The European Commission has unveiled major reforms to the EU Taxonomy, significantly reducing the compliance burden for companies while maintaining momentum toward the bloc’s ESG goals and carbon neutral strategy. Part of the broader Omnibus I package introduced in February, the changes are set to apply from early 2026, covering the 2025 financial year. 

The EU Taxonomy, a core component of the EU’s Sustainable Finance Action Plan, classifies economic activities that contribute to one or more of six environmental objectives—such as climate change mitigation, circular economy, and biodiversity protection—while ensuring they Do No Significant Harm (DNSH) to others. Its goal is to direct capital toward sustainable investments across Europe. 

Key Simplification Measures: 

• Reduced Reporting Complexity: The number of datapoints in reporting templates has been cut by 64% for non-financial companies and 89% for financial firms. 

• Exemptions for Non-Material Activities: Companies are no longer required to assess taxonomy alignment for activities contributing less than 10% of revenue, capex, or opex. 

• Simplified Opex Reporting: Non-financial companies can skip taxonomy eligibility assessments for operating expenses deemed immaterial, only needing to disclose total opex and a justification. 

• Streamlined GAR (Green Asset Ratio) and DNSH criteria: New adjustments simplify requirements for financial institutions, especially for pollution prevention and chemical use. 

Commissioner Maria Luís Albuquerque emphasized the reforms are a step toward a more “growth-friendly, usable, and proportionate sustainable finance framework” that balances regulatory clarity with Europe’s long-term ESG and carbon neutrality commitments. 

The proposal now enters a four-month scrutiny period by the European Parliament and Council, after which the changes are expected to take effect. The overhaul aims to make ESG compliance more achievable while still enabling the EU to meet its ambitious climate and sustainability goals. 

Source : 

https://www.esgtoday.com/eu-launches-major-simplification-of-sustainability-taxonomy-to-ease-compliance-burden-on-companies/