The EU's taxonony's Key Performance Indicators (KPIs)
As of January 2023, companies are required to report their alignment to the EU taxonomy. With the introduction of EU taxonomy’s Key Performance Indicators (KPIs) is an important step in the journey of sustainability reporting.
The EU taxonomy requires non-financial undertakings report on the KPIs. Financial undertakings, like banks and investors, need to report on their proportion of investments in companies with taxonomy-aligned activities.
The taxonomy consists of 3 EU taxonomy KPIs- turnover, OpEx and CapEx for your activities.
Within the EU taxonomy, you need to report both on both eligibility and alignment in the following ways:
• Eligibility: The percentage of your KPIs related to the company’s taxonomy eligible activities, in other words the percentage with the potential of being aligned.
• Alignment: The percentage of your KPIs related to the taxonomy eligible activities which also fulfill the taxonomy criteria, and hence is aligned.
There are 3 KPIs for the EU taxonomy that need to be reported on:
1. Turnover
Net turnover, meaning the amounts gained from sale of products. Will for most companies mean that the total turnover used in taxonomy reporting is the same as stated in the revenue statement in the financial reporting.
2. CapEx – Capital expenditure
Total of investments in tangible and intangible assets during the financial year considered before depreciation, amortisation and any re-measurements associated with the taxonomy-eligible activities. More specifically, the taxonomy refers to the CapEx covering costs based on certain international financial reporting standards (IFRS) such as Property, Plant and Equipment, Intangibles etc. listed under “Extract of the CapEx definition from the Disclosures Delegated Act”
3. OpEX – Operational expenditures
- The OpEx used in the taxonomy differs from what most companies report in their financial statements. - The KPI aims to capture non-capitalised costs (i.e. those costs not captured by the CapEx KPI) which relate to investments in assets and processes. The OpEx is therefore a category of costs which “complements” CapEx in relation to investments and in this regard, together with CapEx, will give an indication of a company’s strategy for maintaining or improving environmental performance and resilience. More specifically, the OpEx refers to costs related to research and development, building renovation measures, short-term lease, maintenance and repair and any other direct expenditures.