can help de-clutter financial data collection and eliminate double-counting. Doing this on a rolling basis will lighten the end-of-year reporting burden.

Unlock strategic value by streamlining EU Taxonomy reporting

Streamlining your EU Taxonomy reporting process saves time and unlocks significant strategic value for your business. By setting the right ambition, optimising your process, and integrating sustainability at the core of your financial activities, you can demonstrate leadership in sustainable finance and effectively meet investor expectations. The drive for this is bigger than ever, given the broader regulatory landscape the EU Taxonomy sits within. There are clear and intentional overlaps between the EU Taxonomy and other EU sustainability core regulations, e.g. the CSRD and the SFDR – use this as a synergy, not a blocker.

 

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Need guidance on optimising your EU Taxonomy and broader ESG regulatory approach? Connect with our sustainable finance lead Ottily Mould.