The climate crisis is one of the greatest challenges of our time. Every industry, from finance to retail, must do its part in order to mitigate the effects and build a more sustainable future. Aligning business activity with climate and environmental objectives is essential in achieving this goal. To help companies achieve this goal, a taxonomy alignment framework has been developed. This eu taxonomy aligned guide will explain what taxonomy alignment is and how it can be used to ensure companies are taking appropriate measures that contribute positively towards mitigating climate change and other environmental objectives.
Taxonomy alignment can be defined as an economic activity that meets certain criteria based on environmental, social, and governance (ESG) principles in order to make a substantial contribution towards at least one of the seven climate or environmental objectives (targets). These objectives are set out by the European Commission's Taxonomy Regulation which aims to provide consistent definitions across Europe for eu taxonomy aligned activities that contribute positively towards those targets.
In order for an activity to qualify as eligible for taxonomy alignment, it must meet three criteria: 1) Make a substantial contribution; 2) Do no significant harm; 3) Meet minimum standards on human rights and labour standards.
The first criterion requires that the eu taxonomy aligned activity must make a substantial contribution towards at least one of seven main climate or environment objectives: adaptation/resilience; mitigation/reduction of greenhouse gas emissions; clean energy transition/renewable energy sources; circular economy excluding waste; pollution prevention & control including air quality & noise reduction; water management & protection including access to water resources & aquatic ecosystems protection & restoration; biodiversity protection & conservation including habitat restoration/protection/creation. In addition, any economic activities related to listed activities may also be included if they meet these criteria as well.
The second criterion requires that any economic activities cannot have significant harm done by them when considering all six ESG-related factors such as eu taxonomy aligned health impacts on humans or animals caused by chemical or physical agents arising from pollution etc., biodiversity loss due excessive resource use etc., land-use changes leading degradation etc., generation of hazardous substances leading contamination etc., negative impacts on local communities due displacement etc., impact on global warming causing extreme weather events etc.. The ‘do no significant harm’ requirement therefore applies across all six ESG factors when determining whether an activity qualifies for taxonomy alignment eligibility or not.
Finally, the third criterion requires meeting minimum standards related to human rights and labour conditions such as compliance with International Labour Organization conventions , proper workplace safety measures, respect for freedom of association , prohibition against child labour, discrimination against employees based on gender race religion disability age sexual orientation marital status political opinion trade union membership pregnancy maternity leave childcare obligations other family commitments. It also includes transparency requirements such as disclosure about eu taxonomy aligned remuneration board composition corporate culture policies procedures whistleblowing channels anti-corruption compliance programs. All these requirements need to be fulfilled in order for businesses’ activities to qualify under EU Taxonomy Regulation .
Taxonomic Alignment provides investors with information about which investments align with their sustainability goals while providing clarity around what constitutes sustainable investments within different sectors - helping them make informed decisions about where they invest their money while ensuring they are contributing positively towards eu taxonomy aligned mitigating climate change while avoiding investment opportunities which could have negative long term consequences environmentally socially economically. Additionally it helps businesses understand where best to target their efforts and the investment decision making process so they can better align their strategies with sustainability goals creating long term value shareholders customers stakeholders society large .
Implementing Taxonomic Alignment Framework involves several steps starting off assessments identifying areas that need improvement followed up eu taxonomy aligned implementation monitoring tracking progress review reporting results take necessary corrective actions necessary along the way ultimately drive more positive outcomes business operations terms meeting respective sustainability goals set forth through EU Taxonomies Regulation .
To sum up there strong case made why every business should consider implementing Taxonomic Alignment Framework part core strategic planning process having tangible positive outcomes terms reducing carbon footprints staying competitively ahead curve delivering value eu taxonomy aligned shareholders customers stakeholders society large ultimately building brighter future everyone involved process without sacrificing profit margins too much means important adopt practices soon possible stay relevant current times come out top post-pandemic era boasting resilience strength needed succeed end day leaving lasting legacy behind us doing right thing now create better tomorrow generations follow us here after.