Publication of new FAQs on EU Taxonomy – What companies need to know now

This year, for the first time, companies subject to reporting requirements will have to disclose information on the taxonomy alignment of their economic activities for the two environmental objectives “climate change mitigation” and “climate change adaptation” for the financial year 2022. On December 19, 2022, the EU Commission published two new Draft Commission Notices in this regard, in which selected questions on the EU Taxonomy are answered.  

 

The first Draft Commission Notice addresses the interpretation and implementation of the technical screening criteria of the two climate-related environmental objectives, while the second Draft Commission Notice deals with general reporting issues under Article 8 of the Taxonomy Regulation. The FAQ documents do not contain any additional reporting requirements but are only intended to provide information and guidance to affected companies on how to implement the reporting obligation. In the following, we summarize the contents for you: 

In the second Draft Commission Notice, the EU Commission officially clarifies that the legal act adopted in July 2022 on the inclusion of natural gas and nuclear energy in the EU taxonomy must already be taken into account in the reporting for fiscal year 2022. The current expected timeframe for the application of the EU taxonomy is shown in the table below.  

In principle, companies subject to the NFRD/CSRD are required under the Taxonomy Regulation to disclose the proportion of their revenue, CapEx and OpEx attributable to taxonomy-aligned economic activities. Only for the OpEx KPI does the regulation provide for a certain degree of flexibility in reporting, provided that OpEx is considered “not material” to a company's business model and this assessment is appropriately justified. In this case, a company is exempt from calculating the OpEx numerator and only must report the total value of the OpEx denominator. The EU Commission explicitly emphasizes here that companies that have no or only minor chargeable OpEx (numerator), but significant total OpEx (denominator) should not claim the exemption. 

Inclusion of further economic activities 

According to the EU Commission, not all activities that can in principle make a significant contribution to the climate objectives were included in the first delegated act. The reason for this is that those economic sectors and activities with the greatest potential to make a significant contribution to reducing greenhouse gas emissions (measured by their share of total emissions and their theoretical potential to reduce emissions) were prioritized first. Efforts will be made to include other activities, such as glass manufacturing, pulp and paper manufacturing, or food and beverage manufacturing, in future reviews of the delegated act on climate objectives or to consider them in the development of the delegated act on environmental objectives 3-6. Companies whose economic activities are not yet included in the EU Taxonomy should closely follow the developments regarding the inclusion of new sectors and economic activities in order to be able to deal with requirements and technical assessment criteria of newly included activities at an early stage, if necessary.   

NACE-Codes

The Commission reiterates that the reference to NACE sectors in the activity description is only indicative and not necessarily exhaustive. An economic activity may meet the activity description as well as the relevant technical screening criteria even if the company's NACE sector is not explicitly listed in the relevant section of the delegated act on climate objectives. If a NACE code is broader than the activity description, the activity description takes precedence over the scope of the NACE code.  

Specific questions on activities from the sectors covered by the climate taxonomy, namely forestry, manu­factu­ring/­production of goods, energy, water supply, sewerage, waste management and remediation activities, transport, construction and real estate, information and communication, and professional, scientific and technical services, are answered on pages 18-67 in the first Draft Commission Notice. The focus is particularly on the construction and real estate sector, for which the draft contains a total of 57 clarifications, including sector-specific definitions, thresholds and calculation methods. 

 

The documents have been approved in principle by the EU Commission, so no further changes to their content are expected. Formal adoption and publication in the Official Journal of the EU will take place as soon as the notifications are available in all official EU languages.