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The current EU legislative requirements‍

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In July 2021, the European Commission introduced the European Green Deal, aiming to make Europe the first climate-neutral continent by 2050.

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Its objectives include:

• Achieving net-zero greenhouse gas emissions by 2050

• Decoupling economic growth from resource use

• Ensuring no person and no place is left behind

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To reach the interim target of reducing emissions by at least 55% by 2030—a commitment upheld by all 27 EU Member States—the implementation of key regulatory frameworks such as the EU Taxonomy, the Sustainable Finance Disclosure Regulation (SFDR), the Corporate Sustainability Reporting Directive (CSRD), and the Corporate Sustainability Due Diligence Directive (CSDDD) is essential. These frameworks are central to the European Green Deal and are designed to facilitate the necessary transformational change.

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What is the EU Taxonomy?

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The European Commission published the EU Taxonomy Regulation and Delegated Acts (EU Taxonomy for short) in June 2020, which has entered into force in July 2020. The Taxonomy is a classification system and transparency tool to support reaching the objectives of the European Green Deal, by providing a common language for investment purposes regarding what counts as an environmentally sustainable economic activity.

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Thanks to the EU Taxonomy, companies can monitor and communicate their sustainable activities more concretely, which will help investors to direct investments towards sustainable activities and projects. The Taxonomy regulation will also enable comparability among companies and investment portfolios. Furthermore, the taxonomy can advance the SFDR and NFRD’s regulations, by requiring companies under NFRD and SFDR to comply with the disclosure requirements.

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Three main criteria were developed to determine environmentally sustainable economic activities:

1. Substantial contribution to one or more of the environmental objectives
2. ‘Do no significant harm’ to any of the environmental objectives
3. Compliance with minimum safeguards

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An activity can be disclosed as taxonomy aligned when it meets all three criteria.

Information regarding the activities and the specific criteria applicable to them, can be found on the European Commission – EU Taxonomy Compass.

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So let’s explain the three main criteria further:

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#1. Substantial contribution

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The first criterion for taxonomy-alignment is that an activity needs to contribute to at least one objective, to reach the condition of substantial contribution. Each activity has specific criteria for substantial contribution.

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The taxonomy defines 6 environmental objectives. These are:  

1. Climate change mitigation
2. Climate change adaptation
3. The sustainable use and protection of water and marine resources
4. The transition to a circular economy
5. Pollution prevention and control
6. The protection and restoration of biodiversity and ecosystems

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The first two objectives (climate change mitigation and climate change adaptation) were included in the first Delegated Act, adopted in 2021 and published in the Official Journal in December 2021. The remaining four objectives were covered in the Environmental Delegated Act, published in November 2023, with application starting in January 2024.

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Each objective has a specific set of criteria defining how an activity can substantially contribute to that objective.

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Example:

If we take the activity “Renovation of existing buildings” as an example, within the “Construction and real estate activities” sector, the following substantial contribution criteria is applicable to this activity within the “Climate change mitigation” environmental objective: “The building renovation complies with the applicable requirements for major renovations. Alternatively, it leads to a reduction of primary energy demand (PED) of at least 30 %.”

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How is this relevant to a travel & tourism business? ‍

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The EU Taxonomy and its criteria for substantial contribution are highly relevant to the travel and tourism industry, including hotels. The framework encourages businesses to align their operations with sustainability objectives, ensuring that they contribute positively to environmental goals. For travel and tourism companies, including hotels, this means integrating eco-friendly practices and achieving measurable results in areas like carbon emissions reduction, energy efficiency, and waste management.

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BeCause enables travel and tourism businesses to align with these objectives by:

• Data collection, verification, and distribution: Streamlining sustainability data management, ensuring accurate reporting, and maintaining an audit trail through our data and stakeholder ecosystem.
• Eco-certifications: Supporting hotels in obtaining recognized eco-certifications and showcasing their sustainability efforts to attract eco-conscious travelers.

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#2. Do no significant harm (DNSH)

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The second criterion for taxonomy-alignment is that an activity does not significantly harm any of the 6 environmental objectives. Each activity has specific criteria for DNSH.

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DNSH includes three types of criteria:

1. Qualitative: information through a due diligence process
2. Quantitative: requires verification
3. Process-based: Verification is more difficult, due to the lack of provided information

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Example:

By considering the same activity “Renovation of existing buildings”, one example for DNSH towards the objective “The sustainable use and protection of water and marine resources”, is the following:

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“Where installed as part of the renovation works, except for renovation works in residential building units, the specified water use for the following water appliances is attested by product datasheets, a building certification or an existing product label in the Union, in accordance with the technical specifications laid down in Appendix E to this Annex:

1. Wash hand basin taps and kitchen taps have a maximum water flow of 6 litres/min;
2. Showers have a maximum water flow of 8 litres/min;
3. WCs, including suites, bowls and flushing cisterns, have a full flush volume of a maximum of 6 litres and a maximum average flush volume of 3,5 litres;
4. Urinals use a maximum of 2 litres/bowl/hour. Flushing urinals have a maximum full flush volume of 1 litre.”

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#3. Minimum safeguards

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The third criterion for taxonomy-alignment is that economic activity needs to be in alignment with the following minimum safeguards:

• OECD Guidelines for Multinational Enterprises
• UN Guiding Principles on Business and Human Rights ‍
• Declaration of the International Labour Organization on Fundamental Principles and Rights at Work
• International Bill of Human Rights

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Enabling and transitional activities

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Those environmentally sustainable economic activities, that contribute substantially to an environmental objective can be either enabling or transitional activities.

Enabling activities allow other activities to substantially contribute to an environmental objective by directly enabling them – as the name suggests. For example, Enabling activities can be to install energy efficient equipment in buildings.

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Transitional activities must contribute to the objective: E.g., climate change mitigation. Activities can be categorized as transitional, if there are no other low-carbon alternatives developed, and if their level of greenhouse has emission matches to the sector or industry’s best performance. Transitional activities can be for example best-in-class cement manufacturing.

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The EU Taxonomy Compass also defines these activities.

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Taxonomy-eligible activities

Activities can be either taxonomy-aligned or taxonomy-eligible activities. While taxonomy-aligned activities meet all three main criteria, taxonomy-eligible activities only meet the criteria of “substantial contribution”, and not the DNSH and/or minimum safeguards.

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Companies affected by the EU Taxonomy

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The following companies are subject to mandatory disclosure requirements:

• Large financial companies (under the NFRD)
• Credit institutions
• Investment firms
• Asset managers
• Insurers/Reinsurers
• Large non-financial companies (under the NFRD)
• Financial market participants
• EU Member States – “Setting public measures, standards/labels for green financial products/green bonds”

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General disclosure requirements:

• Large financial and non-financial companies affected by the EU taxonomy are subject to disclosure regarding to what extent the implemented activities meet the set criteria. Furthermore, companies’ revenue deriving from sustainable activities should also be disclosed in %. The mandatory information should be disclosed annually in either a sustainability report, or the non-financial statement of the annual report. However, it is important to note that companies are not required to live up to a certain environmental performance under the EU taxonomy.
• Financial market participants must provide information regarding to what extent the activities funded by their financial products meet the criteria set out in the EU taxonomy. They must disclose information in all the following: periodic reports, pre-contractual disclosures, and on websites. However, it is important to note, that it is not mandatory for investors to invest in those economic activities listed in the EU taxonomy, nor are their financial products required to live up to a certain environmental performance. They can, however, use it as a guide, when aiming to invest in sustainable activities.

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The following companies can choose to disclose voluntarily:

• SMEs
• Non-EU Companies
• Companies not covered by the taxonomy

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Companies under voluntary disclosure can’t be forced by other companies to do so.

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How is this applicable to my hotel?

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Single hotels are not directly obligated to report under the EU Taxonomy unless they are part of a larger corporation subject to the Corporate Sustainability Reporting Directive (CSRD) or seeking green financing. However, they may still need to provide sustainability data for investors, corporate clients, travel platforms, or supply chain partners that fall under these regulations.

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For example:

• Financial institutions and investors: If a hotel seeks green financing or investment, lenders may require evidence of alignment with the EU Taxonomy.
• Corporate clients and travel platforms: Large companies with sustainability commitments may request environmental performance data from hotels as part of their supply chain reporting.
• Eco-certifications and industry standards: Meeting recognized standards like Green Key, EarthCheck, or LEED often requires tracking and reporting key environmental metrics that align with EU sustainability goals.

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Hotels that proactively track and report on sustainability performance—such as energy efficiency, water conservation, and waste reduction—can gain a competitive advantage and ensure compliance with evolving industry expectations.

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What is the Sustainable Finance Disclosure Regulation?

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The Sustainable Finance Disclosure Regulation (SFDR) aims to increase transparency and reduce greenwashing among financial market participants, including financial products and advisors. It allows end investors to compare disclosed sustainability information across financial products. SFDR sets out different disclosure requirements for Article 6, Article 8, and Article 9 Funds, with the level of sustainability disclosure increasing from Article 6 to Article 9.

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So what is an Article Fund, you ask?

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Under the SFDR, investment funds are categorized based on their sustainability commitments:

• Article 6 Funds: These funds either do not integrate sustainability into their investment decisions or only consider sustainability risks without a specific sustainability focus. They must disclose how they assess sustainability risks and their potential impact on returns.
• Article 8 Funds ("Light Green"): These funds promote environmental or social characteristics but do not necessarily have sustainability as their core objective. They must disclose how ESG (Environmental, Social, and Governance) factors are incorporated into their investment strategy.
• Article 9 Funds ("Dark Green"): These funds have sustainable investment as their primary objective and must demonstrate how they actively contribute to environmental or social goals. They are subject to the highest level of disclosure requirements under SFDR.

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By classifying funds into these categories, SFDR ensures greater transparency in sustainable finance, helping investors make informed choices while reducing the risk of greenwashing.

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Commonalities of Article 8 and 9 Funds

There are three main platforms, where Article 8 and 9 funds need to disclose information: periodic disclosures, pre-contractual disclosures, and website disclosures.

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Website disclosures should be updated on an ongoing basis and should provide clear, concise, and accurate data.

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Affected companies under SFDR

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Financial market participants where they manufacture financial products:

• An insurance undertaking which makes available an insurance‐based investment product (IBIP)
• An investment firm which provides portfolio management
• An institution for occupational retirement provision (IORP)
• A manufacturer of a pension product
• An alternative investment fund manager (AIFM)
• A pan‐European personal pension product (PEPP) provider
• A manager of a qualifying venture capital fund registered in accordance with Article 14 of Regulation (EU) No 345/2013
• A manager of a qualifying social entrepreneurship fund registered in accordance with Article 15 of Regulation (EU) No 346/2013
• A management company of an undertaking for collective investment in transferable securities (UCITS management company)
• A credit institution which provides portfolio management

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Financial advisers where they provide investment advice or insurance advice:

• An insurance intermediary which provides insurance advice with regard to ibips
• An insurance undertaking which provides insurance advice with regard to ibips
• A credit institution which provides investment advice
• An investment firm which provides investment advice
• An AIFM which provides investment advice in accordance with point (b)(i) of Article 6(4) of Directive 2011/61/EU
• A UCITS management company which provides investment advice in accordance with point (b)(i) of Article 6(3) of Directive 2009/65/EC;

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Exemption: Financial advisers who employ fewer than three persons à although they are required to consider and factor in sustainability risks in their advisory processes.

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The Sustainable Finance Disclosure Regulation (SFDR) primarily applies to financial market participants, such as asset managers, investment firms, and financial advisors. However, it indirectly impacts companies in the travel and tourism industry, including hotels, tour operators, and travel platforms, in several ways:

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1. Investor and lender requirements: Travel and tourism businesses seeking financing from Article 8 or Article 9 funds may be required to disclose sustainability-related data to align with SFDR criteria. Investors need this data to classify their investments and ensure compliance.
2. Corporate clients and business partnerships: Large corporations, especially those subject to EU sustainability regulations like CSRD (Corporate Sustainability Reporting Directive), may request sustainability disclosures from hotels and travel companies as part of their supply chain due diligence.
3. Sustainability-linked financial products: If a tourism company issues green bonds or sustainability-linked loans, the financial institutions involved may need to assess and disclose the company’s ESG performance under SFDR guidelines.

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What is the Corporate Sustainability Reporting Directive (CSRD)?

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The Corporate Sustainability Reporting Directive (CSRD) has replaced the Non-Financial Reporting Directive (NFRD), aiming to enhance corporate transparency through stricter and more comprehensive reporting standards. Previously, under the NFRD, reporting obligations applied to listed and large companies with an average balance sheet total of €20 million or net revenue of €40 million over a financial year, employing more than 500 employees—covering approximately 11,700 companies. These entities were required to disclose their impact on and exposure to social and environmental sustainability issues, though the NFRD's flexibility permitted non-disclosure in certain cases.

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To bolster the European Green Deal, the European Commission has replaced the NFRD with the CSRD, expanding the scope and enhancing transparency. The CSRD retains the core requirements of the NFRD but introduces new obligations, such as machine-readable reports, third-party audits, and alignment with the European Sustainability Reporting Standards (ESRS).

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The CSRD has significantly broadened reporting obligations by extending the scope to all large companies meeting at least two of the following three criteria:

1. A net turnover exceeding €50 million,
2. A balance sheet total exceeding €25 million,
3. More than 250 employees.

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Additionally, listed small and medium-sized enterprises (SMEs) are required to comply, along with non-EU companies generating over €150 million in annual revenue within the EU and having at least one large or listed subsidiary or branch in the EU. Reporting must be conducted according to the ESRS, covering environmental, social, and governance (ESG) factors, with a double materiality perspective—requiring companies to disclose both how sustainability issues affect them and how their operations impact society and the environment.

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Timeline – CSRD

The implementation timeline for the CSRD varies based on company size and classification:

• 1 January 2024: For companies already within the scope of the Non-Financial Reporting Directive (NFRD), such as large public-interest companies with more than 500 employees.
• 1 January 2025: For all other large EU undertakings or large EU groups, as well as non-EU large undertakings or large groups listed on an EU-regulated market.
• 1 January 2026: For listed small and medium-sized companies, EU small and non-complex credit institutions, and captive insurance undertakings.
• 1 January 2028: For in-scope non-EU companies generating €150 million net turnover in the EU and having at least one entity in the group in scope of the CSRD, or a relevant branch.

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‍What is the Corporate Sustainability Due Diligence Directive (CSDDD)?

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The Corporate Sustainability Due Diligence Directive (CSDDD), adopted by the European Union in July 2024, requires companies to identify, prevent, mitigate, and address adverse human rights and environmental impacts in their operations and supply chains. The directive applies to both EU and non-EU companies with substantial business activities within the EU. It sets clear criteria for businesses to follow and mandates sustainability and ethical accountability.

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Criteria for CSDDD applicability:

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Size of the company:

• EU companies with more than 500 employees and €150 million in net worldwide revenue.
• Non-EU companies generating €150 million in revenue in the EU or those with significant activities in the EU.
• Additionally, companies in certain high-impact sectors (such as textiles, agriculture, mining, and chemicals) with more than 250 employees and €40 million in revenue are also subject to the directive.

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Sectoral focus:

High-risk sectors such as textiles, agriculture, mining, and oil and gas are specifically highlighted in the directive due to their environmental and human rights impact.

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Supply chain scope:

The directive applies to companies' direct operations and upstream and downstream supply chains, including subsidiaries and business relationships with suppliers and partners.

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How CSDDD applies to Travel & Tourism:

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For companies in the travel and tourism sector, such as hotels, tour operators, and travel agencies, the CSDDD means they must:

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Conduct due diligence:

Assess and mitigate any adverse human rights or environmental impacts in their operations and throughout their supply chains. This includes ensuring fair labor practices, ethical sourcing of materials, and reducing environmental degradation caused by operations (e.g., waste management, energy use).

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Implement mitigation measures:

Develop policies to prevent negative impacts. For example, hotels must assess their supply chains for sustainable sourcing, avoid overexploitation of natural resources, and address issues like waste generation and carbon emissions.

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Provide remedies:

If adverse impacts are found, companies must take action to remedy the situation. This could involve compensating workers for labor violations or implementing environmental restoration projects.

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Ensure transparency:

Regularly disclose due diligence processes, risk assessments, and outcomes, giving stakeholders clear visibility into the company’s sustainability efforts. Transparency can be achieved through public reports or direct communication with consumers, investors, and regulators.

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For instance, a hotel chain would need to ensure that its suppliers meet sustainable sourcing standards, avoid labor rights violations, and take steps to reduce their environmental impact. Non-compliance could lead to reputational damage, legal penalties, or loss of investor confidence.

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Relation of the EU Taxonomy, SFDR, CSRD and CSDDD

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The CSDDD (Corporate Sustainability Due Diligence Directive) adds another layer to this framework, emphasizing the responsibility of companies to identify, assess, and address human rights and environmental impacts throughout their supply chains. This legislation closely interacts with the other regulations by requiring companies to ensure their business practices align not only with environmental sustainability but also with broader social and governance considerations. In this way, the CSDDD complements the CSRD’s reporting obligations by extending the scope of corporate responsibility, requiring companies to consider sustainability beyond their direct operations and throughout their value chains.

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Market participants can only make thoughtful investment decisions if they consider both the disclosures under the EU Taxonomy and CSRD, which will now include human rights and environmental considerations as per the CSDDD. This should ensure that market participants are well informed about how companies’ implementation of environmental and social activities takes place. Disclosures under the CSRD will provide more comprehensive information, complementing the EU Taxonomy’s classification system and the due diligence requirements of the CSDDD.

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Current situation: The European Commission's Omnibus Proposal

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Recent legislative developments (the Omnibus Proposal) might lead to significant modifications in the EU’s sustainability regulations:

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The European Commission's Omnibus Proposal, introduced on 26 February 2025, aims to streamline and simplify existing sustainability regulations to enhance the EU's competitiveness. This proposal introduces significant modifications to several key directives and regulations, including the Corporate Sustainability Reporting Directive (CSRD), Corporate Sustainability Due Diligence Directive (CSDDD), Sustainable Finance Disclosure Regulation (SFDR), and the EU Taxonomy Regulation.

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Impact on the Corporate Sustainability Reporting Directive (CSRD):

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Scope reduction: The CSRD's applicability has been narrowed to include only the largest companies—those with more than 1,000 employees—resulting in an approximate 80% reduction in the number of companies required to report.

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Impact on the Corporate Sustainability Due Diligence Directive (CSDDD):

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• Delayed implementation: The initial reporting obligations have been postponed from 2027 to 2028.
• Narrowed focus: Companies are now required to monitor only their direct suppliers, with assessments reduced from annual to every five years.
• Contractual adjustments: The obligation for companies to sever contracts with non-compliant suppliers has been modified to allow for suspension instead.

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Impact on the Sustainable Finance Disclosure Regulation (SFDR):

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Simplified disclosures: While specific details are still emerging, the Omnibus Proposal aims to simplify compliance and reduce administrative burdens associated with the SFDR, potentially easing the reporting requirements for financial market participants.

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Impact on the EU Taxonomy Regulation:

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Simplification efforts: Adjustments have been proposed to simplify compliance and reduce administrative burdens, though specific details of these changes are still emerging.

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Threshold adjustments and consolidated level considerations

Important to note that besides the significant criteria threshold adjustments, these thresholds should be assessed at the consolidated group level, meaning that parent companies (i.e. hotel groups) must consider the total number of employees and overall turnover across all subsidiaries to determine applicability. This approach ensures that large corporate groups cannot circumvent reporting obligations by segmenting operations into smaller entities.

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Benefits of the regulatory adjustments

These proposed changes are intended to reduce the administrative burden imposed on companies by the initial scope of the regulations and enhance the EU's competitiveness on a global scale. Such simplifications are expected to save around EUR 350 million for those companies while at the same time releasing €50 billion of extra resources in additional public and private investment.

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Summary of the implications for the regulations:

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The European Commission's Omnibus Proposal aims to simplify sustainability regulations by addressing corporate concerns about complexity and costs while balancing the EU's Green Deal objectives with global competitiveness. This initiative aims to create favourable business environment that encourages growth, job creation, and investment by reducing administrative burdens and enabling companies to transition to a sustainable economy more effectively and pragmatically. However, some stakeholders have raised concerns that these regulatory relaxations could potentially weaken overall sustainability efforts and compromise the EU's commitment to its Green Deal targets. The proposals are currently pending approval from both the European Parliament and EU member states.

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Take the next step towards sustainable hospitality

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As the EU's CSRD and SFDR continue to emphasize transparency and accountability in sustainability reporting, hotels must prioritize genuine environmental practices to avoid greenwashing and build trust with eco-conscious travelers.

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Achieving a recognized sustainability certification, not only enhances your hotel's credibility but also provides you with a reputable framework in which to track your progress and measure your impact. Moreover, you can improve your operational efficiency, and attract guests who value sustainability.

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Start your journey to sustainability certification today and ensure your hotel remains at the forefront of responsible hospitality practices.

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