A quick guide for EU Taxonomy reporting requirements

23 July 2024

For decades, states and supranational organisations have endorsed action plans to limit the human effect on the planet. Across the globe, the European Union aims to be the first climate-neutral continent by 2050. This requires substantial efforts from both public bodies and companies.

Forvis Mazars in the Netherlands prepared this concise informative document on EU Taxonomy requirements as an introduction for prepares of sustainability reporting.

An analysis on EU Taxonomy disclosures of listed companies in the Netherlands

In addition to providing general information on EU Taxonomy, this report also presents the results of Forvis Mazars in the Netherlands’ analysis conducted on EU Taxonomy disclosures of listed companies in the Netherlands. The study focused on published information in terms of EU Taxonomy eligibility and alignment quantitative disclosures. The study is based on 39 companies (23 large cap, 14 mid cap, and two small cap) listed on the Amsterdam Stock Exchange that had published their annual reports as of March 12, 2024.

Reason for the EU Taxonomy regulation

The European Grean Deal is one of the first concrete supranational policies which aims to make Europe the first climate-neutral continent (no net emissions of greenhouse gases) by 2050. In order to achieve sustainable and inclusive growth, capital flows need to be reoriented towards sustainable investment. EU Taxonomy Regulation (2020/852/EU) entered into force in June 2020 and represents a key step towards the objective of achieving a climate-neutral Union by 2050. It establishes an EU-wide classification system for environmentally sustainable economic activities. It has six environmental objectives that helps to direct investments to economic activities most needed for the transition to sustainable investments, in line with the European Green Deal objectives.

EU Taxonomy as framework

Implementation of the CSRD also leads to non-listed companies to report on EU Taxonomy.

EU enacted CSRD in January 2023 and in conjunction with it, the final delegated act of the European Sustainability Reporting Standards (ESRS) was adopted on 31 July 2023. The ESRS include detailed and standardized disclosure requirements for companies to report on environmental, social and governance matters. The CSRD reporting timeline depends on factors, such as the size of the company or whether it is listed on a regulated market in the EU.

EU Taxonomy has been already in force for large & listed companies. These companies reported on EU Taxonomy for the first time in 2022 on 2021 activities. Now with the implementation of CSRD, reporting on EU Taxonomy is also a requirement for companies that are obliged to comply with CSRD. Within sustainability statements based on the CSRD, companies are also required to provide information on how and to what extent their activities are associated with economic activities that qualify as environmentally sustainable in line with the EU Taxonomy.

An economic activity that is described in the Delegated Acts of the EU Taxonomy Regulation is ‘Taxonomy-eligible’, irrespective of whether it meets any of the conditions outlined in the Delegated Acts. On the other hand, to be classified as ‘Taxonomy-aligned’, an activity has to meet all of the below:

Examples of activities listed in the EU Taxonomy Delegated Acts:

Results of Forvis Mazar’s Analysis on EU Taxonomy Disclosures in 2023 Annual Reports

Public interest entities with more than 500 employees were required to report their EU Taxonomy disclosures for the financial year 2023. Companies were required to present information on eligibility and alignment for two climate objectives (adaptation and mitigation) and only eligibility for the other four environmental objectives (water and marine resources, circular economy, pollution, and biodiversity-ecosystems).

The majority of the analysed companies reported eligibility on EU Taxonomy objectives, with the most common used objectives being climate change mitigation and circular economy. When it comes to the alignment with EU Taxonomy, more than half of the companies reported zero alignment, and climate change mitigation is almost the only objective for which alignment is reported on. Ultimately, our research resulted in that eligibility (potentially sustainable activities) and alignment (sustainable activities) ratios differ significantly between sectors and within a sector across companies.