The European Commission has announced the adoption of measures to simplify the EU Taxonomy, aiming to reduce administrative burdens on companies. These changes significantly decrease the number of datapoints required in reporting templates and exempt companies from assessing taxonomy alignment for non-material activities.
This initiative is part of a broader effort by the EU Commission to lessen administrative and reporting demands on businesses. The Taxonomy is among the first sustainability reporting regulations addressed in the Commission’s [Omnibus I package](https://www.esgtoday.com/eu-to-exempt-80-of-companies-from-csrd-sustainability-reporting-requirements/), which was unveiled in February. The updated rules will take effect at the start of 2026, impacting the 2025 financial year.
The EU Taxonomy is integral to the EU Action Plan on Sustainable Finance, providing a classification system for economic activities that contribute to at least one of six defined environmental objectives while ensuring no significant harm to others. These objectives include climate change mitigation, climate change adaptation, sustainable use and protection of water and marine resources, transition to a circular economy, pollution prevention and control, and protection and restoration of biodiversity and ecosystems.
The Taxonomy [came into effect in 2022](https://www.esgtoday.com/eu-council-clears-eu-taxonomy-rules-for-climate-for-implementation-in-january-2022/) with disclosure requirements for climate change mitigation and adaptation, based on the EU Taxonomy Climate Delegated Act. The remaining four objectives will apply from the beginning of 2024, based on the Environmental Delegated Act.
A key change introduced is the exemption from assessing taxonomy eligibility and alignment for non-material activities. For non-financial companies, activities are deemed non-material if they account for less than 10% of revenue, capex, or operating expenses. For financial companies, non-materiality refers to financial assets accounting for less than 10% of loans and investments financing specific economic activities.
The updated regulation also allows non-financial companies to forgo assessing the taxonomy eligibility and alignment of total operating expenditure if it is not material. Companies need only report the total value of their opex and explain its non-materiality.
Additionally, the regulation reduces reporting datapoints by 64% for non-financial companies and 89% for financial companies. Other simplifications include changes to the green asset ratio (GAR) requirements for financial companies and simplified “Do No Significant Harm” criteria for pollution prevention and control.
The changes are subject to a four-month scrutiny period by the European Parliament and Council, potentially extendable by two months. Maria Luís Albuquerque, Commissioner for Financial Services and the Savings and Investments Union, stated, “Today we take a decisive step towards a more growth-friendly, usable and proportionate sustainable finance framework. Our measures simplify the application of the EU Taxonomy and strike the right balance between reducing excessive administrative burden for our companies, while keeping our longer-term goals in focus, including the transition to a sustainable economy.”
For further details on the proposed changes, [click here](https://finance.ec.europa.eu/publications/commission-delivers-set-simplification-measures-implementing-eu-taxonomy-sustainable-economic_en).
