EU Taxonomy: From Basics to Successful Implementation

The EU Taxonomy is a key element of European climate policy and provides a clear definition of sustainable economic activities. It was introduced to promote the transition to a climate-neutral and resource-efficient economy by creating transparent criteria for sustainable investments.

For companies, implementing the EU Taxonomy means not only meeting regulatory requirements, but also the opportunity to position themselves as a future-oriented and environmentally conscious player.

In this blog, you will learn everything you need to know about the EU Taxonomy, its requirements and how companies can implement them successfully.

The Basics of the EU Taxonomy

What is the EU Taxonomy?

The EU Taxonomy is a science-based classification system for sustainable economic activities. It was introduced in the EU with Regulation (EU) 2020/852 and precisely defines which economic activities can be classified as "sustainable".

The EU Taxonomy is an important tool to show investors which activities are considered sustainable and to accelerate the transition to a climate-neutral, resource-efficient economy. It is therefore a central component of EU environmental and climate policy.

An economic activity is considered sustainable if it:

1. Makes significant contributions to one of the six environmental goals.
2. Does not cause significant harm to other objectives ("Do No Significant Harm", DNSH principle).
3. Comply with certain minimum social standards for occupational safety and human rights.

Which companies are affected by the EU Taxonomy?

The EU Taxonomy applies to two main groups of companies:

1. Companies in the financial sector that offer financial products
2. Companies that have to prepare sustainability reports in accordance with CSRD

On February 26, 2025, the EU Commission published the Simplification Omnibus Package, which exempts companies with > 1,000 employees and a turnover of ≤ €450 million from the EU Taxonomy reporting obligation.

For companies that are not required to report, it may make sense to voluntarily report in accordance with the EU Taxonomy. Many business partners are placing increasing importance on companies meeting sustainability criteria.

Companies must report on how their activities fit into the EU Taxonomy. This includes disclosing how much of their revenue, investment and operating expenditure is spent on environmentally friendly activities.

What are the objectives of the EU Taxonomy?

The EU Taxonomy aims to promote sustainable investments and prevent greenwashing through clear, science-based criteria.

The EU Taxonomy Regulation defines the following six environmental objectives:

1) Climate change mitigation

Sub-goals: Reduction of greenhouse gas emissions, promotion of renewable energies, energy efficiency measures

Practical example of a sustainable activity: introduction of energy-efficient machines or production processes

2) Climate change adaptation

Sub-goals: Development of climate-resilient solutions, risk management for climate impacts

Practical example of a sustainable activity: integration of climate risk assessments into corporate strategy

3) Sustainable use and protection of water and marine resources

Sub-goals: Water conservation and reuse, protection of water bodies, sustainable water management

Practical example of a sustainable activity: use of rainwater for industrial processes

4) Transition to a circular economy

Sub-goals: Waste prevention and recycling, product life cycle optimization, resource efficiency

Practical example of a sustainable activity: use of recycled materials in production

5) Pollution prevention and control

Sub-goals: Air pollution control, soil protection, chemicals management

Practical example of a sustainable activity: use of low-emission vehicles in logistics

6) Protection and restoration of biodiversity and ecosystems

Sub-objectives: Species conservation, ecosystem restoration, sustainable land use

Practical example of a sustainable activity: Supporting nature conservation organizations and initiatives

These goals help sustainability managers make informed decisions about their sustainability strategy and strengthen the credibility of their sustainability initiatives.

Practical implementation of the EU Taxonomy

Successful implementation of the EU Taxonomy requires a structured approach in several phases. The following sections will guide you through the entire process and help you avoid typical pitfalls.

Phase 1: Create an understanding & make project preparations

The success of a Taxonomy implementation starts with thorough preparation. Ensure that a clear project structure is in place. Set up a project team made up of representatives from the relevant departments. This committee should meet regularly to monitor progress and make key decisions.

It is particularly important to involve the IT department at an early stage. The requirements of the EU Taxonomy have far-reaching effects on your system landscape. Check to what extent existing tools can be used and where new solutions, such as AI Software for EU Taxonomy reporting, are required to increase efficiency.

Phase 2: Analysis of relevant economic activities

The aim of this phase is to identify all relevant economic activities of the company and assign them to the Taxonomy categories.

Activity analysis for the EU Taxonomy

• Mapping of economic activities: All business processes and activities that are relevant to the EU Taxonomy must be identified and listed.
• Mapping to the environmental objectives: Each activity must be mapped to the corresponding environmental objectives of the EU Taxonomy. This requires close cooperation between the specialist departments and Controlling.
• Gap analysis of existing processes: Check to what extent the existing processes comply with the requirements of the Taxonomy and where adjustments are necessary.

Important: Due to the simplification omnibus package, companies can exclude non-financial activities (≤10% of revenue, capital expenditure or assets) from the Taxonomy assessment.

This is the operational core of the implementation, which ensures that all relevant activities are recorded correctly.

Phase 3: Technical DNSH assessment

In this phase, the relevant economic activities are assessed on the basis of the Taxonomy criteria. This phase is crucial for documenting taxonomy compliance and understanding the impact of the activities on the environmental objectives.

• Checking the technical screening criteria: For each relevant activity, the technical requirements set out in the EU Taxonomy must be checked. The criteria for the respective activity are checked using EU assessment forms.

• Assessment of the impact on the environmental objectives: For each environmental objective, possible negative impacts of the activities must be assessed. This is where you check whether an activity represents "Do No Significant Harm" (DNSH) for one of the environmental objectives.

At the end of this phase, you document the results of the technical assessment and the DNSH assessment to ensure that the Taxonomy requirements are fully met.

Phase 4: Reporting and integration into key financial figures

The final phase is about integrating the results of the Taxonomy analysis into corporate reporting and adjusting the financial indicators accordingly.

• Calculation of the relevant KPIs: Determine the KPIs that are relevant for the EU Taxonomy, such as taxonomy-eligible turnover, CapEx (investments) and OpEx (operating expenses). Make sure that these key figures are fully and comprehensibly documented.
• Integration into sustainability reports: The results must be included in the company's sustainability reports. This requires close cooperation with the finance department and coordination with existing reporting structures.
• Quality assurance of data: The data collected must be checked for accuracy and completeness to ensure that the reporting complies with regulatory requirements.

Success factors and best practices for implementing the EU Taxonomy

A clear governance structure with defined responsibilities and escalation paths is essential for a successful implementation of the EU Taxonomy. Document decisions and assumptions carefully to ensure audit assurance.

Invest in the training of your employees. Everyone involved must understand the basics of the EU Taxonomy and know how to implement the requirements in their area. Develop training materials and offer regular workshops.

Data availability is one of the biggest challenges in implementing the EU taxonomy. Accurate and continuous collection of relevant data is crucial in order to be able to demonstrate Taxonomy compliance.

This is where ESG software solutions come into play, helping companies to efficiently collect, manage and analyze the data they need. These tools provide a central platform on which all relevant data is collected — from key financial figures and environmental targets to the specific requirements of the EU Taxonomy.

With the AI software Sunhat, you benefit from:

• Flexibility and scalability: Sunhat adapts to dynamic EU Taxonomy requirements and grows with your business.
• Seamless integration: Sunhat integrates easily with your existing finance and systems, ensuring an error-free database.
• High data quality: Sunhat enables regular quality checks and ensures that your data meets the highest standards.
• Audit trail and documentation: Sunhat provides a clear audit trail that documents all changes and assessments and ensures compliance.

Conclusion: Driving sustainable business forward

The EU Taxonomy is more than just a regulatory framework — it is a strategic instrument for future-oriented and competitive business.

For sustainability managers, it offers

• Clear orientation in the development of sustainability strategies
• Improved communication options with stakeholders
• A solid basis for sustainable investment decisions

The continuous evolution of the Taxonomy makes it a dynamic tool that helps companies actively shape their role in the transition to a sustainable economy.

Book a demo now and find out how you can make your EU Taxonomy reporting more efficient.