DNSH Compliance in Sustainability Reporting

🔎 Understanding the new EU Taxonomy rules : a closer look. Following the Commission’s adoption of the Taxonomy delegated regulation under the #Omnibus simplification package, we at EY are pleased to share our latest deep dive into the revised EU Taxonomy rules - a must-read for sustainability reporting professionals! 🔦 This publication goes beyond the headlines to unpack: - Who it applies to and when - New materiality thresholds and how they impact eligibility or alignment assessment - Simplified DNSH criteria for pollution prevention, one of the trickiest areas in practice : what’s changing and what remains complex - Reporting templates overhaul for both non-financial and financials undertakings - Additional key changes for financial undertakings reporting, including relief options and key judgment calls 👉 Explore the full publication to help you prepare with confidence ⬇️ Laure Guégan Roberta Fazi Andrea Gavazzi Sophie Ganter Nelmari Hamman Emily Bollard Inka Kortetmäki #Omnibus #EUTaxonomy #SustainabilityReporting #CSRD #EY

Report on Simplifying Taxonomy Reporting The Platform on Sustainable Finance (PSF), an expert group mandated by the European Commission to advise it on the development of sustainable finance policies, announced today the publication of a new report with comprehensive recommendations aimed at simplifying the EU Taxonomy. The recommendations come amidst a major push by the EU Commission to reduce administrative and reporting burdens on companies, with the Taxonomy among the first in a series of sustainability reporting regulations to be targeted in an upcoming “Omnibus” package. According to the PSF, the new recommendations included in the report could lead to a reduction of more than a third in the Taxonomy reporting burden for companies, and “a significant simplification for financial institutions. Thix includes: - Refining ('DNSH') Do No Significant Harm assessment and reporting obligations - Introducing a materiality threshold to all KPIs, a simplified DNSH assessment for the turnover KPI, and limiting OpEx its mandatory scope to R&D - Allowing proxies and estimates across Green Asset Ratio (GAR) and Green Investment Ratio (GIR), with a simplified retail assessment. - Developing voluntary and simplified approaches for SMEs, banks, and investors to integrate the Taxonomy into (CSRD or SFDR) disclosures https://lnkd.in/dC9F2C2A

ESRS vs DNSH in EU Taxonomy - does reporting of ESRS environmental topics show compliance with DNSH? 🎯 Simple answer - No. ❓ What are the reasons? ✅ #ESRS and #EUTaxonomy are 2 separate pieces of legislation. ✅ Both set reporting requirements: 👉 ESRS are the European Sustainability Reporting Standards based on CSRD. 👉 Art. 8 of EU Taxonomy and Disclosures Delegated Act establish reporting requirements for EU Taxonomy. ✅ Reporting will be done via a single Sustainability Statement. 👉 EU Taxonomy reporting will be included in a separate dedicated section of the Sustainability statement. ❗ Reporting content of EU Taxonomy is not determined by ESRS (except for connectivity and ESRS 1 par. 113 and 1st sentence of par. 115) but, as already mentioned, by the Art. 8 of EU Taxonomy and the Disclosures Delegated Act. ✅ 6 EU Taxonomy environmental objectives are reflected in the 5 ESRS environmental topical standards. However, there are some key differences to consider: 1️⃣ ESRS sets expectation on transparency of the company's sustainability impacts, risks and opportunities but not on performance. 2️⃣ EU Taxonomy sets performance thresholds - quantitative and qualitative criteria - to assess whether specific activities are environmentally sustainable (=taxonomy-aligned). 👉 This includes criteria for substantial contribution, Do No Significant Harm (#DNSH) criteria and minimum safeguards. 👉 DNSH criteria ensure that while the economic activity substantially contributes to 1 of the 6 EU Taxonomy environmental objectives it does no significantly harm the remaining 5 objectives. ❗EU Taxonomy does not set performance expectation at the company level (= there are no minimum criteria on % of company's activities that needs to be taxonomy-aligned). ✅ Due to the differences discussed above, a mere reference to ESRS environmental disclosures is not sufficient to demonstrate compliance with DNSH criteria. ✅ The information disclosed based on ESRS can however be useful to assess the compliance. (Based on FAQ 5 from the draft Commission notice on the interpretation of EU Taxonomy delegated Acts) #esgreporting #sustainabilityreporting

The European Union Taxonomy for Sustainable Finance (Regulation (EU) 2020/852) is no longer just a framework — it is a compliance anchor with binding disclosure and enforcement obligations. The report underscores how Articles 3–9 define alignment: significant contribution, DNSH, minimum social safeguards, and technical screening criteria. Together, these rules make sustainability claims auditable and enforceable. Key compliance takeaways: 1 - DNSH: Article 17 requires life-cycle checks to ensure one objective (e.g. climate mitigation) doesn’t harm another (e.g. biodiversity). 2 - Double materiality: Article 8 disclosures on turnover, CapEx, and OpEx now tie directly into CSRD — requiring both financial and environmental/social impact reporting. 3 - Product claims: Articles 5–7 force SFDR Article 6/8/9 products to back sustainability with taxonomy evidence. 4 - Enforcement: Articles 20–22 empower supervisors to impose sanctions that are “effective, proportionate, and dissuasive.” Misreporting carries real regulatory and reputational risk. For compliance teams, the challenge is integrating ESG data, ensuring audit readiness, and navigating supervisory divergence across Member States. Mahika Ravi Shankar Trade Finance Global (TFG) UK Export Finance — these enforcement mechanisms could be influencing trade finance structures and cross-border sustainable capital flows... and integrating our guide: https://lnkd.in/dE_dpPkv The Taxonomy may be EU law, but its ripple effects are global. 🌍 Duygu Karakuzu Mark Abrams Robin Abrams Brian Canup Venu Borra María del Sagrario Navarro Lérida Dr Maria Mogilnaya The Open Working Group Chris Southworth Matt Arderne Fleur Boos Bob Gravestijn #EUTaxonomy #SustainableFinance #Compliance #CSRD #SFDR #TradeFinance #DoubleMateriality