On 4 July 2025, the European Commission published a draft delegated act amending the basic rules for the implementation of the EU Taxonomy, aimed at significantly reducing the administrative burden on companies. These proposals reflect the institutions’ desire to facilitate the implementation of sustainable finance rules while preserving the main environmental objectives.
The main change consists in removing the obligation to assess the compliance of activities that are not material to the overall key performance indicators of the undertaking. The proposed text specifies that if an activity represents less than 10% of turnover, capital or operating costs, it may be excluded from the analysis against the criteria of the Taxonomy. This relief applies to both non-financial and financial companies, allowing them to focus on aspects that are material to their business.
In addition, the Commission proposes a significant simplification of the reporting templates and accompanying key indicators. For non-financial companies, the amount of data required is reduced by up to 64%, and for financial companies by up to 89%. A transitional period is also introduced during which financial institutions may temporarily refrain from publishing their full key indicators for taxonomy compliance. This transitional regime will be valid until the end of 2027 to allow time for adaptation to the new requirements.
Another significant change concerns the interpretation and application of the ‘Do No Significant Harm’ (DNSH) criteria. In particular, the requirements related to the self-classification of substances under the Classification, Labelling and Packaging of Chemicals Regulation (CLP) have been removed. This also aims to simplify the reporting process and reduce the risk of double administration or inconsistent assessments.
The proposed changes are part of the broader “Omnibus I” package, which brings together various initiatives to improve the effectiveness and consistency of sustainable financial regulation in the EU. They follow the conclusions of extensive stakeholder consultations and economic analyses, which showed that excessive administrative burdens could hamper both the collection of quality data and the effective implementation of the Taxonomy in practice.
The new rules are expected to enter into force on 1 January 2026 and will cover the reporting period for 2025. However, companies will have the option to apply the amendments already when preparing their reports for 2026. This provides additional flexibility in the planning and implementation of internal processes for sustainable reporting.
With these proposals, the European Commission aims to achieve a balanced approach between environmental ambition and economic reality. They confirm the EU’s commitment to sustainability while recognising the need for pragmatic solutions that allow businesses to focus their resources on what matters, without unnecessary regulatory burdens.
More than 100 large companies — such as EDF, Nokia, Allianz and IKEA (Ingka Group) — have expressed concern that large-scale relief could weaken sustainability standards. They insist that the threshold for application should remain at 500+ employees and recommend that companies present concrete transition plans. They argue that the Taxonomy is a key tool for managing climate risks and directing capital towards green technologies and should not be undermined.
Criticism of the procedural approach is acknowledged, highlighting its insufficient legal and democratic legitimacy – the adoption of delegated acts with minimal opportunity for parliamentary and state control is seen as a lack of transparency. According to Austria, for example, key elements should not be adopted through delegated acts, but through more closely and directly controlled legislative processes.
Some stakeholders also express dissatisfaction with the insufficient impact assessments and the accelerated timetable for review and comments. The ISS blog points out that there is a lack of robust cost-benefit analyses and clarity on the scope, in particular the employee threshold (500, 1,000 or 3,000). In addition, there are calls for limited assurance standards to support the integrity of published data.
The Platform on Sustainable Finance recommends simplifying OpEx indicators by using a threshold aligned with R&D expenditure. They support limiting DNSH criteria and call for more clarity and balance between the current key performance indicators (KPIs). It is noted that OpEx has limited added value unless it includes key investments in R&D.
A number of academic studies point out, on the other hand, that excessive regulation could lead to capital flight from Europe, which we are already witnessing – work is needed on global coordination of standards, which in the current situation seems increasingly difficult to achieve.
Next steps
The delegated act will be submitted to the European Parliament and the Council for scrutiny.
The changes will enter into force after a four-month scrutiny period, which may be extended by a further two months. The simplification measures provided for in this delegated act will apply from 1 January 2026 and will cover the financial year 2025. However, companies will be given the option to apply the measures from the financial year 2026 if they consider this more appropriate.
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