EU Taxonomy
Your guide to navigating the complexities of the Green Taxonomy
Table of contents
- Understanding the regulation
- Timeline
- Who is affected
- How to comply
- Requirements
- Latest updates
- Anthesis support
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An introduction to the EU Taxonomy
Please note that the European Commission has adopted a set of measures (published in February 2025 as part of Omnibus I package).
The EU Taxonomy came into force in 2020 with the publication of Regulation (EU) 2020/852, establishing a legal framework to facilitate sustainable investment. It sets out a classification system for identifying economic activities considered environmentally sustainable and forms a key part of the EU’s Sustainable Finance Plan, aimed at directing investment towards such activities.
The first disclosures were required in 2022, when entities subject to the Non-Financial Reporting Directive (NFRD) had to report on taxonomy eligibility for the first time.
What is the EU Taxonomy?
The EU Taxonomy is a classification system that defines which economic activities can be considered environmentally sustainable. It provides clear criteria and thresholds to ensure that investments and business activities align with the EU’s broader sustainability and climate objectives.
An activity is considered sustainable if it:
- Substantially contributes to one or more of six environmental objectives
- Does no significant harm to any of the other objectives
- Meets Minimum Safeguards related to human rights and governance
The regulation is implemented through Delegated Acts, including the Climate Delegated Act, the Complementary Climate Delegated Act, and the Environmental Delegated Act, covering over 100 economic activities across sectors.
Currently, entities in scope of the Corporate Sustainability Reporting Directive (CSRD) are required to include Taxonomy disclosures in their CSRD report. The Taxonomy disclosures must be identifiable within the report and presented as part of the environmental section. The same timeline applies to both EU Taxonomy and CSRD reporting.
Origins and objectives of the Taxonomy
The EU Taxonomy emerged as part of the European Green Deal and the EU Sustainable Finance Action Plan, recognising the need for a unified framework to drive private sector investment towards sustainable growth. It builds upon international frameworks and aligns with the EU’s ambition to achieve climate neutrality by 2050.
An activity can be considered environmentally sustainable if it substantially contributes to one of the environmental objectives while not harming any of the other objectives:
- climate change mitigation,
- adaptation to climate change,
- sustainable use and protection of water and marine resources,
- transition to a circular economy,
- pollution prevention and control,
- protection and restoration of biodiversity and ecosystems.
In addition, the undertaking carrying out the activity must meet the Minimum Safeguards.
Timeline
Who is affected?
The EU Taxonomy impacts a wide range of stakeholders, including:
- Financial market participants offering sustainable financial products
- Undertakings subject to the NFRD and CSRD
- Other non-financial corporates seeking to align operations with EU sustainability goals
From 2024 onwards, wave 1 companies have been required to include Taxonomy disclosures within their sustainability reports, clearly presenting them under the environmental section.
How to comply
To achieve compliance with the EU Taxonomy, organisations must first carry out a detailed assessment of their business operations to determine which of their economic activities are covered by the Delegated Acts. This involves a thorough review of the company’s operational landscape to identify activities that fall within the scope of the Taxonomy’s defined activities.
Once relevant activities have been identified, companies need to evaluate whether these activities meet the detailed technical screening criteria. This assessment ensures that the activities substantially contribute to at least one of the six environmental objectives while also verifying that they do not cause significant harm to any of the others. Additionally, the organization carrying out the activity must meet the Minimum Safeguards to ensure activities labelled sustainable do not violate social norms and meet certain governance standards. The Minimum Safeguards criteria are anchored in internationally recognised standards and frameworks, namely, the OECD Guidelines for Multinational Enterprises, the UN Guiding Principles on Business and Human Rights, and the International Bill of Human Rights.
Following this evaluation, organisations are required to disclose the eligibility and alignment of their economic activities with the environmental objectives set out by the Taxonomy. This disclosure must present clear, transparent information about how the business activities contribute to sustainability goals, providing stakeholders with confidence in the company’s environmental commitments.
Finally, these disclosures must be incorporated into the organisation’s broader sustainability reporting, particularly within the CSRD report, where applicable. The Taxonomy information must be easily identifiable within the environmental section of the report, ensuring full regulatory compliance and facilitating informed decision-making by investors, regulators, and other stakeholders. For entities not yet subject to CSRD but wishing to demonstrate leadership in sustainability, these disclosures can also be included within standalone sustainability reports.
To comply with the EU Taxonomy, organisations must:
- Assess which of their economic activities are covered by the Taxonomy.
- Evaluate whether those activities meet technical screening criteria and Minimum Safeguards.
- Disclose eligibility and alignment with the environmental objectives.
- Include this information within the CSRD or standalone sustainability reports.
EU Taxonomy reporting requirements
Under the current rules, companies in scope must carry out two main types of disclosures:
- Eligibility Reporting: This involves identifying which of the company’s economic activities are covered by the EU Taxonomy. Even if an activity does not meet the technical screening criteria or Minimum Safeguards, companies must still report eligibility. This first layer is about the presence of activities within the Taxonomy framework.
- Alignment Reporting: This is a more detailed exercise where companies disclose which of their activities are aligned with the Taxonomy criteria, meaning they make a substantial contribution to at least one environmental objective, do no significant harm to the others, and comply with the Minimum Safeguards.
For each economic activity, non-financial undertakings must report on three key performance indicators:
- Turnover: the share of revenue derived from Taxonomy-eligible and aligned activities.
- Capital Expenditure (CapEx): the share of capital investments that are eligible and aligned with EU Taxonomy.
- Operating Expenditure (OpEx): the share of operational eligible and aligned with EU Taxonomy
Latest update: simplification of the EU Taxonomy reporting
On the 4th of July 2025, the European Commission adopted a Delegated Act aimed at simplifying EU Taxonomy Reporting to reduce the administrative burden. This was in line with the Omnibus package released earlier in 2025.
The amendments are now with the European Parliament and Council for a 4 month scrutiny period. Unless objections are raised, the changes will apply from the 1st of January 2026, covering the 2025 financial year with the option for businesses to delay adoption until the 2026 financial year.
Key simplifications include:
- Materiality Thresholds: Companies are exempt from assessing Taxonomy-eligibility and alignment for activities that are not financially material. For non-financial companies these are defined as activities contributing less than 10% to total revenue, CapEx or OpEx.
- Operational Expenditure Exemption: Non-financial companies no longer need to assess alignment of their entire OpEx if it is deemed immaterial to their business model.
- Simplified Financial Sector KPIs: For financial companies, Taxonomy KPIs like the Green Asset Ratio have been simplified. Financial companies also have the option not to report detailed KPIs for two years.
- Reduction in Reporting Burden: The number of data points required in reporting templates has been cut by 64% for non-financial companies and 89% for financial companies.
- Simplified DNSH Criteria for Chemicals: The ‘do no significant harm’ assessment related to pollution prevention and control, especially concerning chemical use, has been simplified.
Implications for CSRD-Reporting Entities
Entities in scope of the Corporate Sustainability Reporting Directive (CSRD) are still required to include Taxonomy disclosures within their annual sustainability report. These disclosures must be clearly identifiable and presented within the environmental section of the report. The latest simplification measures provide much-needed relief to both financial and non-financial companies, enabling them to focus more strategically on their core sustainability objectives.
How Anthesis can help
At Anthesis we work hand in hand with our clients to assess their business activities with the EU Taxonomy criteria and support with preparing mandatory disclosures. We collaborate with both financial institutions and companies, offering our support in their application and compliance with European regulations, helping them define opportunities and minimising possible future risks.
Our services include eligibility assessment to determine which business activities fall under the Taxonomy, gap analysis to assess compliance against technical screening criteria and Minimum Safeguards, disclosure preparation to support the drafting and integration of required disclosures in CSRD and sustainability reports, and strategy development to identify opportunities to enhance environmental performance and access sustainable finance.
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