2 EU Taxonomy

The EU Taxonomy

The 2018 EU action plan on financing sustainable growth sets out an EU strategy for sustainable finance with the aim of redirecting capital flows. In this plan, an EU classification system was established to determine which economic activities qualify as sustainable. This sustainability classification system is generally referred to as the EU Taxonomy and it is part of the EU’s overall efforts to reach the objectives of the European Green Deal and make Europe climate-neutral by 2050.

The EU Taxonomy entered into force on 12 July 2020, establishing criteria for environmentally sustainable economic activities related to six environmental objectives. The taxonomy regulation also amended the EU Accounting Directive (2013/34/EU) on non-financial information by expanding the scope of content that needs to be disclosed by large companies in the Management Report. It requires companies to disclose the proportion of their activities that qualify as environmentally sustainable.

The disclosure requirements are set out in a Delegated Act under Article 8(4) of the Taxonomy Regulation (published 6 July 2021). These disclosure requirements will be fully in force for reporting year 2022, and limited disclosures are requested for 2021. For the reporting period 2021, companies shall provide information on the proportion of taxonomy-eligible and taxonomy non-eligible economic activities in their total activities using the KPIs turnover, capital expenditure, and operational expenditure, as well as qualitative information. Therefore, we have assessed our economic activities for eligibility in relation to the first two environmental objectives per the EU Taxonomy. Furthermore, we assessed if we have information available to provide disclosures on the proportions using the financial KPIs.

The first Delegated Act with climate objectives aims to identify those industries that can make the largest contribution toward a carbon-neutral society. These include energy, selected manufacturing activities, transport and buildings. As a Health, Nutrition & Bioscience company, we concluded that the majority of our core economic activities are not covered by the Climate Delegated Act, and consequently, we are not in the primary scope of industries that are relevant to the two climate-related objectives.

The outcome of the below assessment indicates the parts of our current activities that are in scope for the first two environmental objectives that relate to climate mitigation and climate adaptation.

Our eligibility for the first two environmental objectives

Based on the standard table as provided in the EU taxonomy, DSM reports the following for 2021:

We welcome the implementation of the EU Taxonomy and we have assessed its impact on our company in line with its overall objectives, albeit accepting that parts of the Taxonomy Regulation are subject to interpretation, which may lead to variety in its application. Considering the level of complexity as well as the evolving character of the framework, we expect that Taxonomy reporting will develop over time. We will periodically revalidate our methodology and our reported KPIs based on the evolution of the regulations and forthcoming guidance from, amongst others, the European Commission and the European Securities and Markets Authority (ESMA).

More information on our strategy and sustainability commitments can be found in the sections on Delivering a long-term, purpose-led, positive impact, and the DSM Responsible Care Plan. For more information on our climate risk assessment, our ambitions and actions, including our path to reduce emissions by 2030 please refer to Climate adaptation and Climate-related risks.