Report Highlights Ambiguity of Reporting Requirements
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Report Highlights Ambiguity of Reporting Requirementsin First Wave of EU Taxonomy Regulation

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Updated : 2022-02-01

Brussels, February 01, 2022 Today, The Conference Board published a report on the EU’s new Taxonomy regulations. The study by the member-driven think tank highlights the ambiguity of disclosure requirements and recommends a Taxonomy reporting roadmap for companies that have not begun their reporting journey.

As the analysis details, the EU aspires to be climate neutral by 2050 by accelerating and incentivizing investment in sustainable activities. In the absence of any definition or systematic guidance on what is sustainable, the EU has introduced a framework that classifies “green” economic activities. A company then uses that system to report and disclose the extent to which its business activities align with the EU Taxonomy's definition of “sustainable.”

While implementation timelines have been extended to give the market a bit more time to prepare, the timeframe remains tight given the amount of work required to prepare for the reporting. Companies in scope will need to report on their “eligible” economic activities as of 2022. And starting in 2023, they will need to report the Taxonomy alignment of their activities. 

To help companies prepare for what’s ahead, the report offers multiple steps organizations can take:

  • Companies in Europe need to prepare for the first version of Taxonomy reporting in their 2022 annual or sustainability reports. This will cover the financial year 2021. Expanded disclosure will be required from 2023. This presents companies a tight timeframe to work with, given the amount of preparation implementation requires.
  • Parts of the Taxonomy and the associated reporting requirements are still not finalized, so companies in Europe need to follow these developments closely. The European Commission has adopted a “delegated act” for only the first two objectives: climate change mitigation and climate change adaptation. The second delegated act is expected to be published in 2022.
  • Companies that aren’t subject to the EU Taxonomy should consider assessing their preparedness to report on a voluntary basis. Companies whose economic and environmental objectives are well aligned can promote this information to enhance their reputation. Additionally, doing so may attract financing, and investors will ask about it.

 “There is an alarmingly low level of action about the implications of the EU’s Taxonomy by European companies,” said Sara Murray, Managing Director, International, of The Conference Board. “In releasing our report now, we are bringing this important issue to the attention of our Members and making it clear to them that this is an issue they need to prioritize if they have yet to do so. This issue has significant implications for a broad range of stakeholders—not just for investors and asset managers.”

“While Europe may continue to forge the next iterations of Taxonomy disclosure regulations, companies should also keep a close eye on developments in other jurisdictions,” said Anuj Saush, Leader of the Governance & Sustainability Center at The Conference Board. “The UK, as well as Canada, China, Malaysia, Singapore, and South Africa, are also working on a taxonomy.” 

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