EU Taxonomy + CSRD: What companies need to know

CSR, ESG, CSRD, ESRS, EU Taxonomy could also be phrases from the song "Mit freundlichen Grüßen" by Die Fantastischen Vier. These abbreviations are all related, yet they have very different meanings. What exactly do these terms entail? And how does the EU Taxonomy connect with other regulatory measures and concepts? This post explores the EU taxonomy and how it relates to the CSRD (Corporate Sustainability Reporting Directive).

Basics of the EU taxonomy

A taxonomy is a standardized procedure for classifying objects according to certain criteria. The EU taxonomy is more than just another term in the jumble of financial and sustainability terminology. It forms the foundation for sustainable finance in Europe and defines the criteria according to which activities can be classified as environmentally friendly.

What is the EU taxonomy?

The EU Taxonomy is a classification system developed to determine which economic activities can be considered environmentally sustainable. The main objective is to steer financial flows and investments towards sustainable projects by establishing clear and binding criteria for environmental sustainability. It serves as a guide for companies and investors to ensure they act in accordance with sustainability goals such as the European Green Deal.

History and development of the EU taxonomy

The idea of a taxonomy for sustainable finance in Europe arose in response to the growing realization that the financial sector plays a crucial role in meeting global and European environmental goals.

The EU Taxonomy was introduced as part of the European Commission's Action Plan for Financing Sustainable Growth, which was presented in 2018. Since then, it has gone through several stages of development, with stakeholders, experts and policymakers working together to create a robust system.

The EU taxonomy is related to the CSR Directive Implementation Act (CSR-RUG), which is the German implementation of the Non-Financial Reporting Directive (NFRD, Directive 2014/95/EU) requirements. The taxonomy also provides the classification system used in the Sustainable Finance Disclosure Regulation (SFDR) and the CSRD.

EU Taxonomy 2026: Simplification through Delegated Regulation (EU) 2026/73

With Delegated Regulation (EU) 2026/73, the European Commission has significantly simplified taxonomy reporting. The regulation has been in force since 28 January 2026 and applies from 1 January 2026:

• Application: For financial year 2025, companies could apply the new rules voluntarily on a one-off basis; from financial year 2026 they are mandatory.
• 10% materiality threshold: Non-material economic activities can be exempted from the detailed taxonomy assessment.
• Heavily reduced templates: The disclosure templates for turnover, CapEx and OpEx have been significantly streamlined.

Together with the smaller CSRD scope following the Omnibus I package, this reduces both the number of companies subject to reporting and the effort per company.

EU Taxonomy 2023: Four additional environmental objectives

On June 13, 2023, the EU Commission presented a new package of measures to strengthen the foundations of the EU sustainable finance framework. It approved a new set of EU taxonomy criteria for economic activities that make a significant contribution to one or more of the non-climate-related environmental objectives:

Changes were also made to objectives covering climate change mitigation and adaptation. Including more economic activities across all six environmental objectives means more sectors and companies can demonstrate sustainable investment alignment. Further information can be found in the EU Commission's factsheet on Sustainable Finance.

Relevance of the EU taxonomy in the European context

Pressure on companies and financial institutions to act more sustainably and transparently is increasing across Europe. The EU taxonomy provides a uniform language and a clear framework for this. It helps avoid greenwashing and ensures that investments actually have a positive ecological impact. In a continent becoming a global pioneer in sustainability, the taxonomy plays a central role in creating clarity, trust and credibility in the green financial market.

Main elements and key aspects of the EU Taxonomy Regulation

The main purpose of the regulation is to provide a clear and consistent basis for defining sustainability, so that investments labeled as "green" or "sustainable" actually meet such criteria. Four main elements stand out:

Which companies are affected by the EU taxonomy reporting obligation?

The Taxonomy Regulation has been in force since 12 July 2020; the reporting obligation has applied since 1 January 2022. Reporting under Article 8 follows the scope of sustainability reporting:

The CSRD was originally meant to greatly expand the number of companies affected. With the Omnibus I package, the opposite has happened: as the CSRD scope has been narrowed considerably, far fewer companies will be required to report under the taxonomy. The Omnibus directive has been in force since 18 March 2026: from financial year 2027, only companies with more than 1,000 employees AND more than €450m net turnover are subject to reporting; non-EU companies with more than €450m EU turnover and an EU subsidiary or branch with more than €200m turnover follow from financial year 2028. Listed SMEs are no longer in scope.

What specifically needs to be reported?

How companies can ensure their compliance

When does the EU taxonomy apply?

One common misconception about the EU taxonomy is that it applies immediately and in full to all companies. In fact, implementation was planned in stages to give companies time to adapt.

Timeline of taxonomy implementation

1. Adoption and entry into force (2020): The EU Taxonomy Regulation was adopted in June 2020 and has been in force since 12 July 2020. It provides the legal framework for the taxonomy.
2. Start of reporting (1 January 2022): Affected companies began reporting, initially on the two climate objectives.
3. Four additional objectives (June 2023): Criteria for sustainable use and protection of water and marine resources, circular economy transition, pollution prevention and biodiversity protection were adopted; reporting on them was then phased in.
4. Simplification (28 January 2026): Delegated Regulation (EU) 2026/73 entered into force – 10% materiality threshold and reduced templates, optional for financial year 2025 and mandatory from financial year 2026.
5. New scope (from financial year 2027): The CSRD scope after Omnibus I (more than 1,000 employees and more than €450m net turnover) also applies to taxonomy reporting.

Relationship between CSRD and EU taxonomy

Sustainability in the corporate world is complex, and instruments like the EU Taxonomy and the CSRD play a crucial role in bringing clarity to this area. A key feature of the CSRD is its double materiality. How exactly are these two instruments connected?

The EU taxonomy provides a classification system to determine what qualifies as an environmentally sustainable economic activity. The CSRD ensures that companies report transparently on these activities. They work hand in hand:

EU Taxonomy key figures form part of companies' CSRD reporting obligations. Further reporting obligations arise from the European Sustainability Reporting Standards (ESRS).

Sources and further information

For those who want to delve deeper into the EU taxonomy, a range of resources provide both overview and detail.

• Wikipedia: A good starting point for a comprehensive overview: EU taxonomy on Wikipedia.
• Official EU resources: The European Commission's taxonomy pages include official documents, FAQs, a taxonomy calculator and technical guidelines.
• Specialist literature and studies: Numerous publications, studies and white papers address the taxonomy, its market impact and implementation challenges.
• Webinars and seminars: Many organizations, consulting firms and universities offer training and information events on taxonomy compliance.

Conclusion and outlook

The introduction and implementation of the EU Taxonomy marks a turning point in Europe's push towards a more sustainable economy. With clear criteria and vision, the taxonomy sets standards that companies, investors and consumers can use as a guide.

The taxonomy provides a framework for defining environmentally sustainable economic activity, sets out clear reporting requirements and helps pave the way for a greener economy. Its long-term value is undeniable: it helps transform Europe's economy and could serve as a model for other regions. In a world facing the effects of climate change and pollution, the EU Taxonomy represents a meaningful step towards a more sustainable future.

Frequently asked questions about EU taxonomy and CSRD