Vlad Kalashnikov is Head of Products at CFOUR Comply, an inline XBRL (iXBRL) conversion software. Through direct involvement in customer onboarding, he works closely with teams navigating these requirements, giving him firsthand insight into the operational realities firms face with tagging and the challenges corporate service providers encounter delivering these services at scale.
The EU Taxonomy is the European Union’s classification system for identifying which economic activities qualify as environmentally sustainable. For companies already reporting under the Corporate Sustainability Reporting Directive, it is a defined set of Turnover, Capital Expenditure, and Operating Expenditure disclosures that form part of the same sustainability statement, governed by their own alignment criteria and their own delegated acts. This guide explains what the EU Taxonomy requires, how it connects to CSRD reporting, what changed when the European Commission’s simplification Delegated Act entered into force in January 2026, and where digital tagging currently stands.
What Is the EU Taxonomy?
The Taxonomy Regulation, Regulation (EU) 2020/852, establishes a common EU-wide classification system for environmentally sustainable economic activities. According to the European Commission’s Taxonomy Navigator, the framework sets out performance criteria, known as technical screening criteria, that determine whether an activity substantially contributes to one of six environmental objectives while doing no significant harm to the others. The six objectives cover climate change mitigation, climate change adaptation, the sustainable use and protection of water and marine resources, the transition to a circular economy, pollution prevention and control, and the protection and restoration of biodiversity and ecosystems. Rather than setting emissions targets or investment mandates directly, the Taxonomy gives companies, investors, and policymakers a shared definition of what counts as sustainable, which underpins disclosure obligations elsewhere in EU law, including under CSRD.
How the EU Taxonomy Relates to CSRD Reporting
Taxonomy-Eligibility versus Taxonomy-Alignment
Companies assess their activities against the Taxonomy in two stages. Taxonomy-eligibility asks whether an economic activity is described in the Taxonomy’s delegated acts at all, regardless of whether the company currently meets the sustainability criteria. Taxonomy-alignment is the narrower and more demanding test, applied only to eligible activities, and asks whether the activity meets the substantial contribution, do no significant harm, and minimum social safeguards criteria in practice. A company can therefore report a high proportion of eligible turnover while reporting a much lower proportion as aligned, and both figures are required disclosures.
Where Taxonomy KPIs Sit Inside the CSRD Sustainability Statement
Under Article 8 of the Taxonomy Regulation, companies subject to CSRD’s sustainability reporting requirements must disclose the proportion of their turnover, capital expenditure, and operating expenditure that is Taxonomy-eligible and Taxonomy-aligned. These KPIs are published as part of the same sustainability statement that carries a company’s ESRS disclosures, a framework covered in more detail in our explanation of what CSRD requires. Since Directive (EU) 2026/470, the Omnibus I Directive, entered into force on 18 March 2026, mandatory sustainability reporting, and by direct legal cross-reference Article 8 Taxonomy reporting, applies to entities and consolidated groups exceeding 1,000 employees and €450 million in net turnover. Companies below those revised thresholds fall outside CSRD’s mandatory scope, and therefore outside the mandatory Taxonomy KPI disclosure requirement, though some may still report voluntarily.
Key Criteria Companies Need to Assess
Claiming Taxonomy-alignment for an activity requires evidence against four separate tests, each drawn from the Taxonomy’s delegated acts.
Substantial Contribution to One of the Six Environmental Objectives
An activity must make a substantial contribution to at least one of the six environmental objectives, measured against the technical screening criteria set out in the Climate, Environmental, and related delegated acts. These criteria are activity-specific. A renewable energy project and a sustainable water treatment process are judged against entirely different thresholds, reflecting the physical and technical reality of each sector.
Do No Significant Harm
The activity must not significantly harm any of the other five objectives. This do no significant harm, or DNSH, test is assessed alongside the substantial contribution criteria, and the Omnibus simplification Delegated Act narrowed its scope for pollution prevention specifically, reducing the range of chemical substances that must be assessed.
Minimum Social Safeguards
Companies must also confirm the activity is carried out in alignment with minimum safeguards covering human rights, labour rights, and anti-corruption standards, broadly aligned with the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights.
Technical Screening Criteria
Technical screening criteria are the detailed, sector-specific thresholds published in the Taxonomy’s delegated acts that operationalise both the substantial contribution and DNSH tests. Because these criteria are updated periodically, reporting teams need a process for checking which version of the delegated act applies to the financial year being reported.
Recent Changes to EU Taxonomy Reporting Under the Omnibus Simplification
The European Commission’s Delegated Act simplifying the application of the Taxonomy Regulation was published in the Official Journal on 8 January 2026 and entered into force on 28 January 2026, applying retrospectively from 1 January 2026 and covering the 2025 financial year. Companies publishing their FY2025 report after that date may choose between applying the amended rules from 1 January 2026 or the rules as they stood at 31 December 2025, and must state in the report which version was used. Our guide on the CSRD timeline sets out the key revisions under Omnibus simplification programme in more detail.
For non-financial undertakings, the amended rules introduce a 10% materiality threshold allowing certain economic activities to be left unassessed for Taxonomy eligibility and alignment where they cumulatively represent less than 10% of the relevant Turnover or CapEx KPI denominator. Separate simplifications apply to OpEx, including where operational expenditure is not material to the undertaking’s business model. The Delegated Act also narrows the do no significant harm criteria for pollution prevention and simplifies the reporting templates themselves, reducing the volume of data points required. The Commission has confirmed these changes do not alter which companies fall within the scope of the Taxonomy Regulation, only the content and presentation of what in-scope companies must report.
Digital Tagging of EU Taxonomy Disclosures
A separate question from what must be disclosed is how it must be formatted. As of August 2026, digital tagging of Article 8 Taxonomy disclosures in Inline XBRL remains voluntary. European Commission guidance confirms that, pending formal adoption of an amending Delegated Act to the European Single Electronic Format regulation, companies preparing sustainability statements are not legally required to mark up their disclosures or format their management report in XHTML.
Some technical groundwork is already in place, though the taxonomy itself is still being revised. EFRAG, tasked by the European Commission with developing the digital taxonomies needed for CSRD, handed over both the original ESRS Set 1 XBRL Taxonomy and a standalone Article 8 XBRL Taxonomy to the Commission and the European Securities and Markets Authority on 30 August 2024. EFRAG has been explicit that it holds no responsibility for the content of the Taxonomy Regulation itself, only for the digital, technical translation of disclosures the Commission has already defined.
The sequence still has several steps ahead of it. EFRAG’s 2026 work programme confirms it is developing an updated ESRS XBRL taxonomy, revised to reflect the simplified post-Omnibus ESRS and covering the Article 8 disclosures alongside it, with delivery to the European Commission and ESMA targeted for December 2026. Only after that handover does ESMA decide on incorporating the taxonomy into the ESEF Regulatory Technical Standards, and only then does the Commission adopt it through a Delegated Act. On that basis, mandatory tagging is not expected for financial year 2026. Reporting teams should treat any earlier mandatory tagging date as provisional until the Commission publishes the amending Delegated Act in the Official Journal.
Who Needs to Report Taxonomy KPIs, Including Non-EU Companies
Mandatory Article 8 Taxonomy reporting applies wherever mandatory CSRD sustainability reporting applies, since the Taxonomy Regulation’s disclosure obligation is tied directly to the same Accounting Directive provisions. In practice, this covers EU companies exceeding 1,000 employees and €450 million net turnover, as well as non-EU issuers with securities admitted to trading on an EU regulated market that meet those same thresholds, and EU subsidiaries of non-EU groups that individually or as a subgroup meet them.
One area causes regular confusion. Non-EU parent companies reporting at group level under CSRD’s Article 40a, the third-country reporting provision, follow ESRS standards adapted for third-country undertakings, but are not required to produce Article 8 Taxonomy disclosures at that group level. EU branches of those non-EU parents do not prepare their own Taxonomy disclosures either. They serve as a filing mechanism for the third-country parent report, which itself falls outside Article 8’s scope. Our CSRD reporting timeline guide explains how these thresholds align with the phased implementation dates in more detail.
Preparing Your CSRD Reporting Process for EU Taxonomy Disclosures
For reporting teams, the practical task is to build Taxonomy-eligibility and Taxonomy-alignment assessment into the same data collection process used for ESRS disclosures, rather than treating it as a separate exercise. The 10 per cent materiality threshold introduced in January 2026 gives teams a legitimate basis to focus detailed technical screening on core activities first, rather than assessing every line of the business with equal depth. Given that digital tagging remains voluntary but is clearly on a path toward becoming mandatory, teams that structure their Taxonomy data cleanly now, with a defensible audit trail back to the technical screening criteria they applied, will have less rework to do once tagging requirements are finalised.
CFOUR Comply supports iXBRL tagging across ESEF, CSRD, MiCA, and SBR from a single workspace. That structure is built to absorb new tagging requirements, including any future Article 8 mandate, without requiring reporting teams to adopt a separate tool.
Conclusion
The EU Taxonomy adds a defined, criteria-based layer to CSRD reporting rather than a separate compliance track, with eligibility and alignment KPIs sitting inside the same sustainability statement as ESRS disclosures. The Omnibus simplification Delegated Act that entered into force in January 2026 reduced the assessment burden through a new materiality threshold, while digital tagging of these disclosures remains voluntary pending formal EU adoption. Reporting teams that build Taxonomy assessment into their existing CSRD data process now will be better placed for both the current disclosure requirements and whatever mandatory tagging timeline follows.
Talk to CFOUR about bringing EU Taxonomy and CSRD tagging into a single reporting workflow.
Digital tagging requirements for sustainability disclosures are moving from voluntary to mandatory, and preparing your process now avoids a rushed transition later.
No. Only companies within CSRD’s mandatory scope, currently entities and consolidated groups exceeding 1,000 employees and €450 million net turnover following the Omnibus I Directive, must report Article 8 Taxonomy KPIs. Companies outside that scope are not required to disclose them, though some choose to report voluntarily. Taxonomy-eligible means an economic activity is described in the Taxonomy’s delegated acts, regardless of whether it currently meets the sustainability criteria. Taxonomy-aligned means the activity has been assessed against, and meets, the substantial contribution, do no significant harm, and minimum safeguards criteria. Eligibility is typically a much larger percentage figure than alignment. In specific circumstances. Non-EU companies with securities listed on an EU regulated market, or with EU subsidiaries that individually meet the 1,000-employee and €450 million turnover thresholds, must report Article 8 Taxonomy KPIs. Non-EU parent companies reporting at group level under CSRD’s Article 40a are exempt from Article 8 Taxonomy disclosures specifically. Not yet, as of August 2026. Digital tagging of Article 8 disclosures remains voluntary pending formal adoption of an amending Delegated Act to the European Single Electronic Format regulation. EFRAG delivered an original Article 8 XBRL taxonomy module in 2024 but is now updating it as part of its 2026 work programme, with delivery to the Commission and ESMA targeted for December 2026, meaning mandatory tagging is not expected for financial year 2026. What Is the EU Taxonomy?
