How new EU taxonomy rules are reshaping sustainability reporting

Ireland leads in eligible turnover (65%) and capex (72%), but lags in alignment. France and Germany benefit from strong mobility and manufacturing sectors, boosting their eligibility rates. Spain and Austria top the charts for aligned turnover and capex, showing that sector mix and regulatory readiness matter. The most eligible sectors are mobility, and power and utilities; but only power and utilities consistently achieves high alignment.

Where a company is based — and what sector it operates in — still makes a difference in taxonomy performance. As the rules tighten, laggards will not be able to hide behind sector averages.

New rules, new challenges — what’s changing and why it matters

The EU is not standing still. Upcoming EU taxonomy changes will simplify reporting for some, but raise expectations and introduce new hurdles for those still required to comply. The Omnibus Simplification Package, expected to take effect in 2026, will: 

• Narrow the scope: mandatory taxonomy disclosures will focus on large enterprises (over 1,000 employees and €450 million turnover). Others may opt for voluntary or streamlined reporting.
• Introduce a 10% materiality threshold: companies can exclude nonmaterial activities from detailed assessment, reducing administrative burden.
• Simplify reporting templates: a 64% reduction in required data points, with more focused templates and the removal of fossil gas or nuclear-specific tables.
• Maintain assurance requirements: limited assurance remains mandatory for in-scope companies, but the focus is on robust, audit-ready documentation.

Fewer companies will be required to report, but those that do will face higher expectations for quality, transparency and auditability. Still, persistent challenges remain:

• Many companies lack the systems and documentation needed for limited assurance, especially for objectives beyond climate change.
• Effective taxonomy reporting demands cross-functional collaboration among finance, sustainability, legal and operations teams.
• Technical complexity and evolving rules mean ongoing education is essential, and many teams have proven to be underprepared.
• Data is often collected manually across fragmented systems, a pattern that is especially common for multinational companies.

Even with the new frequently asked questions (FAQ) and guidance, companies continue to struggle with applying technical screening criteria and minimum safeguards consistently. Compliance is getting harder and companies that treat taxonomy as a routine operation risk falling behind — both in regulatory terms and in the eyes of investors.

The EY EU Taxonomy Barometer 2025 notes timing adjustments through the “Stop-the-clock” directive and a forthcoming content directive that further narrow which companies are in scope. Template revisions consolidate disclosures into one summary and up to three per‑activity tables (turnover, capex, opex), reducing fields by 64%. In parallel, the EU has streamlined “do no significant harm” (DNSH) requirements for pollution prevention and control, and initiated a broader DNSH review, aiming to ease application while keeping the framework robust.

Assurance became mandatory for companies within CSRD scope in FY 2024 and 86% received limited or reasonable assurance. This surge exposed gaps in audit trails and data traceability, with many organizations unprepared for the level of evidence auditors required, especially for objectives beyond climate change.

The expansion of the taxonomy to include four additional environmental objectives in 2023 has increased both the volume and complexity of required data. Many organizations lack centralized systems for efficiently sourcing this information, relying instead on manual data collection processes. Several entities encountered difficulties in gathering and validating the documentation needed to substantiate their alignment assessments, leading some to adopt a conservative approach to reporting.

What companies should do next — actions for future success

The EU taxonomy is not just a compliance exercise — it is becoming a strategic priority for organizations. As regulatory expectations rise and investor scrutiny intensifies, leading companies are already taking concrete steps to strengthen their sustainability reporting frameworks:

1. To keep pace, organizations should invest in robust data systems. Manual processes are likely not enough. Companies will likely need integrated and auditable systems for sustainability data to meet both disclosure and assurance requirements.
2. Strengthening governance is equally important. The report highlights that effective taxonomy reporting depends on cross-functional collaboration, with finance, sustainability, legal and operations teams working together to align financial data with taxonomy-specific metrics. 
3. Ongoing education and capacity building for finance and sustainability teams are key. The complexity and evolving nature of the taxonomy framework mean that finance and sustainability teams should stay up to date with new rules and technical guidance. Many organizations have found that limited awareness and technical understanding among staff have led to inconsistent reporting and a cautious approach to alignment assessments.
4. Preparing for assurance is now a baseline expectation. With limited assurance mandatory for companies within the CSRD scope, organizations should ensure that audit trails and documentation are complete and ready for scrutiny. The report notes that many companies were unprepared for the level of evidence required by auditors, especially for objectives beyond climate change.
5. Engaging with regulators is key. Staying ahead means monitoring updates, participating in consultations and seeking clarification when needed. 
6. Focusing on materiality can help companies streamline reporting under the new thresholds, but transparency and credibility should remain at the forefront.

Ultimately, the integration of CSRD and the EU taxonomy is changing investor expectations. Accuracy, completeness and verifiability are often now the prerequisites for access to capital and reputation. Despite a narrowed scope and some deferred requirements, the direction is clear: organizations that build transparent and audit-ready sustainability reporting frameworks will set standards for the market. Those that take early action will be best positioned to meet stakeholder demands and regulatory requirements as the EU’s sustainability agenda advances.