EU taxonomy

What is EU taxonomy

The EU taxonomy is a classification system that defines which economic activities can be considered environmentally sustainable. It aims to provide clarity on what can be labeled as "green" or environmentally friendly investments. The EU taxonomy criteria help determine which business activities contribute to environmental sustainability across various sectors.

Complying with EU taxonomy standards can have several implications:

1. Transparency: Companies need to disclose how their activities align with the EU taxonomy criteria. This transparency fosters trust with investors, customers, and stakeholders who are increasingly interested in sustainable practices.
2. Investment Opportunities: Companies that meet the EU taxonomy criteria for sustainable activities may attract more investment from funds and investors looking to support environmentally friendly initiatives.
3. Compliance: Companies need to ensure that their practices align with the EU taxonomy to avoid penalties or non-compliance issues.
4. Market Differentiation: Adhering to EU taxonomy standards can help companies differentiate themselves in the market by showcasing their commitment to sustainability, which can be a competitive advantage.
5. Customer Perception: Consumers are becoming more environmentally conscious and are more likely to support companies that prioritize sustainability. Aligning with the EU taxonomy can enhance a company's reputation and appeal to environmentally conscious customers.

Overall, the EU taxonomy encourages companies across all sectors to adopt and promote sustainable practices, contributing to a greener and more environmentally friendly future.

3 things to be aware of as a small or medium business

1. If you collaborate with larger corporations subject to the EU taxonomy legislation, it is mandatory to uphold thorough documentation in line with their project requirements.
2. You must have the capability to report on all CO₂ emissions related to your projects.
3. By 2030, the aim is to have a minimum of 30 million zero-emission cars and 80,000 zero-emission trucks operational. Prepare for regulations and legislation regarding the transition to electric vehicles.

What does this mean to me?

From 2025 onwards, the EU ESG (Environmental, Social, and Governance) reporting rules will have a significant impact on smaller companies collaborating with larger companies that have 250 or more employees. These rules will require all large companies to disclose detailed information on their sustainability practices, including their environmental impact, social responsibility efforts, and governance practices.

For smaller companies working with these larger entities, this means that they will likely be required to align with the sustainability reporting standards set by their larger partners. This alignment may involve providing data on their own ESG performance, ensuring that their practices are in line with the expectations of the larger companies, and potentially making changes to meet the sustainability criteria set by the EU regulations.

In essence, smaller companies collaborating with large companies will need to prioritize sustainability efforts, enhance their ESG reporting capabilities, and demonstrate a commitment to environmental and social responsibility to maintain strong partnerships and comply with the upcoming EU regulations. This shift towards more transparent and sustainable business practices can benefit both parties by fostering a culture of sustainability, driving positive impact, and enhancing overall business reputation in the market.