Update on the EU taxonomy: Updated briefing paper on the reporting obligations of the EU taxonomy

published on 14. Februar 2025 I reading time approx. 6 minutes 

On December 20, 2024, the Accounting Standards Committee of Germany (DRSC) published an update of its briefing paper on the reporting requirements of the environmental taxonomy regulation for non-financial companies. The briefing paper is updated regularly and serves as a guide for companies when implementing the EU taxonomy.

The background to the publication are two new FAQ documents on the EU taxonomy, as well as the ongoing consultation on the machine-readable labeling of taxonomy information (XBRL taxonomy). The latter is also to be used in the context of CSRD reporting and create a standardized digital classification system for the structured and machine-readable presentation of financial and sustainability reports.

Introduction to the EU taxonomy

As a classification system for “green” investments, the EU taxonomy is an important instrument of the “sustainable finance” action plan adopted as part of the European Green Deal. The overarching aim of the regulation is to reorient future capital flows towards sustainable investments.

As part of this, reporting companies must disclose how and to what extent their activities are linked to economic activities that are considered environmentally sustainable under the taxonomy regulation. To this end, companies determine the proportion of taxonomy-eligible and taxonomy-aligned economic activities in relation to the total of their activities.

Content of the briefing paper

The update of the DRSC-briefing paper covers two main topics: On the one hand to the FAQ documents published by the European Commission in November 2024, which provide guidance on specific EU taxonomy related questions. On the other hand, the paper takes into account the start of the consultation in December 2024 on the machine-readable tagging of taxonomy information as part of the XBRL taxonomy.

Developments regarding the XBRL taxonomy

Companies subject to the CSRD are obliged to publish their sustainability reports in a standardized electronic format ESEF (European Single Electronic Format) and mark them up in a machine-readable format using the XBRL language (eXtensible Business Reporting Language). XBRL is a standard for digital reporting that makes it possible to provide financial and sustainability data in a form that can be automatically processed by software.

The briefing paper specifies the planned implementation timeline for the XBRL taxonomy. To further develop digital reporting, the European Securities and Markets Authority (ESMA) launched a public consultation in December 2024 to adapt the technical regulatory standards of the ESEF Regulation. The feedback collected will be evaluated in the second quarter of 2025 before a final report is published in the third quarter. The revised standard will then be submitted to the European Commission, which will then adopt a delegated act to amend the ESEF Regulation. Only after this final adaptation will machine-readable sustainability reporting become mandatory for companies.

New features in the FAQ documents on the EU taxonomy

Of the two newly published FAQ documents, the first deals specifically with taxonomy reporting for financial companies, while the second document contains general and specific questions on the application of the EU taxonomy for all companies. The focus of this article is on the latter.

The FAQ document provides answers to 155 frequently asked questions about the EU taxonomy. Among other things, it addresses the general reporting requirements in accordance with Article 8 of the taxonomy regulation and clarifies specific uncertainties on the interpretation of economic activities and their DNSH criteria (“Do No Significant Harm”).

The structure of the document is based on the environmental objectives of the EU taxonomy, each of which has its own chapter with specific questions. In addition, it contains two general chapters on the regulation itself.

The FAQ document is currently in draft form and is only available in English. Once it has been translated into the official EU languages, the draft will be published in the EU Official Journal.

It should be noted that the European Commission's answers are not legally binding, but merely provide clarification. Therefore, a more in-depth examination of the regulation and the delegated acts of the taxonomy remains necessary.

In view of the large number of FAQs on the EU taxonomy, the following is an up-to-date overview of all FAQ documents published to date (as of February 2025):

FAQs on the Environmental Taxonomy Regulation (April 2021),
FAQs on the Taxonomy Climate Deegated Act (April 2021),
FAQs on the Delegated Act on Taxonomy Reporting (July 2021),
FAQs on simplified Taxonomy Reporting (December 2021),
FAQs on the delegated act on the inclusion of new economic activities (in connection with nuclear energy and natural gas) with regard to the two climate-related environmental targets and on the amendment of taxonomy reporting (February 2022),
FAQs on Taxonomy Reporting (October 2022),
FAQs on the Delegated Act on the four non-climate-related environmental objectives and on the amendment of taxonomy reporting and on the delegated act on the amendment of 7 old and the inclusion of new economic activities with regard to the two climate-related environmental objectives (June 2023),
FAQs on the application of minimum protection (June 2023),
FAQs on the delegated act regarding the two climate-related environmental targets (October 2023)
FAQs on Taxonomy Reporting (October 2023),
FAQs FAQs on Taxonomy Reporting (November 2024), and
Draft FAQs on general questions and on the delegated acts (November 2024)

Selected technical questions from the FAQ document

General Section

The FAQ document specifies in the general section that companies are obliged to assess the taxonomy alignment of their economic activities annually as part of their reporting. However, under certain conditions, they can fall back on existing, valid evidence from previous years. This is possible if no significant changes have occurred in the environmental impacts of the activities or the applicable legal requirements that would influence the result of the taxonomy conformity assessment (Q9).

Questions on the environmental objective of climate change mitigation

In section 3.18 on the manufacture of automotive and mobility components in the environmental objective of climate change mitigation, the FAQ document clarifies that it is not sufficient for taxonomy eligibility if components are merely part of a zero-emission vehicle. Only components that make a significant contribution to improving the environmental performance of the vehicle, such as electric motors and regenerative braking systems (Q17), are taken into account.

In addition, it was previously unclear whether Section 8.1 (Data processing, hosting and related activities) referred exclusively to in-house data centers. The FAQ document explains that all types of data centers are covered under this section, including activities in colocation data centers operated by third-party providers (Q64).

General Questions concerning the Regulation

The document also states that companies do not have to publish prior-year figures when applying the EU taxonomy for the first time. This clarification is particularly necessary in view of the extension of the scope of the taxonomy reporting obligation next year, as the legal text does not contain an explicit exemption for the disclosure of prior-year figures in such cases (Q146).

Key takeaways

New FAQs on the EU taxonomy explain reporting requirements, DNSH criteria and reporting obligations
The feedback phase for adapting the technical regulatory standards of the ESEF Regulation is currently running until Q2 2025

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