By means of the EU Taxonomy, "green" economic activities shall become more visible. For a business to classify an economic activity, the EU Taxonomy Regulation provides four criteria. Companies must take a position on all four criteria and disclose information. One criterion is compliance with minimum safeguards based on the UN Guiding Principles on Business and Human Rights. Until now, the design of this criterion has been vague. On July 11, the Platform for Sustainable Finance, an advisory body of the EU Commission, specified this criterion in a draft report. According to the draft, minimum protection refers firstly to human rights, including workers' rights, bribery/corruption, taxation, and fair competition. Secondly, other legal requirements, such as the Corporate Sustainability Reporting Directive (CSRD), must also be observed to ensure compliance with the minimum safeguards. Third, companies will have to prove that they respect their due diligence obligations and that their internal processes are effective. The EU Taxonomy affects an estimated 50,000 companies in the EU.
NEXT STEPS: The draft reporting on minimum protection is open for comment until the September 6, 2022.
Source: Platform for Sustainable Finance
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