On 4 July 2025, the European Commission adopted a delegated act simplifying EU Taxonomy reporting for financial and non-financial companies. Key changes include materiality-based exemptions, simplified KPIs for financial firms, streamlined reporting templates, and clarified criteria for “do no significant harm” related to pollution prevention. These measures aim to reduce the reporting burden while maintaining alignment with the EU’s sustainability goals. The new rules apply from 1 January 2026, with a one-year deferral option.
What is the EU Taxonomy and How Can Businesses Comply?
The EU Taxonomy is the EU’s official classification system for determining whether an economic activity qualifies as environmentally sustainable. It is a cornerstone of the EU Green Deal and aims to direct investments toward activities that contribute to the EU’s climate and environmental objectives.
To be considered Taxonomy-aligned, an activity must:
- Substantially contribute to at least one of the six environmental objectives set out in the Taxonomy Regulation:
- Climate change mitigation
- Climate change adaptation
- Sustainable use and protection of water and marine resources
- Transition to a circular economy
- Pollution prevention and control
- Protection and restoration of biodiversity and ecosystems
- Do no significant harm (DNSH) to any of the other five environmental objectives.
- Comply with minimum social safeguards, such as the OECD Guidelines for Multinational Enterprises, the UN Guiding Principles on Business and Human Rights, ILO core labour standards, and the International Bill of Human Rights.
- Fulfil detailed technical screening criteria as set out in the delegated acts.
Companies subject to the Corporate Sustainability Reporting Directive (CSRD) must assess which of their economic activities are eligible and aligned with the Taxonomy, calculate the proportion of turnover, CapEx, and OpEx associated with those activities, and report using the standardised templates.
Latest Update: Simplified EU Taxonomy Reporting Adopted
On 4 July 2025, the European Commission adopted a delegated act introducing major simplifications to the EU Taxonomy reporting obligations for both financial and non-financial companies. This follows a draft published in February 2025 under the Commission’s Omnibus legislative package and a round of public consultation.
Key simplification measures include:
- Materiality-based exemptions: Companies are exempt from assessing Taxonomy eligibility and alignment for economic activities that are not financially material. For non-financial companies, this includes activities accounting for less than 10% of total revenue, CapEx, or OpEx.
- OpEx alignment exemption: Non-financial companies are exempt from assessing Taxonomy alignment of their entire OpEx when it is non-material to the business model.
- Simplified KPIs for financial companies: Financial companies benefit from simplified KPIs (such as the Green Asset Ratio) and are granted a two-year grace period from reporting detailed Taxonomy indicators.
- Streamlined templates: The volume of required data points has been reduced by 64% for non-financial companies and 89% for financial companies.
- Simplified DNSH requirements: Criteria for “do no significant harm” in the area of pollution prevention and control—particularly regarding the use and presence of chemicals—have been clarified and simplified.
Next Steps and Applicability
The delegated act is now subject to review by the European Parliament and Council. A four-month scrutiny period applies, which can be extended by an additional two months. If no objections are raised, the act will enter into force.
The simplification measures will apply from 1 January 2026 for the 2025 financial year. Companies may opt to defer implementation by one year, applying the changes from the 2026 financial year instead.
Read more
See here for the Commission’s July 4 press release:
https://ec.europa.eu/commission/presscorner/detail/en/ip_25_1724
The provisional version of the delegated act is available here: