Step 1: Making a Substantial Contribution
The first step to complying with the EU Taxonomy is to make a substantial contribution to at least one of the six environmental objectives. An activity must meet certain TSCs in order to assert that it makes a substantial contribution to an environmental objective. These TSCs are tailored to each activity and objective pairing to ensure that the thresholds and conditions being met are relevant and appropriate.
Step 2: Doing No Significant Harm (DNSH)
If an activity makes a substantial contribution to one of the six environmental objectives, that same activity must at the same time do no significant harm to the remaining environmental objectives. The DNSH principle ensures that the economic activity being screened does not interfere with achieving other environmental objectives. Relevant and respective Technical Screening Criteria (TSC) are defined for each activity-objective pairing to determine whether or not an activity passes the DNSH criteria.
Step 3: Complying with Minimum Social Safeguards
The final step to determining your Taxonomy alignment requires companies to show that they adhere to minimum social safeguards (MSS) as a whole. As per Article 18 of the EU Taxonomy, means that you must either present, if available, or implement procedures that abide by the OECD Guidelines on Multinational Enterprises, the UN Guiding Principles on Business and Human Rights, and the ILO Core Labour Conventions.
Step 4: Calculating your financial KPIs
Once you have completed your alignment screening, the KPIs can be calculated. For each financial KPI (turnover, CapEx, and OpEx), you will need to report the percentage of total turnover, CapEx, and OpEx that is associated with EU Taxonomy-eligible activities and the percentage that is associated with EU Taxonomy-aligned activities.
Step 5: Completing your report and making disclosures
You are now ready to compile this information into the European Commission’s standard reporting template and make your disclosures. The EU standard reporting templates can be found in the Annexes of the Disclosures Delegated Act, and require all the eligibility and alignment details and information produced in the implementation steps outlined above.