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The EU Taxonomy is a science-based classification system defining which economic activities qualify as environmentally sustainable. Which objectives it pursues, who must report and how taxonomy alignment is demonstrated – explained concisely.
A science-based EU classification system that defines which economic activities qualify as environmentally sustainable – a common language for capital market participants.
Six environmental objectives: climate change mitigation, climate change adaptation, water, circular economy, pollution prevention & control, and protection of biodiversity and ecosystems.
Substantial contribution to at least one objective, Do No Significant Harm (DNSH) to the others, and compliance with minimum social safeguards.
Taxonomy-eligible and taxonomy-aligned share of turnover, CapEx and OpEx – disclosed as part of CSRD reporting.
The EU Taxonomy Regulation is a science-based classification system established by the European Union that defines which economic activities qualify as environmentally sustainable. It creates a common language for investors, companies and governments to direct capital flows towards sustainable activities and prevent greenwashing. The taxonomy is not a prohibition instrument but a transparency framework.
An economic activity can be taxonomy-aligned if it makes a substantial contribution to at least one of the following six environmental objectives:
For an activity to qualify as taxonomy-aligned it must cumulatively meet three requirements:
The distinction between eligibility and alignment is central to disclosure. Taxonomy-eligible means that an economic activity is in principle within the scope of the taxonomy – i.e. it is described in the delegated regulation. Taxonomy-aligned means that the activity additionally meets the technical screening criteria for substantial contribution, the DNSH requirements and the minimum safeguards. Companies must first determine the eligible share and then, for the aligned share, demonstrate the full set of criteria.
In principle, all companies subject to the CSRD that carry out activities in economic sectors covered by the taxonomy. The KPIs to be disclosed are:
The EU Taxonomy and the CSRD are closely interlinked: the taxonomy KPIs are part of CSRD disclosure and are typically published within the ESRS reporting framework (in particular ESRS E1). The EU Omnibus simplification package proposes to reduce taxonomy reporting obligations for smaller companies and lower the reporting burden without removing the fundamental transparency obligation.
Taxonomy-eligible means that an activity is in principle within the scope of the Taxonomy Regulation. Taxonomy-aligned means that it additionally demonstrably meets all technical criteria – substantial contribution, DNSH and minimum safeguards.
The DNSH principle requires that an activity making a substantial contribution to one environmental objective must not significantly harm any of the other five objectives. The technical screening criteria set specific DNSH thresholds for each objective.
In principle all companies subject to the CSRD that carry out activities in taxonomy-regulated economic sectors. The exact scope may change as a result of the Omnibus simplification package.
The taxonomy provides the definition of environmentally sustainable activities; the CSRD is the reporting framework that requires companies to disclose this information. The taxonomy KPIs (turnover, CapEx, OpEx) are a key component of CSRD reporting.
Technical screening criteria (TSC) are the sector-specific thresholds and requirements that an economic activity must meet to qualify as a substantial contribution to an environmental objective. They are set out in delegated regulations of the European Commission and are updated periodically.
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