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The Taxonomy Regulation is the European classification system that determines when an economic activity is environmentally sustainable. It sets out six environmental objectives and four cumulative conditions. The Regulation does not require you to act sustainably: it requires you to be transparent about the extent to which your activities meet the criteria. The Omnibus I package has reduced the number of companies that must report and has substantially simplified the reporting itself.

The short answer

Regulation (EU) 2020/852 provides a single yardstick for green activities. Companies within the scope of the CSRD report what proportion of their turnover, capital expenditure and operating expenditure relates to taxonomy-aligned activities. Large companies that fall just outside the thresholds may report voluntarily.

Why this Regulation exists

The market for green finance grew faster than the definitions did. Every provider applied its own yardstick for sustainability. Comparison was impossible and the risk of greenwashing was considerable.

The Taxonomy Regulation solves that with a single common language. It forms part of the European Green Deal and is the foundation on which the CSRD and the SFDR build.

The Regulation has direct effect. It does not need to be transposed into Dutch law.

The six environmental objectives

Article 9 lists six objectives:

1. Climate change mitigation.
2. Climate change adaptation.
3. The sustainable use and protection of water and marine resources.
4. The transition to a circular economy.
5. Pollution prevention and control.
6. The protection and restoration of biodiversity and ecosystems.

The technical criteria for the first two objectives were adopted first. The criteria for the remaining four followed later. All six objectives have now been worked out in detail.

The four conditions

Article 3 imposes four requirements. An activity is environmentally sustainable only if it satisfies all four.

1. Substantial contribution. The activity contributes substantially to at least one of the six environmental objectives.
2. No significant harm. The activity does no significant harm to any of the other five objectives. This is the do no significant harm principle, elaborated in Article 17.
3. Minimum safeguards. The activity is carried out in accordance with the minimum safeguards of Article 18. These refer to the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights. The ILO fundamental labour standards and international human rights law form part of them as well.
4. Technical screening criteria. The activity meets the technical screening criteria that the European Commission has laid down for each activity in delegated regulations.

In practice the fourth condition is the heaviest. The criteria are detailed and differ from sector to sector. They contain threshold values for matters such as emissions, energy performance or use of materials.

Three kinds of activity

The Regulation distinguishes between activities that are sustainable in their own right, activities that enable other activities, and transitional activities.

• Low-carbon activities. Activities that emit little in themselves, such as renewable energy generation.
• Enabling activities. Activities that make emission reductions possible elsewhere, such as the manufacture of wind turbines. They must not lead to a carbon-intensive lock-in.
• Transitional activities. Activities for which no low-carbon alternative yet exists, but which are among the best performers in their sector.

Alongside alignment, the reporting also uses the category of eligibility. An activity described in the delegated regulations is eligible. Only once it meets all four conditions is it aligned.

Who has to report?

The reporting duty is set out in Article 8 and is tied to the group of companies that must publish sustainability information.

Since the Omnibus I package, which entered into force in March 2026, the position is as follows:

• Mandatory. Companies within the scope of the CSRD. These are companies with more than 1,000 employees on average and more than EUR 450 million in net turnover. Both thresholds must be met.
• Voluntary. Large companies with more than 1,000 employees that do not meet the turnover threshold may report if they wish.
• Out of scope. Listed small and medium-sized companies.

The first CSRD report covers financial years beginning on or after 1 January 2027. For companies established outside the EU, financial year 2028 applies.

Separate key figures apply to financial undertakings, such as the green asset ratio for banks.

What you report

You publish three key figures in the management report:

For many companies the CapEx ratio is the most revealing of the three. It shows how much you are investing in the transition, even where your current turnover is not yet aligned.

What Omnibus has changed

Simplification has taken two tracks.

The first track is the narrowing of the group of reporting companies, described above.

The second track is the simplification of the reporting itself, through Delegated Regulation (EU) 2026/73. Among other things, that amends the delegated regulation on the content and presentation of taxonomy information. The main points are these:

1. Materiality threshold. Activities representing less than 10 per cent of turnover, capital expenditure or operating expenditure need not be assessed for alignment.
2. Fewer data points. The number of mandatory data points falls sharply. For non-financial undertakings by roughly two thirds, and for financial undertakings by almost ninety per cent.
3. A single template. The reporting templates have been merged into a more manageable whole.
4. Adjusted DNSH criteria. Several criteria on pollution have been clarified or deleted.
5. Partial alignment. Companies may report that an activity partially meets the criteria. Previously it was aligned or not.

There is also a transitional arrangement for financial undertakings, which may report in less detail for the time being.

Why the taxonomy matters even without a reporting duty

If you fall outside the reporting duty, the taxonomy will still reach you. Banks and investors use the criteria to assess their own portfolios. They will therefore ask you for the data.

Bear in mind the protection introduced by the Omnibus package. If your company has no more than 1,000 employees on average, no more may be requested from it than the voluntary reporting standard for SMEs, the VSME. A contractual provision that goes further is not enforceable.

Subsidies and public procurement are also aligning more and more closely with the taxonomy criteria. See further our pages on the CSRD and on ESG reporting.

Frequently asked questions

Does the Taxonomy Regulation oblige me to become more sustainable?
No. The Regulation requires transparency, not a particular outcome. A low percentage is permitted. An incorrect percentage is not.

What is the difference between eligible and aligned?
Eligible means that your activity is described in the delegated regulations. Aligned means that it actually meets all four conditions.

May I publish taxonomy information voluntarily?
Yes. Large companies above the employee threshold may expressly choose to do so. If you publish voluntarily, the ordinary rules against misleading sustainability claims apply in full.

Would you like to know whether your activities fall within the taxonomy and how to report on them responsibly? The lawyers at Law & More in Eindhoven and Amsterdam will be glad to help, in Dutch or in English. You are welcome to contact us.