Strategic Focus: Unpacking The EU Taxonomy

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Executive Summary

The EU Taxonomy Regulation is a green classification system that translates the EU’s climate and environmental objectives into criteria for specific economic activities and investment purposes. Since January 2023, 11,000 firms have transitioned from taxonomy eligible reporting to the more complex taxonomy alignment reporting. This report unpacks the requirements of the EU Taxonomy and explores how firms can prepare for some of the more challenging aspects of the regulation. Crucially, it highlights the importance of sustainable taxonomies as tools that can be used by organizations of all sizes to drive sustainable strategy development, enhance competitive positioning and improve access to capital. This report can be used by executives in sustainability, operations, procurement, finance and legal functions to enhance their disclosure practices.

Table of contents

The EU Taxonomy Is Central To The EU’s Environmental Policy Agenda
Four Assessment Criteria To Establish Taxonomy Alignment
EU Taxonomy Regulation Will Require Heavy Lifting From Reporting Organizations
Three Ways Organizations Can Enhance Their EU Taxonomy Reporting

Table of figures

Figure 1. Requirements Of The EU Taxonomy Regulation
Figure 2. The Environmental Objectives Of The EU Taxonomy
Figure 3. Example Of Technical Screening Criteria For An Activity’s Climate Change Mitigation Contribution 
Figure 4. Sustainable Taxonomies Beyond The EU
Figure 5. ESG Information Architecture Components

About the authors

Lily Turnbull

Industry Analyst
Lily is an Industry Analyst in the Verdantix ESG & Sustainability practice. Her current research agenda focuses on ESG and sustainability services, ESG assurance, and sustainable finance. Lily joined Verdantix in 2022 and has previous experience in social impact research and ESG software development. She holds an MSc in Women, Peace & Security from the London School of Economics and Political Science and a BA in Theology & Religion from the University of Bristol.

Kim Knickle

Research Director, ESG & Sustainability
Kimberly Knickle is Research Director of the ESG & Sustainability practice at Verdantix. Her research areas encompass ESG regulations and reporting, ESG risk, supply chain sustainability, circular economy, social impact, and sustainable finance. Kim has worked for more than 20 years in the IT industry, providing research and analysis to help companies invest wisely in new technologies. Before joining the analyst industry, she held various roles in IT services, engineering and product safety testing, beginning her career at Underwriters Laboratories, Inc. Kim holds an MBA from Boston University and a BS in Electrical Engineering from Cornell.

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