NEWS     28.08.2025

Sustainable Business – European Union Taxonomy 2025

 

The European Union (EU) has established a legal framework that identifies which economic activities can be considered environmentally sustainable, also known as the EU Taxonomy. First adopted in 2020 as part of the EU’s wider sustainability agenda, the Taxonomy’s objective is to provide clarity for businesses and investors, promote sustainable investment, and ensure that environmental objectives are met in a verifiable way.

The Taxonomy defines six key environmental objectives:

  • climate change mitigation,
  • climate change adaptation,
  • sustainable use and protection of water and marine resources,
  • transition to a circular economy,
  • pollution prevention and control,
  • the protection and restoration of biodiversity and ecosystems.

An economic activity is considered sustainable if it contributes significantly to at least one of these objectives, does not cause substantial harm to the others, and meets minimal social standards, including labour and human rights.

Beyond listing sustainable activities, the Taxonomy provides a structured mechanism for evaluating economic operations. Companies evaluate their activities using technical screening criteria for each environmental objective, determining the proportion of their turnover, capital expenditure, and operating expenditure that aligns with these standards.

The process requires detailed data collection, often involving supply chain audits, production process evaluation, and environmental performance monitoring. By quantifying the proportion of sustainable activities, companies can demonstrate compliance in a verifiable way.

The Taxonomy is closely linked to reporting obligations under the Non-Financial Reporting Directive (NFRD) and its successor, the Corporate Sustainability Reporting Directive (CSRD). Companies falling under these directives must disclose how and to what extent their activities are sustainable, and specify the proportion of turnover, capital expenditure, and operating expenditure related to activities that comply with Taxonomy.

For investors, the Taxonomy provides a common reference point for identifying real sustainable investments. It allows them to compare companies and investment opportunities on a standardised basis, rather than relying on general and/or self-declared “green” activity claims. Companies that can clearly prove they meet its standards are more likely to attract financing and partnerships from investors who prioritize environmental responsibility.

The reporting process can also highlight areas where a company’s operations could be improved – from supply chains and production methods to products and services. In this way, it not only promotes transparency for investors but also encourages businesses to improve their environmental performance and prepare for future regulatory changes.

In 2025, the European Commission introduced amendments to simplifying reporting as part of the Omnibus Simplification Package, addressing concerns from businesses about the administrative burden. Under the new rules, companies can exclude activities that represent less than 10% of their turnover from reporting, and the number of required data points has been significantly reduced. These changes will apply from January 1st, 2026, covering the 2025 financial year, although companies have the option to delay their application until the 2026 report.

Overall, the EU Taxonomy has become a key element of the European approach to sustainability. Complying with its principles is more than just meeting regulatory requirements – it is a smart strategy for companies that are willing to remain competitive as sustainability becomes the global standard. The 2025 updates make it easier to comply with regulations, provide clear guidance on aligning business activities with environmental objectives, and guide investors in identifying truly sustainable opportunities.

 

Grzegorz Kłodkowski