EU Taxonomy
EU Taxonomy is an extensive classification system to identify sustainable business
The EU Taxonomy is a classification system developed by the European Union to guide businesses, investors and policymakers in identifying environmentally sustainable economic activities. By providing clear criteria, the EU Taxonomy ensures that financial and corporate activities align with sustainability goals and increase transparency in companies’ operations.
EU Taxonomy in a nutshell
The EU Taxonomy is a classification system and tool to help investors, companies, issuers and project promoters steer funding towards sustainable business activities.1 2 The EU Taxonomy affects over 50,000 EU-based companies and requires them to disclose information on their eligible and aligned turnover, OPEX and CAPEX. The EU Taxonomy currently covers macro sectors, such as energy, transportation, industry, buildings and agriculture, which account for the majority of pollution (including GHG emissions) in the EU.
For companies preparing to disclose under the EU Taxonomy, it involves assessing the eligibility and alignment of their activities with six environmental objectives:
- Climate change mitigation
- Climate change adaptation
- Sustainable use and protection of water and marine resources
- Transition to a circular economy
- Pollution prevention and control
- Protection and restoration of biodiversity and ecosystems
Companies also need to evaluate their activities against the Taxonomy’s three core criteria:
- Substantial contribution to one or more environmental objectives.
- Do no significant harm (DNSH) to other objectives.
- Compliance with minimum social safeguards (such as labour rights and human rights).
How can AFRY's EU Taxonomy experts help?
Our consultancy specialises in guiding companies through complex regulatory requirements. We provide support in assessing eligibility, conducting alignment analysis and identifying alignment gaps. Additionally, we can also assist in establishing robust data collection processes for financial KPIs and preparing clear, compliant disclosures.
Leveraging AFRY’s extensive network of industry experts, we also help implement actionable solutions to close identified alignment gaps effectively.
Our EU Taxonomy capabilities include:
- Eligibility and alignment assessment
- Financial data collection and reporting process development
- Closing alignment gaps
- Education
Our experts can assist in identifying relevant eligible economic activities and possible alignment gaps in substantial contribution, Do no significant harm (DNSH) and Minimum Safeguards criteria.
We can assist in establishing robust data collection processes for financial KPIs and preparing clear, compliant disclosures with a clear audit track.
AFRY can provide technical know-how from various sectors and assist companies in implementing actions to comply with complex, sector-specific alignment criteria.
Our specialists can provide tailored education on EU Taxonomy for businesses across various industries. The content can vary from general capacity building to more detailed topic- or sector-specific EU Taxonomy training.
Omnibus proposes several changes to EU Taxonomy to decrease the reporting burden
Omnibus has proposed changes to simplify sustainability reporting for non-financial undertakings.
Mandatory reporting may now only apply to the largest companies, with over 1,000 employees and a turnover exceeding €450 million. Other large organisations in the future CSRD scope have the option for voluntary reporting.
An "opt-in" regime allows companies with over 1,000 employees and a turnover under €450M to voluntarily disclose turnover and CAPEX KPIs if they claim alignment with the Taxonomy, with the choice to include OPEX KPIs. Companies can also report on partially aligned activities (practicalities have not yet been specified).
To reduce complexity, companies may omit assessing activities where turnover, CAPEX or OPEX fall below 10% of the denominator. OPEX-related activities can also be excluded if their turnover contribution is under 25%.
Simplifications include streamlined do no significant harm criteria and new reporting templates to minimise data requirements. These updates aim to reduce the reporting burden and are set to apply from 1 January 2026.
The EU Taxonomy is closely linked to the Corporate Sustainability Reporting Directive (CSRD), requiring companies under its scope to disclose their alignment with the criteria of the Taxonomy, ensuring comprehensive and transparent sustainability reporting.
The reporting obligations are linked to companies’ size, and the coverage will expand over time from large companies to SMEs. The EU Taxonomy regulation currently covers 16 different macro sectors.
