As part of the Omnibus Proposal, the EU launched a 4 week public consultation on the Delegated Acts of the EU Taxonomy with the intention to 'make reporting simpler and more cost effective for companies'.
What is the EU taxonomy?
It is a classification system that defines criteria for economic activities that are aligned with a net zero trajectory by 2050 (and broader environmental goals). It helps direct investments to economic activities most needed for the transition, in line with the EU Green Deal objectives.
Our response in a nutshell
With the guidance and expert insights of the World Wildlife Fund (WWF), Wikirate submitted it's respone focusing on 3 key areas:
- Materiality threshold:
- Concerns: The proposed 10% materiality threshold would reduce the scope of companies reporting by nearly 50% and would paint a problematically distorted picture of the market's sustainable investments (e.g. most large oil & gas companies would not be required to report any more).
- Recommendations: Before making any changes to the materiality threshold, the EU Commission should prioritize completing the taxonomy framework to include all eligible activities. Then, if introduced, the materiality threshold should be lowered to a maximum of 2%, and include a 'comply or explain' clause for companies that opt out.
- Partial alignment:
- Concerns: The 'partial alignment' category is not defined and confusing as reporting templates do not account for this option. If this 'partial alignment' criteria could be satisfied, when a company has met a subset of DNSH criteria this would be misleading and damaging as it would mean the company would still be doing significant harm in some areas.
- Recommendations: The EU Commission should build on the work of the EU Platform for Sustainable Finance (PSF) and support 2 types of taxonomy-based transitions; 1) the existing 'green transition' demonstrating full alignment, and 2) an 'intermediate transition' for activities aligned with all DNSH criteria but not yet in the 'Substantial Contribution' criteria to demonstrate 'partial alignment'
- Do No Significant Harm (DNSH) criteria:
- Concerns: The 2 proposed options to cut back the DNSH criteria bare a huge risk of; 1) greenwashing, as investments in companies using harmful chemicals like PFAS can be misleading labeled as 'green', and 2) regrettable substitution, with companies replacing 1 harmful chemical with another to circumvent the DNSH list.
- Recommendations: The EU Commission should look for alternative ways to achieve simplifications, for example in line with PSF recommendations to introduce a 'comply or explain' approach with a sunset clause.
Download the pdf to see our full response.
EU public consultation website: https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/14546-Taxonomy-Delegated-Acts-amendments-to-make-reporting-simpler-and-more-cost-effective-for-companies_en