EU Taxonomy Regulation – Climate and environmental sustainability goals

News from the AGN EMEA Accounting, Auditing & Education Committee (AAEC):

The EU Taxonomy Regulation serves to achieve the EU’s climate and environmental sustainability goals. The following six environmental goals determine the classification of environmentally sustainable economic activities:

1. Climate protection
2. Climate change adaptation
3. Sustainable use and protection of water and marine resources
4. Transition to a circular economy
5. Pollution prevention and control
6. Biodiversity and ecosystem protection and restoration

Economic activity is considered environmentally sustainable if that economic activity:

• Makes a significant contribution to achieving one or more of the above six environmental goals;
  
• Does not result in significant harm to one or more of the above six environmental objectives;
  
• In compliance with a certain minimum level of protection (e.g. compliance with the OECD Guidelines for Multinational Enterprises and the United Nations Guiding Principles on Business and Human Rights);
  
• Meets the technical evaluation criteria established by the Commission by means of delegated acts.

With respect to the taxonomy-compliant economic activities, the following performance indicators must be identified and disclosed:

• The proportion of its revenue generated from products or services that are associated with taxonomy-compliant economic activities (hereinafter referred to as “sustainability-related revenue”).
  
• The share of their capital expenditures related to assets or processes associated with taxonomy-compliant economic activities (hereinafter referred to as “sustainability-related capital expenditures.
  
• The share of operating expenditures related to assets or processes associated with taxonomy-compliant economic activities (hereafter referred to as “Sustainability-related operating expenditures.

For relaxation (although whether it’s actually relaxing is another matter), we recommend the
Netflix documentary “Breaking Boundaries – The Science of our Planet”. At least then, you’ll
know why the EU is pushing so hard on the issue of sustainability reporting and taxonomy quotas.

Should you ever lose track of the big picture, my colleagues and I from the AGN EMEA Accounting, Auditing & Education Committee (AAEC) will be happy to help and guide you safely through the IFRS and CSR jungle. As a member of AGN International, you can use the AGN AAEC Helpline at any time or contact me by email at carsten.ernst@wirtschaftstreuhand.de or by mobile phone at +49 173 8710322.

Carsten Ernst Managing Partner Wirtschafts Treuhand Group Stuttgart, Germany

– Expert in financial (IFRS) and sustainability (ESRS and GRI) reporting – Audit of financial and sustainability reports in accordance with ISAs – Member of the following AGN bodies: – EMEA Board of Directors (Chairman) – EMEA AAEC Accounting, Auditing and Education Committee (Member)