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29.02.2024

The EU taxonomy: Guide to what is sustainable and what is not

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As part of the European Green Deal, the European Union introduced the EU taxonomy. It will be used by Europe as a guideline when investing in sustainable activities.

Next article offers a look at the EU taxonomy, where we discuss the definition, the criteria that classify an activity as sustainable, the environmental objectives and the concrete impact on your business.

 

What is the EU taxonomy?

The EU taxonomy stems from the Green Deal, the overarching measure in which Europe set the goal of becoming the first continent to be climate neutral by 2050.

To achieve these sharp targets, it is important that each member state does its part in making Europe more sustainable. To support the sustainable transition, Europe has allocated a huge budget of more than EUR 1,000 billion for investments in sustainable activities.

To make it clear to companies when an activity is sustainable and to avoid greenwashing, Europe has defined a framework for what is understood by a sustainable activity with the EU taxonomy. You can compare the EU taxonomy to a European encyclopedia for sustainability.

The EU taxonomy assesses sustainability at the activity level, allowing a company with different activities to have both sustainable and unsustainable activities. The EU taxonomy allows Europe to allocate its investment budget to universally defined sustainable activities.

 

When is an activity sustainable?

An activity can only be described as sustainable when it meets 4 criteria:

The activity contributes substantially to at least one of the six environmental objectives of the EU taxonomy (substantial contribution criteria).

  1. Limiting climate change
  2. Climate change adaptation
  3. Sustainable use and protection of water
  4. Transition to a circular economy
  5. Pollution prevention and control
  6. Protection and restoration of biodiversity and ecosystems

The activity, in contributing to one of the environmental objectives, does not significantly harm any of the other five environmental objectives of the EU taxonomy (do no significant harm).

The activity meets minimum social safeguards, such as adherence to the UN Guiding Principles on Business and Human Rights (minimum safeguards).

The activity meets the technical screening criteria prepared by the European Commission (a detailed description of the "substantial contribution" and "do no significant harm" criteria).

 

When does an activity contribute to 1 of the 6 environmental objectives?

An activity can contribute to the 6 environmental objectives of the EU taxonomy in 3 different ways:

By directly contributing to 1 of the 6 environmental objectives of the EU taxonomy, for example:

  • Solar power generation contributes directly to climate change mitigation through the carbon-neutral production of electricity.

Through an indirect contribution to an environmental objective, for example:

  • Solar panel production allows others to mitigate climate change through the carbon-neutral production of electricity, despite the fact that the actual production of the solar panels does not directly contribute to climate change mitigation.

As transition activities, where these activities are the least harmful alternative and there is no feasible alternative, provided they meet 4 conditions:

  • The activity does not prevent the development of sustainable alternatives.
  • Carbon emissions from the activity are the lowest possible alternative within the sector.
  • The activity should not cause transition to sustainable alternatives in the future to be too costly or complex.
  • The technical screening criteria for the activity must demonstrate that the transition activity can follow a feasible path to climate neutrality.

 

How will EU taxonomy impact my business?

 

Curious about the specific criteria for your activities? Be sure to consult the tool made available by the European Commission where EU taxonomy criteria are listed specifically by activity.

 

Are you like us all the way pro sustainability? Then check our sustainability page.

Do not hesitate to contact us here contact us with questions.

Would you like to proactively address this issue so that you too can make an impact to create a more sustainable world? Then make an appointment here with our pro experts!