On 4 April 2023, the European Commission published preliminary documents outlining the four remaining environmental objectives of the taxonomy. In this article, we examine what has been disclosed and the potential implications.

Reminder: what is the EU taxonomy?

The European taxonomy is essentially a classification system for economic activities that is made up of definitions and rules designed to identify which activities can be classified as ecologically sustainable.

At the time of its launch, the European Commission framed the European taxonomy through six environmental objectives: (i) climate change mitigation; (ii) climate change adaptation, (iii) sustainable use and protection of water and marine resources, (iv) transition to a circular economy, (v) pollution prevention and control and (vi) protection and restoration of biodiversity and ecosystems.
The first two objectives (already defined) address the subject of climate change. Details for the four other objectives, necessary for the overall classification of sustainable activities, were nevertheless lacking. It was within this framework that the European Commission launched a consultation period (referred to as “Taxo4”) running from the beginning of April through 3 May concerning additional details relating to these remaining four objectives. It is important to note that at the same time, the new proposed text also contains modifications of the two climate objectives (i and ii) in order to include additional economic activities.

The six environmental objectives of the EU taxonomy

Source: The European Commission.

The new version of the European green taxonomy includes 48 new activities

The additional details relating to the four other objectives have allowed the addition of 35 activities in the water supply and treatment and waste management sectors, construction and public works, environmental protection and finally, the hotel industry. The modifications made to the climate objectives (i and ii) have also allowed the addition of 13 activities, notably in the transportation sector and the manufacturing of electrical equipment.

More particularly, the aeronautical industry has been added as a transition activity when new aircraft contribute between 1.5% and 2% efficiency as a function of their tonnage. This could appear to be minor. However, we believe that the obligation to certify aircraft to fly entirely with SAF (sustainable aviation fuel) by 2032 is a much more ambitious constraint, as it will be accompanied by an obligation to use 10% SAF in 2030, a percentage slated to increase steadily each year.

In terms of real estate construction, the circular economy pillar requires that 90% (in weight) of waste generated by construction and demolition work be either reused or recycled. Upstream, this should push producers to innovate in terms of the products proposed to builders. Downstream, this should encourage the development of recovery and processing chains for these waste materials. This circularity is also found in the management of water resources pillar, which encourages the collection of grey water.

The hotel sector has also been added to the “biodiversity” pillar, with the obligation to sign an agreement with the local agency in charge of the preservation of the conservation area in which the hotel is located. This agreement, with a minimum length of five years, must involve the purchase of local products, the providing of educational opportunities relating to local biodiversity and the offering of visits to natural spaces for which fees are charged. Finally, a percentage of revenues (between 0.5% and 1%) must be paid to local preservation agency.

What are the next steps?

Following the end of the consultation period on 3 May, the final texts should be published by the European Commission in June 2023. This will be followed by verification period of at least two months during which the European Parliament and the Council of the European Union will be able to object to the texts. If no objections are raised, the texts will become effective and applicable starting 1 January 2024.

These few examples show that the new version of the European green taxonomy aims to address the environmental impacts in an interconnected manner in order to fight climate change. On the other hand, they also demonstrate the complexity of a subject in which the intertwining of actors makes it complicated to establish rules, as there is still a long way to go before all actors concerned by climate change are covered by this taxonomy.

As the European Commission moves forward in clarifying the taxonomy, companies will be able to better measure and therefore discuss their role in the alignment. Nevertheless, this supports the positioning of the Mandarine Global Transition fund, which has chosen to address climate change through all these components, i.e. CO2, water, waste materials, the circular economy and preservation of the biodiversity. The holistic approach of Mandarine Global Transition effectively aims to support an ecological and energy transition that allows value creation within companies in keeping with these objectives, which seek to preserve the planet.

The “Taxo4”: decoding the last four environmental objectives of the Taxonomy

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