European taxonomy – a new challenge for the business environment – SURVEY

INNOVA Project Consulting in partnership with The Diplomat Bucharest launches in the period of October 21 – November 12 a survey on The awareness of EU Regulation 852/2020 on Taxonomy.

One of the tools promoted by the European Commission to achieve the objectives of the European Green Deal is sustainable investments. To this end, the Commission has decided to set up a European classification system for sustainable activities, ie an EU taxonomy. Thus, on 12 July 2020, Regulation (EU) 2020/852, also known as the taxonomy regulation, entered into force. It will facilitate directing the capital to those activities that substantially contribute to the achievement of six environmental objectives and will thus help to mitigate the risk of “greenwashing”.

Which are the organizations to which the taxonomy regulation applies?

The Regulation on taxonomy applies to financial market participants offering financial products, to financial and non-financial undertakings that are obliged to publish non-financial information according to the provisions of Directive 2014/95 transposed in Romania by several normative acts. It also applies to Member States and the EU in the context of introducing national and European requirements for financial market participants or issuers for the purpose of labeling financial products or corporate bonds traded as environmentally sustainable.

Thus, starting with 2022, all entities that publish non-financial information in either the annual management reports or in the sustainability reports will be required to include in these reports also information on how and to what extent the entity’s activities are associated with economic activities that qualify as environmentally sustainable. An activity is considered to be environmentally sustainable if it meets the technical criteria set out by the EC in delegated acts to the specific taxonomy regulation for each of the six environmental objectives.

Non-financial enterprises will include in their annual reports the following performance indicators:

– the proportion of total turnover derived from products or services associated with economic activities that qualifies as environmentally sustainable;

– the proportion of their capital expenditure and the proportion of operating expenditure related to assets or processes associated with economic activities that qualify as environmentally sustainable.

For financial enterprises, the obligations established by this regulation will be much more difficult to implement, as the reported performance indicators have to be calculated for each product of the entity related to the type of environmentally sustainable activity and each environmental objective.

Given the complexity of the requirements set out in the taxonomy regulation and related delegated acts, implementation will be done in two stages: the first related to taxonomy-eligible activities from 2022 for the financial year 2021, and the second on taxonomy-aligned activities starting with 2024. At the same time, the EC announced that at the end of this year it will return with more clarifications on the implementation of the first stage, but also with information on the other delegated acts that still need to be developed. Currently, alignment with the taxonomy is only possible for the first two environmental objectives for which the technical screening criteria for the assessment of eligible economic activities have been achieved and published.

In order to establish how well known Regulation 2020/852 is among Romanian companies and how prepared they are to comply with the new requirements starting with 2022, INNOVA Project Consulting in partnership with The Diplomat Bucharest launches between 21 October until a 12 of November survey, available here.

Take the survey here