EU Taxonomy Simplification
Using the Temporary Relief Period Strategically
On 8 January 2026, the European Commission published a Delegated Act simplifying EU Taxonomy reporting. The Act introduces targeted relief measures to reduce operational complexity, especially for organizations still building data, controls, and system readiness.
Rather than fundamentally redesigning the EU Taxonomy, the Commission has introduced a temporary recalibration of its application. The measures acknowledge that implementation timelines and data availability have, in many cases, been misaligned with operational reality, while preserving the core structure, objectives, and classification logic of the framework.
Key changes at a glance
- Materiality Threshold: A new quantitative materiality threshold (10%) allows undertakings to exclude immaterial economic activities from detailed Taxonomy assessment. This reduces data collection and focuses alignment analysis on activities contributing meaningfully to revenue, CAPEX, or OPEX.
- Simplified Reporting Templates: Revised templates simplify disclosures and allow deferral for FY2025, giving organizations continuity while stabilizing reporting processes.
- Refined DNSH Criteria: Targeted adjustments, particularly under the Pollution Prevention & Control objective, may affect activity-level eligibility and alignment outcomes, requiring careful reassessment.
- Temporary Opt-Out for Financial Institutions: From 1 January 2026 to 1 January 2028, financial undertakings may opt out of detailed EU Taxonomy reporting, significantly reducing short-term compliance pressure.
- Delayed KPIs: Trading Book and Fees & Commissions income KPIs are deferred until 2028, reflecting ongoing methodological and data challenges.
Why This Matters Strategically
The Delegated Act represents a targeted easing of short-term compliance pressure rather than a shift away from the EU Taxonomy itself. While reporting requirements are temporarily simplified, the underlying classification system and its relevance for capital allocation, transition planning, and sustainable finance remain intact.
In practice, this means EU Taxonomy relevance is increasingly shifting from explicit reporting obligations toward implicit financing expectations. Even where financial institutions make use of temporary opt-outs, Taxonomy-Alignment criteria are likely to continue informing credit assessments, transition finance frameworks, and investment decisions, particularly for capital-intensive sectors.
For non-financial companies, the introduction of a materiality threshold enables sharper prioritization and more effective integration of Taxonomy considerations into investment planning and transition strategies. The relief period lets companies focus on economically relevant activities instead of broad, resource-intensive reporting.
For financial institutions, the temporary opt-out provides breathing space, but also introduces strategic risk. Organizations that treat the relief period as a pause in EU Taxonomy implementation may underestimate the pace at which implicit expectations from investors and supervisors continue to evolve. As a result, banks and their clients could face rushed implementation and gaps in systems or processes when full reporting obligations resume.
In practice, this means EU Taxonomy relevance is increasingly shifting from explicit reporting obligations toward implicit financing expectations. Even where financial institutions make use of temporary opt-outs, Taxonomy-Alignment criteria are likely to continue informing credit assessments, transition finance frameworks, and investment decisions, particularly for capital-intensive sectors.
For non-financial companies, the introduction of a materiality threshold enables sharper prioritization and more effective integration of Taxonomy considerations into investment planning and transition strategies. The relief period lets companies focus on economically relevant activities instead of broad, resource-intensive reporting.
For financial institutions, the temporary opt-out provides breathing space, but also introduces strategic risk. Organizations that treat the relief period as a pause in EU Taxonomy implementation may underestimate the pace at which implicit expectations from investors and supervisors continue to evolve. As a result, banks and their clients could face rushed implementation and gaps in systems or processes when full reporting obligations resume.
Balancing Simplification and Integrity
Some political and civil society stakeholders have raised concerns about the simplification measures. Critics argue that introducing a materiality threshold and narrowing certain DNSH criteria could reduce the scope of disclosure compared to the original Taxonomy Regulation and create legal uncertainty around the consistent application of environmental safeguards.
They also warn that allowing activities to be treated as non-material below a quantitative threshold may weaken comparability and transparency across disclosures, increasing the risk of inconsistent interpretation and greenwashing. While a motion to object to the Delegated Act was ultimately rejected by the European Parliament, these critiques highlight the need to balance simplification with environmental integrity and sustained market confidence in the EU Taxonomy framework.
Nevertheless, the Commission’s message is clear: the relief period should be used to strengthen alignment, governance, and decision-usefulness – not to pause or disengage from Taxonomy obligations.
They also warn that allowing activities to be treated as non-material below a quantitative threshold may weaken comparability and transparency across disclosures, increasing the risk of inconsistent interpretation and greenwashing. While a motion to object to the Delegated Act was ultimately rejected by the European Parliament, these critiques highlight the need to balance simplification with environmental integrity and sustained market confidence in the EU Taxonomy framework.
Nevertheless, the Commission’s message is clear: the relief period should be used to strengthen alignment, governance, and decision-usefulness – not to pause or disengage from Taxonomy obligations.
What Companies Should Do Now
- Reassess Taxonomy scope using the new materiality threshold and document decisions in a defensible and auditable manner.
- Decide strategically on reporting approach, whether to adopt simplified templates immediately or use the FY2025 deferral to stabilize data, processes, and internal controls.
- Use the relief period to build readiness by strengthening data systems, governance structures, and internal controls. In practice, most organizations require multiple reporting cycles to reach full operational maturity ahead of renewed obligations from 2028 onwards.
- Review DNSH interpretations, particularly for Pollution Prevention & Control, to ensure alignment with revised eligibility and alignment criteria.
- For financial institutions, maintain EU Taxonomy-Alignment in financing, risk management, and investment decisions during the opt-out period, leveraging strengthened governance, controls, and data.
Regulatory Outlook
While the current Delegated Act addresses the most pressing implementation challenges, further technical refinements remain possible. These are most likely to affect technical screening criteria, DNSH interpretations, and sector-specific disclosures.
Organizations should therefore expect greater short-term stability in the overall framework, combined with incremental technical adjustments, rather than additional structural simplification of the EU Taxonomy.
Organizations should therefore expect greater short-term stability in the overall framework, combined with incremental technical adjustments, rather than additional structural simplification of the EU Taxonomy.
To support organizations in interpreting the EU Taxonomy Simplification Delegated Act and preparing for the next reporting phase, DEKRA offers EU Taxonomy Advisory. The advisory covers the new materiality threshold, updated DNSH criteria, and alignment with ESRS and financial reporting.
DEKRA also provides EU Taxonomy and Sustainable Finance Training to help sustainability, finance, and risk teams understand the practical implications of the simplified requirements and prepare for full reporting obligations in 2028.
Learn more:
EU Taxonomy Training Course