Omnibus I Proposal: amendment of environmental taxonomy

On February 26, the European Commission (the “Commission”) approved a proposal for a regulatory package (the “Omnibus I Proposal”) simplifying the application and reporting requirements under the EU Taxonomy Regulation. For more details about the Omnibus Proposal I and its justification, see our Post | Proposal to simplify sustainability and investment.

Omnibus I Proposal amends certain aspects of the delegated regulations on disclosure of information related to taxonomy (2021/2178/UE), climate taxonomy (2021/2139/UE) and environmental taxonomy (2023/2486/UE). For a summary of the content of these delegated regulations, see our Legal Flash | New developments in green taxonomy.

Below we highlight the key aspects of this amendment.

Justification

The experience acquired during the first few years of application of the EU Taxonomy Regulation (2020/852/EU) and of its implementing regulations have clearly shown the major advantages offered by this transparent classification system for identifying activities that contribute substantially to the six environmental objectives under the regulation. It has also been shown that there is margin to simplify the disclosure requirements imposed on the companies subject to the regulation’s scope.

• The objective of the simplification proposal is for the reports companies must prepare in line with the EU Taxonomy Regulation to be more simple and cheaper. Therefore, it is proposed to make certain requirements more flexible and to reduce the amount of information to be reported (up until 66% for non-financial companies and 89% for financial companies).
• This simplification exercise is independent of that established in the Omnibus I Proposal for the CSRD Directive, while also complementary. For more details see Legal Flash | Towards simplification of sustainability reporting.

Content of Omnibus I Proposal

• Amendments proposed in disclosure rules
  
  
• Minimum materiality threshold: It is proposed to introduce a minimum materiality threshold, so companies can focus on assessing those activities that represent a significant percentage of their business volume, investment in capital expenditure (“CapEx”) or in operational expenditures (“OpEx”). In this way, it will not be necessary to assess whether the activities that do not reach those thresholds meet the technical screening criteria.
  Application of this materiality threshold will mean that financial companies will not have to report on the key performance indicators (“KPIs”) relating to the activities that are not relevant for their business.
• Disclosure of OpEx for non-significant activities: Non-financial companies will not have to report on the OpEx percentage that adjusts to the taxonomy for those activities that do not make up over 25% of their business volume.
• Exclusion of KPI exposure for companies with less than 1,000 employees: In line with the amendments proposed in the CSRD Directive, it is proposed that financial companies can exclude from their KPI denominators the exposures to those companies with less than 1,000 employees.
• Delay in application of certain financial KPIs: It is proposed to delay the application of the KPIs relating to the negotiation portfolio and to the commissions of certain financial institutions until 2027.
• Template simplification: It is proposed to simplify the KPI summary template for non-financial companies, which becomes a single table instead of three. This table will only include the data points that financial companies need to calculate their own KPIs. Also, the following is removed from the summary table: information about non-eligible activities, information broken down by objectives, data points about the do-no-significant-harm (“DNSH”) criterion and the minimum social guarantees for activities that are adjusted to the taxonomy.
  The information for each activity is also simplified, with all the information corresponding to the activity in question being collected in one row.
• Revision of general criteria relating to the DNSH principle in relation to the use and presence of chemical products in the climate taxonomy and the environmental taxonomy.
  The Omnibus I Proposal seeks to facilitate analysis of compliance with the generic DNSH criteria on pollution prevention and control regarding use and presence of chemicals, focusing only on substances that are already included in the European Chemicals Agency's Candidate List of hazardous chemicals.
  It proposes eliminating and, if applicable, rewording the second paragraph under letter (f) in appendix C of annexes I and II of the delegated regulation on climate taxonomy and of annexes I, II and IV of the delegated regulation on environmental taxonomy, which contains the generic DNSH criteria on pollution prevention and control regarding use and presence of chemicals.

Next steps

The Omnibus I Proposal amending the delegated regulations on taxonomy is currently subject to prior consultation before the Commission processes this legislative initiative.

Now, we must consider that the exercise of simplifying the obligations imposed on companies by the EU Taxonomy Regulation will not end with this initiative, and other aspects will continue to be worked on, such as improvement of the usability of the DNSH criteria, in line with the recommendation by the International Platform on Sustainable Finance (“IPSF”) on February 5, 2025.