What is the EU taxonomy?

The classification scheme that establishes a list of environmentally friendly and economically sustainable practices is called EU Taxonomy. The EU taxonomy is a vital instrument for scaling up environmental investment and bringing the European Green Deal into effect. It is anticipated, for example:

1. That presenting appropriate definitions to businesses, consumers, and policymakers on which economic practices can be deemed environmentally friendly;
2. It can provide investors with protection; 
3. Safeguard private investors from greenwashing;
4. Assist companies in preparing the transition;
5. Minimize market fragmentation;
6. And ultimately help move investments where they’ll be required.

What is Sustainable Growth?

Sustainable growth & communication entails addressing current needs while also ensuring that future generations will fulfill their own. It has primarily three pillars: economic, environmental, and social concerns. Initiatives in all three fields must collaborate and encourage one another to promote sustainable growth. 

Why EU Taxonomy?

It is critical to steer investments into sustainable programs and initiatives to achieve the EU’s 2030 climate and energy goals and the European Green Deal’s objectives.

The ongoing COVID-19 outbreak has highlighted the value of redirecting the capital flow to sustainable initiatives to improve our economies, industries, and communities, especially health systems, against climate and environmental disruptions and threats with significant health co-benefits.

An “EU taxonomy”, or a standard classification system for sustainable economic practices, was called for in the action plan for financing sustainable development.

EU Taxonomy and Sustainable Growth

All related EU policies, including trade policy, must support sustainable growth, according to EU law. EU trade policy aims to guarantee that economic growth is accompanied by:

1. Social justice 
2. Respect for Civil rights  
3. Worker protections 
4. Sustainable Environmental Regulations   

Via EU trade arrangements, benefits for developing nations, and trade and development strategy,
the EU aims to ensure that trade policy can support sustainable development.

Taxonomy Regulation and Delegated Acts

On June 22, 2020, the Taxonomy Regulation was first issued in the Official Journal of the European Union and the draft was approved in principle by the European Commission on 21 April 2021 It provides the basis for the EU taxonomy by defining four broad criteria that economic activity must follow in order to be considered environmentally friendly.

Six environmental goals are defined by the Taxonomy Regulation.

1. Prevention of climate change.
2. Modification of climate change.
3. Water and aquatic resources are used and preserved in a safe way.
4. The shift to a circular economy is underway.
5. Pollution management and reduction.
6. Biodiversity and habitat being protected and preserved.

The taxonomy regulation grants the Commission the authority to issue delegated and implementing acts that set out how responsible authorities and market actors must comply with the directive’s requirements.

The Commission is tasked by the Taxonomy Regulation with compiling a list of environmentally friendly practices by determining technical screening requirements for each environmental goal through delegated actions.

Contribution to Sustainability

Trade and sustainable growth rules are used in modern EU trade arrangements. The EU and its trading partners must do the following:

1. Meet international labor and environmental rules and agreements; 
2. Actively impose their environmental and labor regulations; 
3. Not veer away from environmental or labor laws in order to stimulate commerce or investment;
4. Trade natural resources such as wood and fish in a sustainable manner; 
5. Fight illicit trade in threatened and endangered fauna and flora;
6. Facilitate the trading that helps to combat climate change; 
7. And foster activities such as corporate social responsibility.

In addition, the EU makes use of its trade arrangements to:

1. Encourage long-term public procurement, and
2. Remove trade and competition obstacles in renewable energy.

EU trade agreements with Canada, Central America, Colombia, Peru, Ecuador, Georgia, Japan, Mercosur, Mexico, Moldova, Singapore, South Korea, Ukraine, and Vietnam promote sustainable growth.

We hope that this article has given you a better idea of what EU taxonomy is and how it might assist you. If you have any further questions, don´t hesitate to contact us!