Both the EU Taxonomy and the Corporate Sustainability Reporting Directive (CSRD) are part of the European Union's Sustainable Finance Package, which we presented in our blog post Sustainability in the European economy. While the CSRD will establish comprehensive and standardized sustainability reporting based on the European Sustainability Reporting Standards (ESRS) for large companies from 2024, the EU taxonomy deals with the categorization of financial flows into taxonomy-eligible and taxonomy-compliant revenues.
The environmental objectives of the Taxonomy Regulation
The EU Taxonomy Regulation sets out criteria for a number of economic activities (categorized by NACE codes) that must be met in order to make a significant contribution to one of the six environmental objectives. In addition, these activities must not significantly harm the other environmental objectives and must meet a minimum level of social safeguards to be eligible for the taxonomy. The environmental objectives of the Taxonomy Regulation are fully reflected in the environmental topics of the ESRS.
The materiality analysis as the first step of the CSRD
The materiality analysis plays a central role in the preparation of the CSR report. This identifies the company's main environmental impacts as well as the main risks and opportunities that affect the company. The materiality analysis leads to the reportable ESRS chapters, which must be included in the CSRD sustainability report.
The EU taxonomy and the materiality analysis
When selecting the environmental impacts of a sector in the first step of the materiality analysis, the context analysis, the EU taxonomy can be taken into account. The company's NACE codes are checked for EU taxonomy-eligible economic sectors and if these are present in the taxonomy, the threshold values and focus areas of the six environmental objectives for this economic sector can be adopted in the company's context analysis.
However, the ESRS do not prescribe an automatic mechanism for the inclusion of environmental impacts based on the EU taxonomy in the materiality analysis. The EU taxonomy can only be used as a tool to better understand the business activity and to classify the environmental impacts into opportunities or risks depending on the business activity.
Presentation of the EU taxonomy and other reporting obligations in the CSRD
In addition to the materiality analysis, the EU taxonomy with its key figures and reporting elements for your company must be included in the sustainability report. The sustainability report will also cover all sustainability topics in accordance with reporting standards other than the ESRS. It should therefore bundle all reporting obligations on ESG topics and satisfy the various stakeholders and authorities as a single report. In Annex F, ESRS 1 explicitly gives the EU taxonomy its own reporting chapter before the environmental information in accordance with the topic-specific ESRS topics.
How can Sustainability& help you?
Together with you, we go through the requirements of the EU taxonomy and the CSRD step by step and record your environmental impacts and risks. We provide you with efficient and goal-oriented support from the materiality analysis to the sustainability report and work with you to develop a roadmap for fulfilling your individual sustainability obligations.
