EU-Taxonomy And Why You Should Be Prepared

Being in the corporate industry entails preparing for changes in policies and requirements set by regulatory bodies. Knowledge of new alterations and growing trends is necessary to adapt your business operation to maintain relevance and gain an advantage due to compliance levels. As part of the struggle to drive sustainability, the European Union has the responsibility of formulating regulations, and the EU-Taxonomy is just an example. It is not a new phenomenon and has been ongoing for a while now. This article takes an in-depth look at the state of taxonomy in light of recent events and what you need to know to be prepared.

What is the EU-Taxonomy Framework?

The EU Taxonomy, also referred to as the green taxonomy, was established in 2020 and has experienced numerous updates and discussions in its scope. It is a framework that is established to classify investments and spell out the ones which are sustainable in relation to the European Green deal. Primarily, the EU Taxonomy target is to promote sustainable economic activity by companies.

Understanding The Environmental Objectives

The six environmental objectives that form the basis of the EU taxonomy were created to address greenwashing and help market stakeholders to identify and make excellent choices for investing in sustainable assets.

The environmental objectives are as follows;

• Climate Change Mitigation
• Climate Change Adaptation
•  Sustainable Use And Protection Of Water and Marine Resources
• Transition To A Circular Economy
• Pollution Prevention And Control
• Protection And Restoration Of Biodiversity And Ecosystems.

The first two objectives, which comprised the first part of the EU taxonomy, have already been established following the mandate of 2020. It is now expected that all taxonomy-covered corporate organizations make a report and disclosure of the activities in regard to the first two environmental objectives, in accordance with the established technical criteria.

Attention now is focused on the remaining four objectives, which are expected to come into effect by January 2023. Recall that in 2021, the discussion surrounding the technical criteria for the reporting of and disclosure of these remaining four objectives was kick-started, and the final release of the technical criteria was made available by December 2021.

Effecting the Second part of EU-Taxonomy: What Steps Should Companies Take in preparation?

With every detail about the technical criteria and guidelines now finalized, it is expected that companies get prepared for the second part of the EU taxonomy. Ahead of the second aspect of the EU taxonomy, it is pertinent to understand your position as an organization in the recent scheme and identify what activities apply to your organization.

Following this, data collection and definition as regards the activities and how it directly ties to the environmental objectives of the EU Taxonomy is crucial. Organizations should also consider setting up in-house ESG teams and form collaborations with necessary professionals and begin the process of data analysis. While preparatory details with every company are different, the initial steps are generic and can be modified to suit every organization’s scope.

Conclusion

2023 is just around the corner and holds a lot for the corporate world. Organizations should be adequately prepared for the start of the full implementation of the EU Taxonomy objectives by putting all necessary information and data in place. For investors, it is now a moment of truth as a more comprehensive disclosure on environmental objectives would be duly considered before making pertinent investment decisions. Experts and Observers would closely monitor the situation and assess the impact of the full effect of the EU Taxonomy on the world sustainability goal.