The EU Taxonomy's Key Performance Indicators (KPIs): How to compute it right
As of January 2023, companies are required to report their alignment to the EU Taxonomy. With the introduction of EU Taxonomy’s Key Performance Indicators (KPIs) is an important step in the journey of sustainability reporting. In this blog, we understand what these KPIs are and how to report on them.
To understand the EU Taxonomy better, head to our blog where we have the EU Taxonomy explained in depth. Continue reading below to understand KPIs for the taxonomy.
What are EU Taxonomy KPIs?
The taxonomy consists of 3 EU Taxonomy KPIs- turnover, OpEx and CapEx for your activities.
Within the EU taxonomy, you need to report both on both eligibility and alignment in the following ways:
- Eligibility: The percentage of your KPIs related to the company’s taxonomy eligible activities, in other words the percentage with the potential of being aligned.
- Alignment: The percentage of your KPIs related to the taxonomy eligible activities which also fulfill the taxonomy criteria, and hence is aligned.
Who needs to report on KPIs?
The EU Taxonomy requires non-financial undertakings report on the KPIs. Financial undertakings, like banks and investors, need to report on their proportion of investments in companies with taxonomy-aligned activities. You can read more about these in our blog.
3 KPIs for the EU Taxonomy to Understand Companies’ Sustainability
There are 3 KPIs for the EU Taxonomy that need to be reported on:
Net turnover, meaning the amounts derived from sale of products and the provision of services after deducting sales rebates and value added tax and other taxes directly linked to turnover. Will for most companies mean that the total turnover used in taxonomy reporting is the same as stated in the revenue statement in the financial reporting.
2. CapEx – Capital expenditure
Total of investments in tangible and intangible assets during the financial year considered before depreciation, amortisation and any re-measurements associated with the taxonomy-eligible activities. More specifically, the taxonomy refers to the CapEx covering costs based on certain international financial reporting standards (IFRS) such as Property, Plant and Equipment, Intangibles etc. listed under “Extract of the CapEx definition from the Disclosures Delegated Act”
3. OpEX – Operational expenditures
- The OpEx used in the taxonomy differs from what most companies report in their financial statements. As it was initially discussed to exclude OpEx as a KPI from the taxonomy entirely, it could be thought of as “inclusion of parts of the OpEx” instead of “OpEx with exclusions”.
- The KPI aims to capture non-capitalised costs (i.e. those costs not captured by the CapEx KPI) which relate to investments in assets and processes. The OpEx is therefore a category of costs which “complements” CapEx in relation to investments and in this regard, together with CapEx, will give an indication of a company’s strategy for maintaining or improving environmental performance and resilience. More specifically, the OpEx refers to costs related to research and development, building renovation measures, short-term lease, maintenance and repair and any other direct expenditures.
The particularities of the EU Taxonomy KPIs you should have in mind when inputting your KPI metrics
When working to compute the EU Taxonomy KPIs for companies, keep the following in mind:
- Splitting the turnover, capex and opex between the different taxonomy-eligible activities can be tricky, especially the first year of reporting as this might diverge from your usual financial reporting.
- How the KPI’s differ from normal financial reporting (OpEx in particular, which is the KPI diverging the most from OpEx in common financial reporting, focusing on for instance research and development and maintenance and repair and excluding for instance overhead and cost of employees operating your assets)
How Celsia Can Help
Computing the right metrics for the EU Taxonomy Key Performance Indicators can be tricky, meticulous, and involve extensive manpower. Fret not! We are here to help you through your journey of sustainability reporting. At Celsia, our aim is to help make sustainability assessment fast, simple, and effective with our EU taxonomy reporting solution. Regardless of the size of the organization, we can help compute the EU Taxonomy KPIs for companies.
Celsia offers a high tech platform to make sustainability assessments for commercial organizations, investment firms, and banks. And this, without involving any third party company to evaluate!
Drop us a line at firstname.lastname@example.org and start your sustainability reporting journey.
ESG reporting: necessary reporting standards and requirements
Read this blog to know about different ESG reporting standards in the EU.
Principal Adverse Impact (PAI) indicators in SFDR
Read this blog to understand PAI indicators in relation to SFDR.