EU Taxonomy Reporting: What to Disclose and How to Do It
EU Taxonomy reporting means disclosing what share of your turnover, capital expenditure (CapEx) and operating expenditure (OpEx) comes from activities the EU classes as environmentally sustainable. You first identify which of your activities the Taxonomy covers (eligibility), then test whether they meet its criteria (alignment), then report three percentages in a prescribed template. For the 2025 financial year, reported in 2026, you can choose between the older rules and the simplified ones introduced by the 2025 Omnibus delegated act. This guide explains both, step by step.
Key takeaways
Eligibility means an activity is described in the Taxonomy. Alignment means it also passes the technical screening criteria, the “do no significant harm” tests and minimum social safeguards.
You report three KPIs: turnover, CapEx and OpEx, each split into eligible and aligned shares.
Under the simplified rules, activities making up less than 10% of a KPI can be treated as non-material, assessed separately for each KPI.
For the 2025 financial year you may use either the simplified rules or the previous ones, but you must say which, and apply your choice in full.
Who must report is tied to the CSRD, and its scope is still moving, so check your status before building a process.
What the Taxonomy is, and what it is not
The EU Taxonomy is a classification system. According to the European Commission, it is a market transparency tool that helps direct investment towards activities needed for the transition. It does not forbid any investment, and it does not label a company as good or bad. Its job is to give investors, lenders and customers one shared definition of “environmentally sustainable”, which makes greenwashing harder.
The obligation to publish Taxonomy information comes from Article 8 of the Taxonomy Regulation. The Commission’s FAQ on the Taxonomy describes Article 8 as the provision that increases market transparency by requiring companies to give investors information on their activities. In practice, you meet it by including a Taxonomy section in your sustainability statement, which is part of your management report.
The Taxonomy covers six environmental objectives: climate change mitigation, climate change adaptation, water and marine resources, the circular economy, pollution prevention and biodiversity. Each has its own list of activities and criteria, which the Commission sets through delegated acts.
Eligibility vs alignment: the distinction that drives everything
Most confusion in Taxonomy reporting comes from mixing up these two terms.
Eligible: the activity appears in the Taxonomy’s lists. Being eligible says only that the framework can describe what you do.
Aligned: the eligible activity meets every requirement, so it can be counted as environmentally sustainable.
As Datia’s explainer puts it, eligibility signifies scope, while alignment confirms that the environmental and social criteria are met. Companies must disclose the share of revenue, CapEx and OpEx that is eligible and the share that is aligned.
A simple example: a manufacturer of heat pumps has eligible turnover from selling them. Whether that turnover is aligned depends on whether the products meet the technical thresholds, whether production does no significant harm to the other five objectives, and whether the company respects minimum safeguards on human rights, anti-corruption, taxation and fair competition.
Expect your aligned figure to be lower than your eligible figure, often markedly. That gap is normal and is not in itself a sign of poor performance. It is, however, the number analysts will look at.
The five steps of a Taxonomy assessment
The assessment follows a fixed sequence, set out in the Datia guide:
Identify eligible activities. Map your business lines, products and projects to the activity descriptions in the Taxonomy.
Test substantial contribution. For each eligible activity, check it against the technical screening criteria for the objective it contributes to.
Apply “do no significant harm” (DNSH). Show that the activity does not undermine the other environmental objectives. This is usually the most evidence-hungry step, because it draws on site-level data about water, waste, emissions and chemicals.
Check minimum social safeguards. This is tested at company level, not activity level.
Calculate and report the KPIs in the prescribed templates.
Two practical points. First, an activity can only be aligned if it passes steps 2 to 4 together. Second, keep an audit trail for each pass or fail, because your auditor or assurance provider will ask how you reached it.
The three KPIs
Non-financial companies report three ratios, each with eligible and aligned shares:
KPI | What it measures | Typical data source |
Turnover | Share of net revenue from eligible or aligned activities | Revenue ledger by product or service |
CapEx | Share of capital spending linked to eligible or aligned activities or to a plan to make them so | Fixed asset register, project approvals |
OpEx | Share of specific operating costs (such as maintenance, repair and short-term leases) linked to eligible or aligned activities | Cost centres, maintenance records |
The main trap is double counting. Each euro of turnover, CapEx or OpEx must be assigned to one activity only. The simplest control is to build the three KPIs from the same activity map, so a project cannot appear in two places.
Financial institutions use different KPIs, such as the green asset ratio for banks, and different templates. If you are a bank, insurer or asset manager, the logic is the same, but the data comes from your counterparties and investees.
What changed with the 2025 Omnibus simplification
The Commission’s Omnibus package, announced in February 2025, led to a delegated act that simplifies Taxonomy disclosures. It was adopted on 4 July 2025, published in the Official Journal on 8 January 2026 and entered into force on 28 January 2026. Its main features, according to the Commission’s questions and answers:
A 10% materiality threshold. Activities that together generate less than 10% of total turnover, CapEx or OpEx can be treated as non-material and left out of the eligibility and alignment assessment.
Assessment per KPI. Materiality is judged separately for each KPI. An activity can be non-material for turnover but material for CapEx, in which case it is excluded from one and included in the other.
Disclosure of what you excluded. You still report the proportion of non-material activities in the templates, and explain in your sustainability report why you consider them non-material.
Lighter templates. The Commission’s questions and answers describe the changes as a cut in red tape. One industry guide estimates the reduction in data points for non-financial companies at about 64%, though the exact figure depends on how you count.
For financial institutions, the same document notes a temporary opt-out until 31 December 2027. A bank can stop reporting detailed Taxonomy KPIs if it states in its management report that it does not claim its activities are associated with environmentally sustainable activities under the Regulation. The Trading Book KPI for banks is also postponed until 2028. For a view of how supervisors are treating bank disclosures, see our report on how the EBA cut the ESG reporting burden for large banks.
Old rules or new rules for the 2025 financial year?
Because the act applies from 1 January 2026, reports for the 2025 financial year, published in 2026, fall under a transitional provision. Per the Commission notice in the Official Journal, you may choose either the simplified rules or the pre-existing requirements. If you choose the old rules, you must apply them in full, including the more detailed templates and the original KPI methodology. Your disclosures must state which version you used, so the report stays auditable.
How do you choose? Three questions help:
Do you have prior-year data on the old templates? If so, staying on them gives clean year-on-year comparison.
Is more than 10% of any KPI spread across small activities? If the threshold would exclude very little, the simplified rules save less effort.
Are your lenders or investors asking for the detailed breakdown? Some will want it regardless of what the law now requires.
From financial year 2026, the simplified rules apply.
Who has to report
Taxonomy reporting sits on top of the Corporate Sustainability Reporting Directive (CSRD): companies that must publish a sustainability statement must include the Taxonomy information. Scope has been shifting. In May 2025, the Commission proposed a “stop the clock” measure postponing reporting for certain companies by two years, and a content proposal to exempt companies with annual turnover below EUR 450 million from mandatory Taxonomy reporting. Always check the current legislative position for your entity before committing budget, as scope and timetable have changed several times.
Two more points for readers in the UK and elsewhere outside the EU:
UK companies are not subject to the EU Taxonomy as such, but a UK group with significant EU activity, or an EU subsidiary within the CSRD’s scope, may be pulled in. Check the entity-level rules, not just the group’s home country.
Even outside scope, customers, banks and investors in Europe may ask for Taxonomy-style data. Voluntary reporting is a legitimate choice, as long as you label it clearly as such.
For the wider picture, read our guide to CSRD reporting: who must report, what to include and how to start, and our analysis of the Omnibus proposal and whether it is simplification or deregulation.
How Taxonomy reporting connects to CSRD and ESRS
The Taxonomy tells you what counts as sustainable. The ESRS tell you how to report your sustainability performance. The two need to line up in your report: your climate transition plan, your capital allocation and your Taxonomy CapEx plan should tell one consistent story.
Double materiality, the CSRD’s test for which topics to report, is a separate exercise from the Taxonomy’s 10% threshold. Do not reuse one for the other. A topic can be material in your ESRS assessment while an activity is non-material for Taxonomy purposes, and the reverse. Our explainer on double materiality in corporate sustainability reporting covers the CSRD side, and the history of the standards is in the path towards ESRS adoption.
A practical starting plan
If you are reporting for the first time, or rebuilding a process that was too manual, work in this order.
1. Decide your scope and version
Confirm whether you are in scope, which financial year you are reporting, and, for 2025, whether you use the old or simplified rules. Write the decision down.
2. Build the activity map
List every business line, product and major project, with its revenue, CapEx and OpEx. Match each to Taxonomy activity descriptions. The Commission’s EU Taxonomy Navigator includes a Taxonomy Calculator, an interactive educational tool for understanding the reporting obligations, and it is a good place to check an activity description.
3. Apply the 10% test, if you use the simplified rules
Run it per KPI. Record the excluded activities and the reason, since you must explain them in the report.
4. Collect evidence for alignment
For each remaining eligible activity, collect the data needed for the technical screening criteria and DNSH tests. Assign owners in operations, finance and procurement. Engineering, HR and legal teams usually hold the evidence, not the sustainability team.
5. Calculate, review and document
Compute the three KPIs, reconcile them with the financial statements, and keep a file showing every judgement. Plan for limited assurance, because the sustainability statement is assured.
6. Build in flexibility
The screening criteria are under revision, with a delegated act expected in 2026 according to the Commission’s sustainable finance news. Store your activity map and evidence in a structured way so thresholds can change without a rebuild.
Common mistakes
Treating eligibility as a result. A high eligible share says little. Analysts read the aligned share.
Mismatched denominators. Turnover, CapEx and OpEx must be reconciled with the audited financial statements.
Weak DNSH evidence. Assertions without site-level data will not survive assurance.
Ignoring minimum safeguards. This is a company-level test, and it needs your human rights and compliance policies to be documented.
Working in spreadsheets with no version control. With several sites and a yearly cycle, versions diverge fast.
A small first-time reporter has the same obligations as a large one. The 3-step guide from NorDESG notes that Taxonomy reporting can be complex and cumbersome for first-time reporters, especially smaller firms with limited resources, which is a reason to start early and keep the scope of your first pass tight.
Choosing tools for Taxonomy reporting
You can report from spreadsheets, and some companies with few activities do. Once you have several sites, many product lines or a need for audit trails, dedicated software starts to pay for itself. When comparing options, look for:
activity mapping against the current Taxonomy lists, with updates when the criteria change;
KPI calculation with a clear link to your general ledger or ERP;
evidence storage for DNSH and safeguards, with named owners and approval history;
exports in the official templates for both the old and simplified rules;
links to your ESRS data, so one dataset feeds both disclosures.
Large technology vendors are also adding reporting features to their cloud platforms. Our news piece on Microsoft’s expanded Sustainability Cloud shows where the market is heading.
Where Exereco can help
Exereco brings together sustainability news, ESG advisory, training, reporting software and networking for organisations working across Europe and Africa. If your team is deciding on scope, building an activity map or choosing a reporting approach, you can see what we offer at Exereco and talk to us about advisory support, software or training for your reporting team. We also track every Taxonomy and CSRD change in our news coverage, so you can see updates as they land.
FAQ
What is the difference between Taxonomy eligibility and alignment?
Eligibility means an activity is described in the Taxonomy, so it is within the framework’s scope. Alignment means it also meets the technical screening criteria, does no significant harm to the other objectives and complies with minimum social safeguards. You report both shares.
Which KPIs do non-financial companies report?
They report turnover, CapEx and OpEx, each split into eligible and aligned shares. Under the simplified rules, activities making up less than 10% of a KPI may be treated as non-material, and that is assessed separately for each KPI. The excluded proportion must still be shown in the templates.
Is Taxonomy reporting mandatory?
It is mandatory for companies within the CSRD’s scope, as part of their sustainability statement. Scope has been under revision since the 2025 Omnibus proposals, including a proposal to exempt companies under EUR 450 million in turnover, so check the current position for your entity. Companies outside scope may report voluntarily.
Can I use the old rules for the 2025 financial year?
Yes. For reports on the 2025 financial year published in 2026, you can choose the simplified rules or the previous requirements. If you choose the previous ones, you must apply them in full, and your report must state which version you used.
Do UK companies have to report under the EU Taxonomy?
Not as UK companies alone. The obligation arises through the CSRD, so it applies where an EU entity or a qualifying non-EU group falls within scope. Take advice on your group structure before assuming you are in or out.
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