What Is the EU Taxonomy and Does It Still Matter Post Omnibus?
The Omnibus may have reduced reporting obligations for some companies, but the EU Taxonomy remains a valuable framework for evaluating sustainability performance, supporting financing discussions, and assessing transition readiness
Companies across Europe have spent the last several years preparing for EU sustainability reporting requirements. As the Omnibus package simplifies these requirements and narrows the scope of mandatory reporting, many organizations are now asking a new question: does the EU Taxonomy still matter?
The short answer is yes.
While the Omnibus reduces the number of companies required to disclose EU Taxonomy metrics, the EU Taxonomy remains a cornerstone of the EU sustainable finance framework. More importantly, its relevance extends well beyond mandatory reporting. It provides a common framework for assessing the environmental sustainability of economic activities and can support decisions around investment, capital expenditure and sustainable finance.
This FAQ explains what the EU Taxonomy is, how it has changed, and why organizations may still benefit from an EU Taxonomy assessment even when they are no longer subject to mandatory reporting.
What is the EU Taxonomy?
The EU Taxonomy is the European Union’s classification system for environmentally sustainable economic activities. It establishes a common framework for determining whether specific economic activities can be considered environmentally sustainable according to detailed technical criteria.
The framework covers six environmental objectives:
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- Climate change mitigation
- Climate change adaptation
- Sustainable use and protection of water and marine resources
- Transition to a circular economy
- Pollution prevention and control
- Protection and restoration of biodiversity and ecosystems
An activity is considered EU Taxonomy-aligned when it:
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- Makes a substantial contribution to at least one of the six environmental objectives
- Does no significant harm (DNSH) to the remaining objectives
- Meets minimum safeguards
- Satisfies applicable technical screening criteria
Together, these requirements create a structured, activity-level framework for assessing environmental sustainability rather than relying on broader company-level sustainability commitments alone.
Why is the EU Taxonomy Important?
For many organizations, the EU Taxonomy first emerged as a reporting requirement. However, its practical applications extend much further.
It Supports Sustainability Reporting
Organizations within the scope of CSRD reporting are also subject to Article 8 Taxonomy disclosures. These companies disclose the proportion of their turnover, capital expenditures (CapEx), and operating expenditures (OpEx) associated with Taxonomy-eligible and Taxonomy-aligned activities.
This provides concrete, financially specific information on the extent to which a company’s activities and investments meet the EU Taxonomy criteria for environmental sustainability.
It Creates a Common Language for Sustainable Finance
The EU Taxonomy provides companies, investors, lenders, and other financial market participants with a common classification system for environmentally sustainable economic activities.
EU Taxonomy assessments can support a range of financing and investment-related use cases, including:
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- Green bond and green loan financing
- Assessment of transition-related investments
- Investment screening and portfolio analysis
- Private equity portfolio assessments
- Capital allocation and investment planning
- Transaction analysis where Taxonomy eligibility or alignment is relevant
By providing a common framework and defined technical criteria, the EU Taxonomy can support more consistent conversations between companies and capital providers about the environmental characteristics of economic activities and investments.
It Can Remain Relevant Even Outside CSRD Scope
A company does not need to be subject to mandatory reporting requirements to benefit from an EU Taxonomy assessment.
Organizations may still receive requests for Taxonomy-related information from investors, lenders, private equity owners, prospective buyers or other financial stakeholders. Taxonomy assessments can also be undertaken voluntarily where the information is relevant to financing or investment decisions.
In these situations, understanding EU Taxonomy eligibility and alignment can help businesses respond to information requests, evaluate financing and investment opportunities, and provide more structured information about the environmental characteristics of their activities and planned investments.
How Did the Omnibus Package Change EU Taxonomy Reporting?
The Omnibus reforms have significantly changed the EU sustainability reporting landscape and, by extension, the number of companies required to report under Article 8 of the EU Taxonomy Regulation.
Fewer Companies Are Subject to Mandatory Reporting
Mandatory EU Taxonomy disclosures are linked to the scope of sustainability reporting under the Accounting Directive. The narrowing of that scope has therefore substantially reduced the number of organizations required to publish Article 8 Taxonomy disclosures.
Under the revised rules, the principal EU reporting threshold applies to undertakings with more than 1,000 employees and net annual turnover exceeding €450 million. Companies should nevertheless assess the applicable rules carefully, including consolidation, financial-sector and non-EU undertaking provisions.
Reporting Requirements Have Been Simplified
The EU Taxonomy Simplification Delegated Act introduced several measures intended to reduce reporting complexity, including:
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- A financial-materiality exemption allowing non-financial undertakings not to assess activities that cumulatively account for less than 10% of the denominator of the relevant turnover, CapEx or OpEx KPI
- An option for non-financial undertakings not to report the OpEx KPI where OpEx is not material to their business model, subject to specified disclosures
- Streamlined reporting templates, reducing the number of data points
- Targeted simplification of certain pollution-related Do No Significant Harm criteria
These changes are designed to reduce the reporting burden while preserving the framework’s core objectives.
Additional Simplifications May Still Be Coming
Further simplification is pending: In March 2026, the Commission proposed broader revisions to the EU Taxonomy’s Technical Screening Criteria and Do No Significant Harm (DNSH) requirements. The proposed revisions cover most activities under the Climate and Environmental Delegated Acts, as well as the generic DNSH appendices
The Commission initially indicated it planned adoption by summer 2026. However, as of 12 November 2026, these revisions remain pending. Their final content, adoption date and application timetable remain subject to confirmation.
Does Omnibus Make the EU Taxonomy Less Important?
No. The Omnibus is primarily a simplification initiative, not a departure from the EU’s sustainable finance objectives. While it reduces reporting obligations for many companies, it maintains the EU Taxonomy as a cornerstone of the sustainable finance framework and a common reference point for identifying environmentally sustainable economic activities.
In practice, the EU Taxonomy continues to provide a structured framework for assessing the environmental sustainability of economic activities and investments, including:
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- Environmental sustainability and Taxonomy alignment
- Transition-related activities and investments
- Capital expenditure plans
- Sustainable financing opportunities
- Portfolio alignment and exposure
- Readiness for sustainable finance transactions
As a result, the EU Taxonomy be used not only as a reporting framework, but also as a strategic tool to assess business activities and financing opportunities.
Related reading: “What the EU Taxonomy Is Revealing About Corporate Transition Readiness” explores how EU Taxonomy assessments can provide insight into a company’s transition preparedness and future sustainability performance.
When Should Companies Conduct an EU Taxonomy Assessment?
An EU Taxonomy assessment can be particularly relevant when organisations:
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- Need to Meet Article 8 Reporting Requirements: Companies subject to mandatory EU Taxonomy reporting may need to assess which economic activities are Taxonomy-eligible and Taxonomy-aligned and calculate the relevant turnover, CapEx and OpEx KPIs.
- Are Exploring Green Financing Opportunities: Organizations considering green bonds, green loans, or other sustainable finance instruments may use EU Taxonomy screening to assess eligible activities and investments and support discussions with lenders and investors.
- Are Planning Significant Capital Investments: Companies planning investments in activities covered by the EU Taxonomy may benefit from assessing whether planned CapEx is Taxonomy-eligible and whether it meets the criteria for Taxonomy alignment.
- Manage Investment Portfolios: Investors, private equity firms and portfolio companies may use the EU Taxonomy as a common framework for assessing the environmental characteristics and alignment of economic activities across investments and identifying potential transition or investment opportunities.
- Receive Investor or Lender Requests: Companies outside mandatory reporting scope may still receive requests for EU Taxonomy-related information from investors, lenders, or other financial market participants that use Taxonomy data in their own investment, financing or reporting processes.
- Are Preparing for Financing or Transaction: An EU Taxonomy assessment can provide additional insight during acquisitions, divestitures, refinancing, capital raising, or other transactions where the environmental characteristics of assets, activities or planned investments are relevant to the transition.
How Can Companies Get Started With an EU Taxonomy Assessment?
A meaningful EU Taxonomy assessment goes beyond determining reporting requirements. It requires organizations to map their economic activities against the Taxonomy, assess eligibility, apply the relevant technical screening criteria, evaluate Do No Significant Harm (DNSH) requirements and minimum safeguards, and determine which activities and investments can be considered Taxonomy-aligned.
Whether the objective is regulatory reporting, sustainable finance, investment planning or transaction preparedness, a structured assessment can provide a clearer view of current eligibility and alignment, identify data or performance gaps, and highlight investments that could contribute to greater alignment over time.
Learn More About EU Taxonomy Assessments
The EU Taxonomy continues to provide an important framework for assessing environmentally sustainable economic activities, even as reporting requirements evolve.
Whether you are preparing for Article 8 reporting, evaluating sustainable financing opportunities, assessing planned investments, or responding to investor requests, ISS-Corporate can help you assess EU Taxonomy eligibility and alignment and translate the findings into decision-useful insights for reporting, financing and investment planning.