Application of the EU Taxonomy for Companies

The EU taxonomy regulation for the objective assessment of the sustainability of economic activities considers different circumstances and obligations for different economic actors. It is divided into the following three groups:

  1. Companies (over 500 employees) that fall under the non-financial reporting directive (NFRD)

  2. Financial market participant, including occupational pension providers, that offer and distribute financial products in the EU (including those from outside the EU)

  3. EU and its member states when setting public measures, standards or labels for green financial products or (corporate) bonds

Here you find our overview of the EU taxonomy

Here you find our implementation timeline of the EU taxonomy

Executive summary for companies:

  • The requirements for financial market participants and companies that do not offer financial products differ

  • Some companies/financial market participants may fall into both categories (depending on size and economic activity)

  • All companies concerned must disclose how and to what extent their economic activity considers or includes sustainability based on the taxonomy regulation

  • Companies must disclose the following:
    • EU taxonomy-compliant share of turnover

    • Capital expenditure (CapEx) aligned with the EU taxonomy

    • Operating expenses (OpEx) aligned with the EU taxonomy

  • Disclosure should be part of non-financial reporting, probably in the annual report or an explicit sustainability report

Helpful tips:

  • The EU taxonomy regulation does not require companies to categorise relevant economic activities as transitional or enabling. However, the EU recommends doing so, as financial institutions are required to disclose these aspects in their portfolios. A company that does so makes itself more attractive to potential investors

  • Companies that are required to report according to the EU taxonomy are also required by the Non-Financial Reporting Directive (NFRD), among other things, to disclose information that illustrates a company's development, performance, position, and impact on environmental issues. This framework can be used to provide an overview of EU taxonomy-related revenue and investment information
  • Other voluntary disclosures (e.g. on a project basis) can be listed even if they are not directly required by the EU taxonomy. The EU recommends including all capital expenditures (CapEx) and selected operating expenses (OpEx), such as maintenance costs for green assets that either increase the life or value of the assets, as well as research and development costs. Operating costs, such as acquisition costs and leasing costs are normally (with some exceptions) not taxonomy compliant

For the two environmental objectives already published, investments are accounted differently, as shown below. The next detailed explanation by the EU will reveal how investments are accounted for in relation to the remaining four environmental objectives.

Climate change mitigation
Climate change adaptation

Can be counted where economic activity meets taxonomy criteria for substantial contribution to climate change mitigation and does no serious harm to the other environmental objectives (DNSH criteria)

Turnover can be recognised only for activities enabling adaptation but not for already adapted activities

CapEx and OpEx

Can be counted where costs incurred (CapEx and OpEx) are part of a plan to meet taxonomy criteria for substantial contribution to climate change mitigation and relevant DNSH criteria

Can be counted where costs incurred (CapEx and OpEx) are part of a plan to meet taxonomy criteria for substantial contribution to climate change adaptation and relevant DNSH criteria


Company turnover example

Company level

Upon successful completion of the outstanding projects, 100% of the turnover meets the taxonomy guidelines

Company complies with EU regulation and respects minimum safeguards

Project level

no project


Projects to bring facilities B and C in line with taxonomy

Company can claim that 100% of its investments (CapEx) can be associated with the taxonomy criteria

May be eligible for EU Green Bond Standard

Asset level

Facility A

Turnover share: 15 %

Meets emission threshold + does not harm environmental objectives (DNSH criteria)

Facility B

Turnover share: 25%

Does not meet

emission threshold

Facility C

Turnover share: 60%

Meets emission threshold

BUT does seriously harm environmental objective

(not DNSH compliant)

Investment example 1:

A cement company is renovating and adapting two plants counting turnover and capital expenditure as taxonomy-aligned:

A cement company wants to renovate and adapt two of its plants that contribute 50% of its turnover. The renovation of cement facilities includes retrofitting to reach high energy-efficiency levels, increasing the use of blended materials to reduce the clinker-to-cement ratio to below 0.65, and the use of alternative clinkers and binders. The cement production facilities are expected to achieve thermal energy intensity of approximately 3 GJ/t clinker and carbon intensities in line with the taxonomy.

A climate risk assessment of the facilities based on climate data indicates that facilities are vulnerable to flooding. The company decides to increase the capacity of the drainage systems to make them more resilient to flooding. The costs of adapting the facilities are valued at EUR 5 million per facility. The overall renovation of the facilities amounts to EUR 500 million, which represents 80% of the company’s capital expenditures.

The company seeks to raise funds in the capital market and issues a green bond based on the EU green bond standard, which includes compliance with DNSH criteria for both mitigation and adaptation. The bond will therefore be taxonomy-aligned. Once the works related to climate change mitigation are finalised, the company could claim all turnover generated from those two facilities (50% of the company’s turnover) as well as 80% of its capital expenditures are taxonomy-aligned.

Investment example 2:

A corporate adapting its headquarters as a first step to make the entire operations climate-resilient (Counting capital expenditure as taxonomy-aligned)

A service company wants to make its entire business more resilient to the risks of climate change. None of its facilities can serve the purpose of extracting, storing, transporting, or manufacturing fossil fuels.

The company is conducting a climate risk assessment to analyse potential climate change impacts on its headquarters and other company buildings. The assessment is based on climate data and shows that flooding and extreme heat are the main risks to the headquarters, while also some of the facilities are vulnerable to flooding. The company identifies several measures to significantly reduce the identified risk. Among them are measures to provide passive cooling and increasing the capacity of drainage systems. The action plan included an impact assessment to ensure that the measures to be implemented are in line with local and regional adaptation efforts and comply with DNSH criteria for buildings.

The total cost of the proposed changes is EUR 50 million. The company is seeking several loans over a three-year period. The plan starts with the adaptation of its headquarters with estimated costs of EUR 10 million - the subject of the first loan. This first loan may be followed by further loans or, for example, a EUR 40 million bond in a private placement.

Each of the loans is aligned with the taxonomy criteria, even though one loan (e.g. the first loan of EUR 10 million) does not in itself reduce all material climate risks to the company's operations; it is a necessary measure in a broader, time-bound plan to adjust the company's overall assets. The lending bank could bundle the loans and thus advertise the EUR 50 million as green and 100% taxonomy compliant.

How can my company benefit from EU taxonomy labeling?

The turnover gives a clear picture of where a company stands in relation to the EU taxonomy. It allows investors to determine the percentage of their funds invested in taxonomy-aligned activities. CapEx, on the other hand, gives investors a sense of a company's direction. It allows them to assess the credibility of a company's strategy and it makes it easier to realize whether they agree with the company's strategic approach.

Companies that disclose their investments according to the EU taxonomy provide important information for building green portfolios and for analysing corporate transformation and/or environmental sustainability performance and strategies. Early-stage sustainability-orientated economic activities and corresponding investments can thus attract further investment and prove to be a competitive advantage.

For the best possible transparency, the EU recommends that the full taxonomy calculation is reported separately for each environmental objective (climate change mitigation and adaptation by the end of 2021 and the remaining four by 2022). This also allows the company to identify the most comprehensively met environmental target.


EU Technical Expert Group on Sustainable Finance
European Commission

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