E
EU Taxonomy
Definition
The EU Taxonomy Regulation (EU) 2020/852 is a classification system defining which economic activities are environmentally sustainable. Activities must meet four conditions to qualify as ‘taxonomy-aligned’: (1) make a substantial contribution to at least one of six environmental objectives; (2) do no significant harm (DNSH) to any of the other five objectives; (3) comply with minimum social and governance safeguards; and (4) comply with technical screening criteria set out in EU delegated regulations. The six objectives are: climate change mitigation; climate change adaptation; sustainable use and protection of water; transition to a circular economy; pollution prevention and control; and protection of biodiversity. The Taxonomy Climate Delegated Act was revised July 4, 2025, with simplifications applicable from January 1, 2026.
Source
EU Taxonomy Regulation (EU) 2020/852; Taxonomy Climate Delegated Act (Commission Delegated Regulation (EU) 2021/2139, revised July 4, 2025); CSRD (EU) 2022/2464 (taxonomy disclosure requirements for CSRD reporters).
Practical Explanation (Compliance Context)
CSRD-scoped companies must disclose the proportion of their turnover, capital expenditure (CapEx), and operating expenditure (OpEx) that is taxonomy-aligned, taxonomy-eligible but not aligned, and not taxonomy-eligible. The July 2025 revision of the Taxonomy Climate Delegated Act (applicable from 2026 FY) simplifies the technical screening criteria and DNSH criteria for some activities. Manufacturers in construction, energy, transport, and manufacturing sectors should assess which activities qualify and prepare for 2026 FY taxonomy disclosures.