Best Practice EU Taxonomy

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published on 14 november 2023 | reading time approx. 2 minutes

 

We are entering the third reporting year of the EU Taxonomy Regulation and the first year in which at least the ability to report on environmental objectives 3-6 is required. For current users, there are still many questions regarding the interpretation of the regulation and its procedural implementation, and the future newly obligated compa­nies are also starting their EU taxonomy implementation projects in order to be able to provide reliable reporting in good time. We have compiled the most important best practice approaches for you below. 

The EU Taxonomy Regulation marks an important turning point in the European sustainability agenda and aims to steer the flow of investments towards more sustainable economic activities. However, the successful implementation and integration of this regulation into the business practices of companies and financial market participants represents both a challenge and an opportunity. Here are some best practice approaches that can help with implementation: 
 

Forming interdisciplinary teams

A team that brings together experts from the areas of finance, sustainability, IT, product development, purchasing and sales is essential. These groups can look at the requirements from different angles and create synergies that support a holistic implementation of the taxonomy. 


Training and development  

While some employees may already be familiar with the basics of sustainability, they are unlikely to know the nuances and specific requirements of the taxonomy, which is also regularly evolving. Workshops, training and regular education can help to develop a deep understanding of the regulation, keep up to date and ensure that implementation is effective. 


Strengthening data management

For many companies, it can be a major challenge to collect the data required for reporting in accordance with the taxonomy. In particular, the data for the conformity assessment can be very demanding depending on the respective economic activities. Investing in modern IT systems and working with data providers can help. Consistent and accurate data collection is the backbone of effective EU taxonomy implementation. 
 

Review and adaptation

The landscape of sustainability is dynamic. Companies should therefore adopt an iterative approach, regularly reviewing how taxonomy practices are working and where improvements can be made. This applies to process implementation as well as the continuous development of regulatory requirements. 


Communication

The taxonomy also provides an opportunity for communication. Companies should actively report on how they are meeting the requirements of the regulation, what progress they are making and what impact their invest­ments and practices are having on the environment and society. The focus here is particularly on the new and further development of taxonomy-compliant products and investment in compliant products. 
 

Integration into the business strategy

The taxonomy should not be seen as a mere compliance exercise. It provides an opportunity for strategic realignment, placing sustainability practices at the heart of business strategy. The threshold values for compliant activities contained in the EU Taxonomy Regulation represent the benchmark for top-in-class products. 
 

Risk management

In addition to the potential benefits, non-compliance with the taxonomy also entails significant risks. These could be of a financial, regulatory or reputational nature. For example, future funding may become more expensive or access to funding may be denied if no or too few compliant activities are reported. A proactive approach to risk management can help to minimize these risks. 


Cooperation with industry initiatives

No company is alone. Many industries and sectors face similar challenges when implementing the taxonomy. By collaborating with industry initiatives, companies can learn from the experiences of others and share best practices. 
 

Obtain external advice

The complexity of the taxonomy means that not all companies will have the expertise in-house. Consultancies and industry associations can provide valuable insight and support. 


In summary, while the EU Taxonomy Regulation can seem complex, it provides a valuable opportunity for companies to rethink and strengthen their sustainability practices. A structured, interdisciplinary approach, combined with engagement, communication and constant review, can help companies take full advantage of the regulation while minimizing the associated risks. In a world increasingly focused on sustainability, success­ful implementation of the taxonomy can help companies position themselves as industry leaders.

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