EU Proposes Simplified Taxonomy Reporting to Reduce Burden on Companies

The European Commission has launched a public consultation from 26 February to 26 March 2025 on proposed amendments to the EU Taxonomy Regulation (Regulation (EU) 2020/852) that aim to simplify reporting requirements for companies while maintaining transparency in sustainable investments. The proposed changes, outlined in the Taxonomy Delegated Acts, aim to reduce administrative complexity and increase clarity for companies subject to sustainability disclosure requirements.

What is the EU Taxonomy?

The EU Taxonomy is a classification system that helps define which economic activities can be considered environmentally sustainable. It is a key tool in the EU’s Green Deal, which aims to channel investments into activities that truly contribute to environmental protection and climate goals.

To be considered sustainable under the EU Taxonomy, an economic activity must:

• Make a significant contribution to at least one of the six environmental objectives.

• Do no significant harm to any of the other objectives.

• Comply with minimum social and governance safeguards.

The six environmental goals are:

• Climate Change Mitigation – Reducing greenhouse gas emissions, such as investing in renewable energy or energy-efficient buildings.

• Climate Change Adaptation – Helping communities and businesses cope with climate risks, such as flood prevention infrastructure.

• Sustainable Use and Protection of Water & Marine Resources – Reducing water pollution and ensuring responsible water consumption.

• Transition to a Circular Economy – Promoting recycling, sustainable product design, and waste reduction.

• Pollution Prevention and Control – Reducing air, water, and soil pollution, including reducing the use of hazardous chemicals.

• Protection & Restoration of Biodiversity & Ecosystems – Supporting nature conservation, reforestation, and sustainable agriculture.

By setting clear technical screening criteria, the EU Taxonomy aims to prevent greenwashing (false sustainability claims) and help investors and companies make informed decisions about sustainable activities.

Key Amendments in the Proposal

The proposed amendments introduce several measures to make sustainability reporting simpler and more cost-effective, including:

• Reduced Reporting Scope – Companies will no longer have to assess and report on economic activities that are not financially material to their business, if they represent less than 10% of key financial indicators such as turnover, capital expenditures, or operating expenses.

• Streamlined Reporting Templates – The number of reported data points will be significantly reduced to minimize duplicative and complex reporting requirements.

• Clarifications of ‘Do No Significant Harm’ (DNSH) Criteria – The proposal simplifies the chemical assessment obligations under Appendix C by reducing the number of substances that companies must assess, potentially removing up to 10,000 substances from the reporting framework.

• Postponement of Certain Key Performance Indicators (KPIs) – Financial institutions will have more time to comply with certain sustainability-related metrics, with some requirements delayed until 2027.

Why These Changes Matter

• Less Burden on Businesses – The amendments reduce compliance costs and focus reporting efforts on high-impact environmental activities.

• Better Usability & Legal Clarity – Companies will find it easier to determine whether their activities meet EU sustainability standards.

• Stronger Alignment with Other EU Regulations – The changes support broader EU sustainability initiatives, including the Corporate Sustainability Reporting Directive (CSRD) and the Sustainable Finance Disclosure Regulation (SFDR).

Next Steps

The proposal is open for feedback until 26 March 2025, after which it will be further assessed by the European Parliament and the Council of the EU. If adopted, the new rules will take effect from 1 January 2026.

Conclusion

The Commission’s initiative reflects a balanced approach to sustainability reporting -maintaining transparency while reducing excessive regulatory burdens. These adjustments should improve the practical implementation of the EU Taxonomy, making it easier for companies to contribute to Europe’s green transition.

For more details, visit the official consultation page here.