Authors: Petr Opluštil, Lívia Djukić
On 5 April 2023, the European Commission published the long-awaited draft technical screening criteria for the remaining 4 environmental objectives of the EU Taxonomy (the Taxonomy Environmental Delegated Act – the “Delegated Act”). What is their purpose and what activities do they apply to?
The EU Taxonomy is a classification system that helps companies and investors to identify sustainable economic activities and subsequently make sustainable investment decisions. The EU Taxonomy sets out four basic conditions that an economic activity must meet to qualify as environmentally sustainable:
So far, technical screening criteria have only been set for the first two environmental objectives – climate change mitigation and climate change adaptation. The Delegated Act is intended to establish technical screening criteria for the four other environmental objectives, which are:
The Delegated Act aims to increase the transparency of the fourth condition of the EU Taxonomy, to mitigate the risk of potential greenwashing and to unify the concept of which specific activities qualify as environmentally sustainable.
The draft Delegated Act specified the technical criteria for selected economic activities in the sectors of manufacturing, water supply, sewerage, waste management and remediation, construction and civil engineering, disaster risk management, accommodation activities, information and communication, and environmental protection and restoration.
Specific economic activities within each sector have been identified as having the potential to make a substantial contribution to (one or more) environmental objectives. Whether the technical criteria for specific economic activities could be developed without further delay was also an important factor. Certain economic activities (such as agriculture, forestry or fishing) could not be easily incorporated into the Delegated Act and will be subject to further assessment.
The individual technical screening criteria are set out in the annexes to the Delegated Act. A separate annex has been drafted for each area and contains a definition of the economic activities concerned (including the relevant NACE codes) for which it provides specific technical screening criteria to achieve the objectives under the Delegated Act.
The draft Delegated Act (here) has been opened for comments since its publication; the comment procedure runs until 3 May 2023. The European Commission will then evaluate the comments received and finalise the technical criteria. Their final version should be ready in June 2023. The Delegated Act is expected to come into force on 1 January 2024.
The Delegated Act is another regulation in a series of regulations under the EU Taxonomy. Companies wishing to secure green financing for their activities, or which will sooner or later be subject to non-financial reporting obligations, will be required to indicate the extent to which their activities are sustainable according to the EU Taxonomy and whether they comply with the technical screening criteria set out in Delegated Act or another relevant regulation. However, other companies not directly affected by non-financial reporting will also have to comply with the new sustainability rules – whether as part of their supply chain, when filing applications for sustainable finance or for other business reasons.
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