As sustainability reporting becomes a boardroom priority, the EU Taxonomy is emerging as the common language for defining what ‘green’ really means in finance.
What is the EU taxonomy?
As sustainability reporting becomes a boardroom priority, the EU Taxonomy is emerging as the common language for defining what ‘green’ really means in finance. The EU Taxonomy is a classification system that defines which business activities are environmentally sustainable in the European Union. The taxonomy includes over 100 specific activities, each supporting at least one of six environmental goals, and not harming other goals:
- Reducing climate change
- Adapting to climate change
- Protecting water and marine resources
- Moving to a circular economy
- Preventing pollution
- Protecting nature and ecosystems
Why does the EU Taxonomy matter?
Beyond contributing to a more sustainable future, aligning with the EU Taxonomy offers two clear advantages:
- Better access to capital: Companies that follow the taxonomy can access better financing options, such as Robeco’s Global Green Bonds, ABN AMRO‘s sustainability-linked loans (SSLs), or the European Investment Bank’s reduced-rate loans. This can mean lower interest rates on loans.
- Compliance with upcoming EU rules: under the European reporting rules for sustainability (Corporate Sustainability Reporting Directive or CSRD), EU Taxonomy will become mandatory.
How does it work?
The taxonomy requires you to check if your organisation's activities match those listed in the taxonomy. This applies to how you make money (turnover) and how you spend it (capital and operational costs).
For instance, if your company invests in renewable energy equipment, that capital expenditure may be ‘eligible’ under the taxonomy. If it meets all environmental criteria, it becomes ‘aligned’ - and you can report it as part of your green investment share.
The annual report will show the percentage of your eligible and aligned income and spending in your annual report.
Why use Onestream for this?
With OneStream, you can integrate EU taxonomy directly in your financial processes. This includes not only the actual process, but the forecasting process as well. The workflow and security design can quickly be changed to accommodate this new style of reporting. And last, you can consolidate those inputs if needed, so that any amount flagged as intercompany will be eliminated.
At Finext, we’ve helped several organizations embed EU Taxonomy reporting directly into OneStream - ensuring compliance while improving data traceability and decision-making. Curious how this could work for your organization? Explore our demo or reach out - we’d love to show you how easy taxonomy reporting can be.
