Non-financial companies are subject to new reporting obligations within the NFRD scope because of the EU green taxonomy regulations. From the calculation of the imposed key performance indicators to the preparation of the sustainability report, below are a few guidelines to assist you.
Details of the new quantitative and qualitative Key Performance Indicators (KPIs) to be disclosed within the NFRD framework are indicated in the delegated acts of the Taxonomy Regulation on climate change mitigation and adaptation, published in July 2021. Since then, the companies concerned have been busy contacting their different business units to collect and centralize the required information needed to calculate these indicators.
As of January 1st, 2022, non-financial companies are expected to identify and classify all their activities and indicate whether they are taxonomy-eligible or not, with regards to two of the six environmental objectives: climate change mitigation and adaptation. Following this initial step, the three KPIs: % of turnover (CA), % of capital expenditure (CapEx) and/or % of operating expenditure (OpEx) have to be assigned to each activity.
Article 8 of the Taxonomy Regulation specifies that it is also necessary to describe the nature of the activities, making a clear distinction between those that are “transitional” or “enabling“, without omitting to specify which objectives they contribute to.
Despite this apparent simplification, a methodical and rigorous approach is necessary in order to avoid any error or accusation of greenwashing. This is particularly the case for activities that contribute towards more than one environmental objective; in this context, companies are expected to disclose this information and should be particularly vigilant, not to count the turnover generated for this activity more than once.
As of January 2023, the publication of KPIs will be mandatory for all overarching objectives. This implies calculating not only the percentage of taxonomy-eligible activities, but also, that of taxonomy-aligned activities for all the six objectives (climate change mitigation and adaptation, water and marine resources protection, circular economy, waste recycling, pollution reduction and ecosystem protection).
In anticipation of this second disclosure milestone, the delegated acts concerning the second set of screening criteria concerning the objectives 3 to 6, is expected to be published in the upcoming weeks. In order to successfully apply this calculation methodology, several essential advisory tools are at your disposal:
As an expert in the creation of legally-binding and financial documents, and thanks to its network of partners, Pomelo-Paradigm can assist you with your sustainability reporting and document formatting within the NFRD scope. Contact us for a free sustainability evaluation.