EU taxonomy climate reports of listed companies vary widely

The majority of listed companies in the Netherlands provide insight into the part of their business activities that has a major impact on the climate. According to European taxonomy regulations, these companies must classify this according to the same green language. However, the way this is done varies greatly.

As a result, comparisons of the efforts of Dutch companies on the climate are hardly possible anymore. This is stated in the KPMG report ‘Setting the baseline to transparency’, in which listed companies were measured for the first time in relation to the European taxonomy legislation and regulation that these organizations must comply with, which was introduced in July 2020.

Also read: “It’s done with chat boxes about sustainability and circularity”

Efforts that contribute

Making buildings more sustainable, investing in sustainable energy production and educating farmers to protect their crops from climate change; These are just a few examples of business activities that the EU identifies as efforts that can make a significant contribution to climate protection or adaptation to climate change. Last year, large Dutch listed companies were to publish an EU taxonomy climate report for the first time.

Read also: CSRD and ISSB put an end to standard soup in the field of sustainability

Taxonomy provisions

14 of the 34 listed companies surveyed realize part of their turnover with potentially climate-friendly activities in accordance with the taxonomy regulation. 23 companies are investing in this domain. At the same time, a third of companies do not explicitly state in their annual reports which activities fall under the taxonomy rules. 15 companies use the terminology from the regulation. The other organizations provide their own interpretation of their taxonomy reporting. Only six companies report specifically which environmental goal they contribute to. The length of taxonomy reports also varies considerably. From 241 words to over 3000 words. However, this is not an indication of the quality of reporting, because companies also describe what the EU taxonomy means without providing comprehensive insight into the results. Also the explanation for the calculation of the results is often missing.

Completely sustainable business operations

What is also striking is that the majority of listed companies do not link EU taxonomy reports and their Environmental, Social & Governance (ESG) strategy to a fully sustainable business operation. Only seven of the 34 companies describe in their annual report how the sustainability efforts comply with the rules. As a result, compliance with laws and regulations for the time being seems to be the main motive for the taxonomy reports.

Brand new taxonomy regulation

“Our research shows that the brand new European taxonomy regulation is still difficult for many companies to implement,” said Gijs de Graaff, Director Accounting Advice at KPMG. “The willingness to report along the lines of the green language is there. At the same time, the search for the right data and interpretation of laws and regulations is still a major challenge for many organizations. This ensures that every company interprets the EU taxonomy in its own way. This means that it is hardly possible to compare the efforts for the climate among listed companies. There is a great need for greater clarity so that the EU taxonomy becomes an effective tool for promoting activities that contribute to climate protection. ”

Also read: Are Dutch boards ready for the new ESG rules?

About EU taxonomy

The EU Taxonomy Regulation was created to support the transition to a climate-neutral Europe by allowing more capital to flow into sustainable activities. The regulation aims to increase transparency about sustainable business investment in order to both prevent greenwashing and provide society with reliable insight into the size of sustainable activities as part of companies’ turnover, capital and operating expenses.

Listed companies with more than 500 employees must indicate which part of their activities contributes to preventing or adapting to climate change. These European rules came into force in July 2020 and are constantly being expanded. From next year, for example, it must be added which part of the effort promotes the circular economy, prevents pollution or protects and restores biodiversity. Sustainable use and protection of water and other maritime resources are also covered by the Taxonomy Regulation.

About the research

In recent months, KPMG has examined and compared the annual reports of 34 listed companies such as Akzo, ASML, Heineken, Ahold, DSM, KPN, Philips, PostNL, Vopak, Boskalis, BAM, TomTom and Nedap to assess the extent to which EU taxonomy provisions are complied with.

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