EU Taxonomy Alignment
EU Taxonomy alignment determines what proportion of your revenue, capital expenditure, and operating expenditure relates to economic activities that are environmentally sustainable. It is mandatory for CSRD companies and feeds directly into investor green finance calculations.
EU Taxonomy alignment determines what proportion of your revenue, capital expenditure, and operating expenditure relates to economic activities that are environmentally sustainable. Step 1 — Eligibility: Determine which of your economic activities are covered by the EU Taxonomy (i.
Eligibility vs alignment — the two-step process
Step 1 — Eligibility: Determine which of your economic activities are covered by the EU Taxonomy (i.e. listed in the Delegated Acts). An activity is eligible if it appears in the Taxonomy, regardless of whether it meets the sustainability criteria.
Step 2 — Alignment: For eligible activities, assess whether they meet the Technical Screening Criteria (TSC) for Substantial Contribution to at least one objective, AND the Do No Significant Harm (DNSH) criteria for all other objectives, AND the Minimum Social Safeguards.
Only activities meeting all three tests are taxonomy-aligned. Companies must disclose both eligible % and aligned % for each of the three KPIs.
The three KPIs you must calculate
Revenue KPI: What proportion of your turnover comes from products and services associated with taxonomy-eligible/aligned activities?
CapEx KPI: What proportion of your capital expenditure relates to assets or processes associated with taxonomy-eligible/aligned activities, or is part of a plan to expand/transition to aligned activities?
OpEx KPI: What proportion of relevant operating expenditure (R&D, maintenance, short-term leases) relates to taxonomy-eligible/aligned activities?
All three KPIs must be disclosed separately for eligible and aligned, and separately for each environmental objective.
The six environmental objectives
1. Climate change mitigation — the most developed objective with Technical Screening Criteria for 100+ activities.
2. Climate change adaptation — activities that reduce physical climate risk.
3. Sustainable use and protection of water and marine resources.
4. Transition to a circular economy.
5. Pollution prevention and control.
6. Protection and restoration of biodiversity and ecosystems.
Criteria for objectives 3–6 are less developed than 1–2. Many companies currently calculate alignment only for objectives 1–2 and report low alignment for 3–6 due to limited TSC coverage.
Frequently asked questions
Do all CSRD companies need to report EU Taxonomy KPIs?
Yes — EU Taxonomy disclosure is mandatory for all companies subject to CSRD/NFRD. The three KPIs (Revenue, CapEx, OpEx) must be included in your CSRD report.
What is the difference between eligible and aligned?
Eligible means the activity appears in the Taxonomy — it could potentially be sustainable. Aligned means the activity actually meets the Technical Screening Criteria and DNSH tests — it is sustainably performed. Aligned is always a subset of eligible.
Our alignment is very low — is this a problem?
Low alignment is common, particularly in sectors where TSC are not yet developed (objectives 3–6) or where activities require significant transition investment. Disclosure of low alignment with a clear transition plan is better than inflating the figure. Greenwashing enforcement is increasing.