The EU taxonomy regulation was published and entered into force in 2020. It establishes the conditions an economic activity will have to meet to be considered sustainable. To be recognized as green, economic activities have to make a substantial contribution to at least one of the EU's climate and environmental objectives, while also doing no significant harm to the others, all the while meeting minimum social safeguards. As of January 2023, businesses have to report their Taxonomy score. Here, we explain the taxonomy regulations and the delegated acts related to it. 

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The EU taxonomy regulation

The EU taxonomy regulation establishes six environmental objectives: 

1. Climate change mitigation
2. Climate change adaptation
3. The sustainable use and protection of water and marine resources
4. The transition to a circular economy
5. Pollution prevention and control
6. The protection and restoration of biodiversity and ecosystems

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EU taxonomy Delegated Acts

The EU plans to provide consistent, objective criteria on how an activity can make a substantial contribution to one of these objectives by publishing technical screening criteria for eligible activities in delegated acts. There are currently two acts adopted and one in a draft form with regards to technical screening criteria. There are likely to be additional delegated acts in the future or additional activities added to the existing ones.

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The Climate Delegated Act

The Climate Delegated Act covers the technical screening criteria activities which can make a substantial contribution to climate change mitigation and adaptation. This act focuses on the economic activities in sectors that are most relevant for climate neutrality and climate change adaptation, including energy, manufacturing, transport, and buildings.

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The Environmental Delegated Act

Within the EU taxonomy, the Environmental Delegated Act reports has been published by the Platform on Sustainable Finance, but not yet by the EU Commission. This act will include all the activities that can make a substantial contribution under the other four environmental objectives. The next step is for the commission to make a first draft delegated act, which is expected to be finalized this year.

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Complementary Climate Delegated Act

As a part of the EU taxonomy, the Complementary Climate Delegated Act adds additional activities from the energy sector, in particular specific nuclear and gas energy activities. The Act applies from 1 January, 2023. Additionally, the Act also introduces specific disclosure requirements for businesses related to their activities in the gas and nuclear energy sectors, accelerating a shift towards a climate neutral future.

Who is the Environmental Delegated Act for?

Although in a draft form, the Environmental Delegated Act looks set to bring a number of new activities and industries within the scope of the taxonomy. The act brings in new activities such as design, manufacture, remanufacture and reselling of furniture, manufacture of food products, animal and crop production, civil engineering, provision of repair services, manufacture of clothing and footwear, and recycling and waste handling.

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The EU has estimated that through the Climate Delegated Act, the taxonomy criteria already cover the economic activities of roughly 40% of listed companies. With the introduction of the Environmental Delegated Act the number of businesses that will have eligible activities looks set to become much higher.

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Challenges of Environmental Delegated Act for your company?

The implementation of Environmental Delegated Acts (EDAs) can pose significant challenges for companies. These acts are designed to regulate and reduce the environmental impact of businesses, but they require significant changes in operations and processes, which can be difficult to implement. Here are some challenges that your company may face in complying with Environmental Delegated Acts:

1. Increased Compliance Costs: The implementation of Environmental Delegated Acts requires companies to invest in new technology, equipment, and processes to reduce their environmental impact. These changes can be costly, and smaller companies may struggle to afford the necessary upgrades.
2. Changes in Operational Processes: Companies may need to re-evaluate and modify their operational processes to comply with Environmental Delegated Acts. This could mean changing the way they source materials, manage waste, or produce goods and services, which can be time-consuming and disruptive to current operations.
3. Lack of Expertise: Environmental regulations can be complex, and companies may lack the expertise to navigate these requirements effectively. This could result in costly mistakes and delays in compliance.
4. Competition: Companies that comply with Environmental Delegated Acts may face increased competition from those that do not. Businesses that do not invest in sustainable practices may have lower costs, which could make them more competitive in the marketplace.
5. Public Perception: In today's society, consumers are increasingly concerned about the environmental impact of the products and services they purchase. Failure to comply with Environmental Delegated Acts could damage a company's reputation and lead to a loss of customers.

Overall, the implementation of Environmental Delegated Acts can be challenging for businesses of all sizes. However, it is essential to recognize that complying with these regulations is not only good for the environment but also for the long-term success of your company. By investing in sustainable practices, you can reduce costs, increase efficiency, and enhance your reputation in the marketplace.

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Consider our company your trusted partner

A software solution can significantly ease the implementation of the Environmental Delegated Act by automating and streamlining the process of data collection, analysis, and reporting. With the complexity of the taxonomy regulation and its delegated acts, it can be challenging for companies to navigate and comply with the requirements effectively. However, an EU taxonomy reporting software like Celsia can help businesses identify eligible activities, assess your environmental impact, and track your progress towards compliance. The software can also provide real-time insights and analytics, enabling companies to make informed decisions on your operations, reduce their environmental impact, and enhance their sustainability performance. By leveraging Celsia, businesses can efficiently and effectively comply with the EU taxonomy Delegated Act while minimizing costs, improving operational efficiency, and increasing their competitive advantage.