Commission to cut EU Taxonomy red tape for companies

The European Commission has adopted a set of measures to simplify the application of EU Taxonomy. This will reduce the administrative burden for EU companies, thus enhancing EU competitiveness while preserving core climate and environmental goals.

The Taxonomy Regulation entered into force in 2020, and its reporting requirements apply since 2022. By providing a common sustainability reference point for financial and non-financial companies, the Taxonomy supports investments that contribute to a sustainable transition of the EU economy, in line with European Green Deal goals.

The main simplification measures include:

• Financial and non-financial companies are exempt from assessing Taxonomy-eligibility and alignment for economic activities that are not financially material for their business. For non-financial companies, activities are considered non-material if they account for less than 10% of a company’s total revenue, capital expenditure (CapEx) or operational expenditure (OpEx). Reducing this administrative burden will benefit companies, allowing them to focus on reporting and financing of their core business activities, and how this contributes to their transition efforts.
• In addition, non-financial companies are exempt from assessing Taxonomy alignment for their entire operational expenditure when it is considered non-material for their business model.
• For financial companies, key performance indicators like the green asset ratio (GAR) for banks are simplified, and they are granted an option not to report detailed Taxonomy KPIs for two years.
• Taxonomy reporting templates are streamlined by cutting the number of reported data points by 64% for non-financial companies and by 89% for financial companies.
• The criteria for ‘do no significant harm’ to pollution prevention and control related to the use and presence of chemicals are simplified.

Last July 4’s changes are adopted in the form of a Delegated Act amending the Taxonomy Disclosures, Climate and Environmental Delegated Acts. The Commission published the draft of this Delegated Act in February 2025 as part of ‘Omnibus I’ package, allowing stakeholders to provide feedback on the draft measures.

Next steps

The Delegated Act will now be transmitted to the European Parliament and the Council for their scrutiny. The changes will apply once the scrutiny period of 4 months, which can be prolonged by another 2-month period, is over. The simplification measures laid out in this Delegated Act will apply as of 1 January 2026 and will cover the 2025 financial year. However, undertakings are given the option to apply the measures starting with the 2026 financial year if they find this more convenient.

More information: European Commission