EU Taxonomy & Sustainability Reporting
5 min
7th June 2025
Understanding the EU Taxonomy: How It Will Shape Business Sustainability Reporting
As businesses across Europe and the world grapple with the challenges of sustainability, one regulatory framework is set to significantly impact how companies report on their environmental, social, and governance (ESG) activities: the EU Taxonomy Regulation.
In essence, the EU Taxonomy is a classification system designed to define what economic activities can be considered “environmentally sustainable” within the EU. This regulation plays a crucial role in guiding businesses towards better sustainability practices and ensuring that capital flows towards truly green initiatives. For companies operating within the EU, understanding and aligning with the EU Taxonomy will be vital—not just for compliance, but also for positioning themselves as leaders in the sustainability space.
In this blog post, we’ll explore the EU Taxonomy Regulation in-depth, discuss which sectors and activities are deemed “green,” and provide practical advice on how companies can align with this framework to ensure long-term sustainability and transparency in their reporting.
What is the EU Taxonomy Regulation?
The EU Taxonomy Regulation, introduced in 2020, is a key part of the European Green Deal, which aims to make Europe the world’s first climate-neutral continent by 2050. The Taxonomy is a classification system that sets out the criteria for determining whether an economic activity is environmentally sustainable.
The regulation covers six key environmental objectives:
- 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
To meet the criteria for “green” activities under the EU Taxonomy, businesses must demonstrate that their activities contribute substantially to one or more of these environmental objectives, without significantly harming any other objectives.
Which Sectors and Activities are Considered “Green” under the EU Taxonomy?
The Taxonomy applies to a broad range of sectors, each with its own specific set of criteria. However, the overarching goal is to ensure that companies and investors focus on activities that contribute positively to environmental sustainability.
Here’s a breakdown of some of the key sectors and activities deemed “green” under the EU Taxonomy:
- Renewable Energy
- Wind energy: Both onshore and offshore wind farms that meet strict environmental and energy efficiency standards.
- Solar energy: Projects that produce electricity from renewable sources such as solar power, as long as they meet sustainability criteria.
- Geothermal energy: Low-carbon, sustainable geothermal projects that minimise environmental impact.
- Energy Efficiency
- Buildings: Refurbishment and retrofitting of existing buildings to improve energy performance and reduce carbon emissions.
- Transport: Low-emission and energy-efficient vehicles, including electric vehicles and public transportation systems.
- Water Management
- Projects that focus on the sustainable use and management of water resources, including those designed to reduce water consumption or increase efficiency in industries such as agriculture and manufacturing.
- Circular Economy
- Activities that promote the reuse, recycling, and reduction of waste, such as sustainable product design, waste management solutions, and innovations that enable resource efficiency across industries.
- Pollution Prevention and Control
- Businesses in industries that prevent, reduce, or control pollution, including the production of less harmful chemicals or products that contribute to air and water quality improvement.
- Biodiversity and Ecosystem Restoration
- Projects aimed at protecting, conserving, and restoring biodiversity, such as rewilding, forest conservation, and sustainable agricultural practices.
For companies to be considered “green” under the Taxonomy, their activities must demonstrate that they substantially contribute to at least one of the six objectives listed above, and they must not cause harm to any of the other objectives.
How Can Companies Align with the EU Taxonomy?
For companies looking to align their activities with the EU Taxonomy, there are several steps they can take. Here’s a practical guide:
- Understand the Eligibility Criteria
The first step is understanding the specific criteria that apply to your sector and activities. The EU Taxonomy Regulation outlines detailed technical screening criteria for each of the six environmental objectives. For example, if your company is in the renewable energy sector, you’ll need to ensure that your projects meet specific standards for carbon intensity and environmental impact. - Assess Your Activities
Next, assess your business activities against the Taxonomy’s eligibility criteria. Are your operations contributing to one of the six objectives in a substantial way? Do they meet the Taxonomy’s Do No Significant Harm (DNSH) criteria, which ensure that your activities don’t cause harm to other environmental goals?
You’ll need to gather data on emissions, energy use, waste management practices, and other factors to determine where your activities stand in relation to the Taxonomy’s requirements. - Improve Sustainability Practices
If your activities don’t yet meet the Taxonomy criteria, it’s time to enhance your sustainability efforts. This might involve:- Upgrading energy efficiency in operations or facilities
- Switching to renewable energy sources
- Investing in circular economy practices such as recycling and waste reduction
- Introducing more sustainable transportation options
- Minimising pollution and restoring natural ecosystems
- Report Transparently
The EU Taxonomy requires companies to disclose how their activities align with its criteria in their sustainability reporting. In 2022, large public-interest companies (with more than 500 employees) began reporting their Taxonomy alignment as part of their Non-Financial Reporting Directive (NFRD), and this will expand with the Corporate Sustainability Reporting Directive (CSRD), effective from 2024.
When reporting, be transparent about which activities are Taxonomy-aligned and provide data to demonstrate compliance. This will not only ensure legal compliance but also enhance your company’s reputation as a sustainability leader. - Stay Up-to-Date with Evolving Regulations
The EU Taxonomy is a living regulation that will evolve over time. The European Commission is expected to update and expand the Taxonomy’s criteria to include new sectors and technologies. Keeping up with these changes is crucial for businesses to maintain their alignment with the Taxonomy and ensure they’re on the right track toward long-term sustainability.
Why the EU Taxonomy Matters for Businesses
The EU Taxonomy is a game-changer for business sustainability. By providing clear, science-based criteria for what constitutes environmentally sustainable activities, it allows businesses to make informed decisions about where to invest and which projects to prioritise.
For companies, aligning with the Taxonomy can:
- Enhance access to capital: Investors are increasingly focusing on sustainable investments, and alignment with the Taxonomy can make companies more attractive to green investors.
- Boost credibility and trust: Transparency in sustainability reporting helps build consumer and investor trust, positioning your business as a leader in ESG.
- Ensure regulatory compliance: As sustainability reporting becomes mandatory for more companies, aligning with the Taxonomy will help you stay compliant with upcoming regulations.
How Dunsany Estate Can Help Your Business Align with the EU Taxonomy
Achieving net zero and biodiversity gain is no small feat, but it’s a journey that every business needs to take to stay competitive and compliant in the coming years. Here are some key steps to get started:
- Measure Your Carbon Footprint: First, you need to understand where your emissions are coming from. Conducting a carbon audit will give you insight into your current carbon footprint and allow you to identify areas for improvement.
- Implement Energy-Efficiency Measures: Reducing energy consumption through energy-efficient technologies, transitioning to renewable energy sources, and optimising your operations can help lower your emissions and reduce costs in the long run.
- Invest in Carbon Offsetting: While reducing your emissions is critical, you can also offset those you cannot eliminate. Partnering with rewilding projects, like the ones we’re working on at Dunsany Estate, is a great way to restore nature and help offset emissions.
- Enhance Biodiversity: Take a close look at how your operations impact local ecosystems. Are there opportunities to restore habitats, plant trees, or protect wildlife? Start incorporating biodiversity targets into your sustainability strategy to ensure that your business is leaving the environment better than it found it.
- Stay Compliant with Regulations: Sustainability regulations are only going to get stricter, and the earlier you get ahead of them, the better. Keeping track of Ireland’s and the EU’s latest sustainability laws will ensure that you stay compliant and avoid penalties.
How We Can Help You Achieve Your Sustainability Goals
At Dunsany Estate, we understand that achieving Net Zero and improving Biodiversity can be challenging, especially with so many regulations to consider. That’s why we’re here to help. Our rewilding projects at Dunsany Estate offer businesses an opportunity to contribute directly to biodiversity restoration. By sponsoring Nature Shares, your company can make a tangible impact on the environment and align with your sustainability goals.
We’ll help you track your carbon offset and biodiversity gain, ensuring that you can report on your sustainability efforts and stay ahead of regulations. Whether you’re looking to meet net zero targets, comply with new sustainability regulations, or simply do your part for the planet, we’re here to support you every step of the way.
Sustainability isn’t just about ticking boxes – it’s about taking action that has real impact. If that’s what your business is aiming for, we’d love to talk.
