EU Taxonomy explained: alignment, KPIs and the 2026 simplification rules
The EU Taxonomy classifies environmentally sustainable economic activities. Companies in CSRD scope report what share of their turnover, CapEx and OpEx is Taxonomy-eligible and aligned. Since January 2026 a simplified Delegated Act applies, with a 10% materiality threshold and fewer data points. From 2027 only groups above 1,000 employees and EUR 450m turnover are in scope.
Last updated 9 November 2026 · By Ella Sustainability Team
Get startedWhat is the EU Taxonomy?
| Objective | Example of a contributing activity |
|---|---|
| Climate change mitigation | Renewable electricity generation, zero-emission buildings |
| Climate change adaptation | Activities that reduce physical climate risk to assets or people |
| Sustainable use and protection of water and marine resources | Water supply and wastewater treatment |
| Transition to a circular economy | Repair, refurbishment and recycling activities |
| Pollution prevention and control | Manufacturing that removes hazardous substances |
| Protection and restoration of biodiversity and ecosystems | Conservation and restoration activities |
What does Taxonomy-eligible and Taxonomy-aligned mean?
| Status | What it means | What you need to prove it |
|---|---|---|
| Not eligible | The activity is not listed in the delegated acts | Nothing beyond the activity mapping |
| Eligible, not aligned | Listed, but at least one test is not met or not evidenced | The activity mapping and the KPI split |
| Aligned | Listed and passes all four conditions | Screening criteria evidence, DNSH evidence, minimum safeguards evidence, KPI split |
Who has to report under the EU Taxonomy after the Omnibus?
| Company | Taxonomy reporting position |
|---|---|
| EU group, more than 1,000 employees and more than EUR 450m turnover | Reports Taxonomy KPIs in the CSRD sustainability statement, first on FY2027 (2028 report) unless already reporting |
| EU company below either threshold | Out of mandatory scope after the Omnibus; may still be asked for data by banks and customers |
| Non-EU parent above EUR 450m EU turnover with a large EU subsidiary or branch | CSRD group reporting from FY2028 (2029 report) |
| UK company with no EU entity in scope | No Taxonomy reporting duty; the UK has no green taxonomy of its own |
| Bank or insurer in scope | Reports its own KPIs, such as the green asset ratio for credit institutions |
What are the EU Taxonomy KPIs?
| KPI | What it measures | Where the data usually sits |
|---|---|---|
| Turnover KPI | Share of net turnover from eligible and aligned activities | Revenue by product line or business unit in the finance system |
| CapEx KPI | Share of capital expenditure on eligible and aligned assets or a CapEx plan | Fixed asset register and project codes |
| OpEx KPI | Share of a narrow set of operating costs, such as maintenance and short-term leases, linked to eligible and aligned activities | Cost centre and general ledger detail |
What changed in the 2026 Taxonomy simplification?
| Change | What it means in practice |
|---|---|
| 10% materiality threshold | Activities below 10% of turnover, CapEx or OpEx do not need a full eligibility and alignment assessment; the test applies to each KPI separately |
| OpEx exemption | Where OpEx is not material to the business model, report the total and explain why, with no further assessment |
| Fewer data points | Per-activity data points fall from 78 to 28 for non-financial companies (a 64% cut) and by up to 89% for credit institutions |
| Merged templates | Separate fossil gas and nuclear templates are removed or folded into the general templates |
| Simpler pollution DNSH (Appendix C) | No need to screen thousands of self-classified chemical substances; the focus moves to substances of very high concern listed by ECHA |
| Deferral for financial firms | Detailed KPIs can be deferred to 31 December 2027 if no alignment claim is made |
What is changing next in the technical screening criteria?
How to prepare EU Taxonomy reporting data, step by step
| Step | What to do | Owner |
|---|---|---|
| 1. Confirm scope | Check which entities fall into CSRD scope after the Omnibus and which lenders or customers ask for Taxonomy data | Sustainability lead with legal |
| 2. Map activities | Match revenue lines, assets and projects to activities in the delegated acts | Sustainability lead with finance |
| 3. Apply the 10% test | Calculate each eligible activity's share of turnover, CapEx and OpEx and set aside those below 10% | Finance |
| 4. Test alignment | For material activities, check the screening criteria, DNSH and minimum safeguards and file the evidence | Site, procurement and HR owners |
| 5. Calculate the KPIs | Produce the turnover, CapEx and OpEx shares with no double counting | Finance |
| 6. Keep the audit trail | Store the source of every number and every DNSH document for limited assurance | Sustainability lead |
Where ESG software helps with EU Taxonomy reporting
Does the UK have its own green taxonomy?
How Ella helps
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Frequently Asked Questions
What is the EU Taxonomy in simple terms?
It is the EU's list of economic activities that count as environmentally sustainable, with technical criteria for each. Companies in scope report how much of their turnover, CapEx and OpEx comes from activities on that list and how much passes all the tests.
What is the difference between Taxonomy-eligible and Taxonomy-aligned?
Eligible means the activity is described in the Taxonomy delegated acts. Aligned means it also makes a substantial contribution to an objective, does no significant harm to the others, meets minimum safeguards and complies with the technical screening criteria.
What are the four conditions for Taxonomy alignment?
Substantial contribution to at least one of six environmental objectives, do no significant harm to the other objectives, compliance with minimum safeguards, and compliance with the technical screening criteria set by the Commission's delegated acts.
Who has to report under the EU Taxonomy in 2026?
Taxonomy reporting follows CSRD scope. After Omnibus I, mandatory scope is groups with more than 1,000 employees and more than EUR 450m turnover, reporting on FY2027 in 2028. Member States may exempt smaller first-wave companies for FY2025 and FY2026, so check local transposition.
What is the 10% materiality threshold in the EU Taxonomy?
Under Delegated Regulation (EU) 2026/73, activities that make up less than 10% of turnover, CapEx or OpEx do not need a full eligibility and alignment assessment. The threshold is applied to each KPI separately.
Does the EU Taxonomy apply to UK companies?
Not directly. A UK group meets it through EU subsidiaries in CSRD scope, non-EU parent reporting from FY2028 where EU turnover exceeds EUR 450m, and requests from EU lenders and investors. The UK dropped its own green taxonomy in July 2025.
How does the EU Taxonomy relate to the CSRD and SFDR?
Companies under the CSRD publish Taxonomy KPIs in their sustainability statement. Fund managers use those KPIs in SFDR disclosures, and the SFDR review proposed in November 2025 keeps a link to Taxonomy alignment in its new product categories.
What software helps with EU Taxonomy reporting?
Look for ESG reporting software that collects finance, site and supplier data from the people who own it, keeps evidence attached to each number and reuses the data for CSRD and carbon reporting. Ella does this as an AI-native agent with expert support from its team.