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EU Taxonomy Questions & Answers

EU Taxonomy Questions & Answers

As an extension of our blog article on understanding the EU Taxonomy, we have created this one to specifically address frequently asked questions from businesses regarding the EU Taxonomy, along with commonly provided answers.

Customer: Why is the EU Taxonomy so important for companies and investors?

Blog Response: The EU Taxonomy holds immense significance for companies and investors because it provides a clear framework and classification system for identifying environmentally sustainable economic activities. In today's world, sustainability has become a top priority, and businesses need reliable tools to support their transition toward a sustainable economy and climate neutrality. The EU Taxonomy serves as one such tool by offering a frame of reference for investors and companies, guiding them toward making informed decisions regarding sustainable investments.

Moreover, the EU Taxonomy promotes transparency and protects against greenwashing practices, ensuring that companies' claims of sustainability align with defined criteria. This not only fosters trust between businesses and investors but also accelerates the financing of sustainable projects and activities that are crucial for the transition to a greener future.

Customer: How does the EU Taxonomy support companies in their transition towards sustainability?

Blog Response: The EU Taxonomy plays a crucial role in supporting companies on their sustainability journey in several ways. Firstly, it helps businesses plan and finance their transition by providing a clear set of criteria and performance indicators. By aligning with the taxonomy's guidelines, companies can assess their economic activities and identify areas where they can make a substantial contribution to environmental objectives while minimizing harm to other objectives.

Additionally, the EU Taxonomy creates a level playing field for companies by establishing sustainability as a component of risk management. This encourages businesses to integrate sustainable practices into their operations and supply chains, which not only reduces environmental impact but also enhances their long-term resilience and competitiveness.

Customer: How does the EU Taxonomy prevent greenwashing?

Blog Response: Greenwashing, the practice of making false or misleading claims about the environmental benefits of a product or service, is a pressing concern in the sustainability landscape. The EU Taxonomy addresses this issue by setting clear and stringent criteria that economic activities must meet to qualify as environmentally sustainable.

The regulations ensure transparency and accountability by requiring companies to disclose their alignment with the EU Taxonomy and comply with the specified criteria. Investors and stakeholders can rely on this information to verify the sustainability claims made by companies, minimizing the risk of greenwashing. This fosters trust in the market and promotes genuine sustainability efforts, creating a more sustainable and responsible business ecosystem.

Customer: How will the EU Taxonomy impact reporting obligations for companies?

Blog Response: The EU Taxonomy brings about significant changes in reporting obligations for companies, particularly for those falling under the scope of the Corporate Sustainability Reporting Directive (CSRD). These companies are required to report the extent to which their activities align with the EU Taxonomy and comply with the criteria set in the Taxonomy delegated acts.

The introduction of the Disclosures Delegated Act supplements Article 8 of the Taxonomy Regulation, outlining the specific reporting requirements and timelines for undertakings. This includes disclosing the EU taxonomy-compliant share of turnover, capital expenditure (CapEx), and operating expenses (OpEx) aligned with the EU Taxonomy.

For companies outside the scope of CSRD, disclosure of this information is voluntary but can provide access to sustainable financing and demonstrate a commitment to sustainability. These reporting obligations promote transparency, facilitate comparison across companies, and encourage businesses to integrate sustainability considerations into their reporting practices.

Customer: How can companies ensure they comply with the EU Taxonomy?

Blog Response: To comply with the EU Taxonomy, companies must carefully assess their economic activities and evaluate how they contribute to the environmental objectives defined by the taxonomy. This assessment should consider the technical screening criteria outlined in the Taxonomy delegated acts, which provide specific guidelines for determining whether an activity is environmentally sustainable.

Companies can seek professional guidance from sustainability consultants, engage with industry experts, or collaborate with specialized organizations to navigate the complexities of the EU Taxonomy. By conducting thorough assessments, aligning their activities with the taxonomy's requirements, and accurately reporting their compliance, companies can ensure they are on the right track toward sustainability and benefit from the advantages associated with the EU Taxonomy framework.

Remember, complying with the EU Taxonomy is not just about meeting regulatory obligations; it is an opportunity for companies to demonstrate their commitment to sustainability, gain investor trust, and contribute to a greener future for all.