The EU taxonomy is an instrument that creates verifiable criteria to enable economic activities to be classified as ecologically sustainable. This information is used by investors to better assess how sustainable companies work in which they (want to) invest. This is intended to bring financial flows into line with political sustainability requirements and direct investments to where a positive contribution to climate and other environmental goals can be achieved. The taxonomy does not list negative activities, nor does it classify unrecorded activities as negative.

The taxonomy regulation affects companies that fall under the NFRD (future CSRD), as well as financial companies such as large banks, asset managers, investment firms or insurance and reinsurance companies.
In 2023 (according to the NFRD), companies that are required to report must report their taxonomy-compliant economic activities for environmental goals 1 and 2 for the 2022 financial year. From 2024, the reporting obligations for environmental goals 3 - 6 are to follow – the taxonomy for these goals must already be shown from 2023. Financial companies regularly report the proportion of the financial product's investments in taxonomy-compliant activities, based on the company's primary information.

Companies must report what percentage of their economic activities can be classified as ecologically sustainable (= taxonomy-compliant) according to the Taxonomy Ordinance. To do this, the appropriate percentage of sales, capital expenditures and operating expenses must be reported. In order to be able to designate an economic activity as taxonomy-compliant, three criteria must be met cumulatively: The business activity must first make a substantial contribution to at least one of the environmental goals. Meanwhile, the business activity must not significantly impair the achievement of the five other environmental goals (Do-No-Significant-Harm). In addition, the business activity must comply with the minimum protection for occupational safety and human rights (Minimal Social Safeguards).

The EU taxonomy is a tool to influence investment decisions in favour of more sustainable economic activities and puts more focus on the strategic component of sustainability reporting. The identification of taxonomy-compliant activities provides additional information about the sustainability performance in the core business of companies. Companies not only have to transparently communicate their taxonomy compliance, but also have the opportunity to strategically expand their demonstrably sustainable economic activities and benefit from easier capital procurement.

While the EU taxonomy represents a standardized set of rules for examining and comparing sustainable economic activities, a sustainability strategy is at best tailored precisely to the circumstances and fields of action of a company.
Nevertheless, the taxonomy can be easily embedded in your own sustainability strategy. Conversely, existing measures of a sustainability strategy can be used to optimize the taxonomy potential.
Depending on the business area, the sustainability strategy can even be well aligned with the specifications of the taxonomy.