What does the EU Taxonomy mean to small and medium-sized companies?
Listed companies with fewer than 500 employees are not required to report their taxonomy score – not yet. But the EU is changing its requirements, amending the existing NFRD (Non-Financial Reporting Directive) to the proposed CSRD (Corporate Sustainability Reporting Directive) so that all companies with more than 250 employees and all listed small and medium-sized enterprises (except listed micro-enterprises) will be obliged to assess and report on their taxonomy score. We’ve also observed that – regardless of size – most companies recognize that using the Taxonomy to document their sustainability performance can boost their competitiveness, make them more attractive to investors and improve their borrowing terms.
Another reason for small and medium-sized company to calculate their score is to attract investments. For example, banks need to calculate their Green Asset Ratio for the EU Taxonomy, therefore they might require your score before giving you a loan.
So the Taxonomy appears to be on good its way to becoming the new default, the new normal – and early movers may start reap the benefits of it already now.
NFRD comes into force January 2022, requiring reporting on the previous year. CSRD is set to follow in 2024, in effect for 2023.