EU Taxonomy compliance and requirements, for green revenue and CapEx figures that stand up to scrutiny.

What it is

What is the EU Taxonomy and what is it used for?

The EU Taxonomy is the European Union's legal definition of an environmentally sustainable economic activity. Regulation (EU) 2020/852 sets the framework and the six environmental objectives; the European Commission writes the detailed technical screening criteria for each activity in delegated acts, advised by the Platform on Sustainable Finance. The result is a shared vocabulary that investors, lenders, companies and public authorities use when they call something green.

It is a disclosure tool, not a ban. Nobody is obliged to run Taxonomy-aligned activities. What the law requires of companies in scope is transparency: how much of their turnover comes from qualifying activities, and how much of their capital and operating expenditure goes into them. Financial market participants use the same criteria when they describe the environmental credentials of the products they offer.

For a finance director the practical challenge is proof. A percentage in the annual report has to rest on an activity-by-activity assessment, engineering data, safeguards checks and a clean link to the ledger.

Current text. Regulation (EU) 2020/852 of 18 June 2020 entered into force on 12 July 2020. The criteria sit in the Climate Delegated Act (applying from 1 January 2022), the Complementary Climate Delegated Act (from 1 January 2023), the Environmental Delegated Act for the other four objectives (from 1 January 2024) and the Disclosures Delegated Act. Commission Delegated Regulation (EU) 2026/73 of 4 July 2025, in force since 28 January 2026, simplifies those acts from 1 January 2026; for financial years that started in 2025, companies could keep the earlier rules. Who has to report also depends on the Accounting Directive scope, which the Omnibus changes to the CSRD have narrowed: confirm your position with your auditor or legal adviser.

Who it is for

Who needs EU Taxonomy compliance?

The obligation attaches to reporting duties, but the requests for Taxonomy data travel much further than the companies that publish it. Organisations come to Sterling for EU Taxonomy work from four starting points:

• Your investors and customers want the numbers. Asset managers, banks and large corporate buyers need eligibility and alignment data from the companies they fund or source from, whether or not you publish a sustainability statement yourself.
• A tender, a green bond or a loan depends on it. Green financing frameworks and public funding programmes often reference Taxonomy criteria, so the project has to show it meets them before the money is released.
• You are in scope of sustainability reporting. Article 8 applies to undertakings that publish sustainability information under the Accounting Directive, so your reporting obligation brings the Taxonomy disclosures with it.
• A European parent asks its subsidiaries. Group companies outside the EU are asked for activity lists, CapEx plans and safeguards evidence so that the consolidated KPIs can be calculated.

Requirements

What are the main EU Taxonomy requirements?

An activity counts as environmentally sustainable only when it passes four tests set in Article 3 of the Regulation, measured against the six objectives in Article 9. Companies then disclose the result as shares of turnover, CapEx and OpEx. The list is a plain-language map of the Regulation's requirement areas; the detailed criteria for each activity are in the delegated acts.

• Six environmental objectives: climate change mitigation, climate change adaptation, water and marine resources, the circular economy, pollution prevention and control, and biodiversity and ecosystems.
• Eligibility: identify which of your economic activities are described in the delegated acts at all.
• Substantial contribution: show that an eligible activity meets the technical screening criteria for at least one objective, including enabling activities.
• Do no significant harm: demonstrate that the same activity does not undermine any of the other objectives, against the criteria written for it.
• Minimum safeguards: carry out the activity in line with the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights, including the fundamental ILO conventions and the International Bill of Human Rights.
• Disclosure of KPIs: non-financial undertakings report the proportion of turnover, CapEx and OpEx associated with aligned activities; financial undertakings report their own indicators.
• Materiality threshold: since the 2026 simplification, activities whose combined turnover, CapEx or OpEx falls below 10% of the relevant total may be left out of the assessment.

Compliance process

How do you become EU Taxonomy compliant?

There is no application, audit or certificate. Compliance means making correct disclosures and being able to show how you reached them. Sterling runs the assessment with your team; the figures, and the decision to publish them, are yours.

1. 01
   Confirm your obligation and reporting boundary.Establish with your auditor and legal adviser whether you report, for which year and at what consolidation level, or which parties are asking you for data.
2. 02
   Gap analysis: map activities and test eligibility.List your revenue streams and investment projects, match them to the activity descriptions, apply the materiality threshold and record every judgement.
3. 03
   Test alignment against the criteria.For each eligible activity, check substantial contribution, the harm criteria and the minimum safeguards, and close the evidence gaps with engineering, procurement and HR.
4. 04
   Calculate and review the KPIs.Allocate turnover, CapEx and OpEx without double counting, complete the templates, then test the trail through internal audit and management sign-off.
5. 05
   Publish, then maintain.Answer auditor and investor questions from the file, and refresh the assessment each year as activities, investments and the delegated acts change.

Check the route before you sign. Nobody can certify Taxonomy alignment, so treat any offer of a Taxonomy certificate or seal with suspicion. Read the criteria for your activities in the delegated acts on EUR-Lex, and ask any adviser to show how its method answers each test. The certification buyer's checklist

Cost

How much does EU Taxonomy compliance cost?

The effort follows the number of activities you run, the objectives they touch and the state of the data behind them. A single-activity manufacturer and a diversified group with real estate, energy and transport assets are different projects.

Timeline

How long does EU Taxonomy compliance take?

Timing is set by your reporting calendar and by how quickly technical evidence can be found. As an estimate, a first eligibility and alignment assessment takes three to six months; the harm and adaptation tests usually take longest.

Share your reporting date at the start. We tell you which activities can be fully evidenced in time and which should be reported conservatively this year.

Your engagement

What your EU Taxonomy engagement includes

One team runs the programme end to end, under one all-inclusive proposal. Sterling does not certify, attest or validate Taxonomy disclosures; we build the assessment and the evidence with you. You choose the level of support: in Design™ (guided) your team does the work with our method, templates and reviews; in Drive™ (managed) our consultants carry the assessment for you. Either way, Sustain™ keeps it current after the first report, and Automate™ runs it in Effivity.

• Boundary, gap analysis and plan

  Reporting scope, activity list and owners agreed before the detailed work starts.

• Activity register and screening

  Each activity matched to the delegated acts, with the reasoning written down.

• Effivity ISO & GRC software

  Registers, evidence and actions in Effivity, included with the engagement at no additional cost.

• Training for everyone

  Internal auditor training, as applicable to your standard, and preferential Sterling Academy access, including complimentary awareness training for your people as part of the engagement.

• Internal audit and management review

  The KPI trail tested and findings closed before the figures are published.

• Disclosure readiness

  Templates completed and questions from your auditor and investors answered from the file.

Disclosure decisions remain with your organisation; your auditor and the competent authorities reach their own conclusions.

Often combined with

Standards organisations pair with EU Taxonomy

• AA1000AA1000 implementation and requirements: apply the AccountAbility Principles and SES, then prepare for AA1000AS v3 assurance by a licensed provider.
• B Corp CertificationB Corp certification made clear: the new B Lab Standards, Foundation Requirements, seven Impact Topics, the audit route and how Sterling prepares you.
• CBAMCBAM compliance and requirements explained: authorised declarant status, the 50-tonne threshold, verified embedded emissions and how Sterling helps you prepare.
• CDPCDP disclosure consulting: a complete, evidenced response on climate, forests and water, prepared with your team.
• CSDDDCSDDD compliance and requirements after Omnibus I: scoping, risk-based due diligence, complaints, monitoring and the 2029 start, delivered in one all-inclusive proposal.
• CSRD / ESRSCSRD and ESRS Sustainability reporting consulting: double materiality, ESRS disclosures and data prepared for limited assurance of your statement.