Insights into the first EU Taxonomy disclosures of 275 European non-financial undertakings
The EU Taxonomy is a work-in-progress and so are companies’ disclosures, writes Conor Holland , ESG Director at KPMG Ireland .
In this first year of the EU Taxonomy reporting, disclosures were required by companies falling under the Non-Financial Reporting Directive (NFRD). Our report brings insights from 275 European large public-interest entities’ EU Taxonomy disclosures that could further refine and strengthen your EU Taxonomy reporting for the coming year. The EU Taxonomy remains a work-in-progress and so are companies’ disclosures.
2021 EU Taxonomy-eligible activities
61% of the companies identified EU Taxonomy-eligible turnover, covering a range of economic activities, but that does not mean that their revenue-generating activities are environmentally sustainable (EU Taxonomy-aligned). This will be indicated in next year’s disclosure on the alignment of economic activities.
79% of the companies reported EU Taxonomy-eligible Capital Expenditure (‘CapEx’) and 60% of the companies reported EU Taxonomy-eligible Operating Expenditure (‘OpEx’) of more than 0 percent. Out of the remaining 40% of the companies that haven't disclosed EU Taxonomy-eligible OpEx, 14 % have chosen not to disclose this Key Performance Indicator (KPI) and applied the materiality exemption.
Qualitative information
Due to limited guidance and no existing best practice, disclosures relating to 2021 varied from a concise paragraph in the back of the annual report to extensive sections with over 10,000 words. We expect that disclosures will become more comparable over time as more guidance is presented, more examples are available, reporting timelines allow for better preparation and governance structures and (specific) processes are implemented or improved.
ESG strategy
Most of the companies made no explicit link between the EU Taxonomy disclosures and the company’s broader sustainability and reporting strategy. This is expected to be more aligned and interconnected over time.