The EU Sustainability Taxonomy : How It Started and How It’ll Be

The content, spectrum, and complexity of sustainability reporting and disclosure have been drastically changed in the European Union in recent years. Starting in March 2018 with the Action Plan on Financing Sustainable Growth and continued with the European Green Deal in December 2019 and the Taxonomy Regulation in June 2020, the EU announced a totally new reporting and disclosure system, focusing on aligning with sustainability, globally expressed in the UN Sustainable Development Goals and the Paris Agreement as overarching sustainability deals. As its Action Plan’s first action, the EU launched a taxonomy system backed by the Taxonomy Regulation and fortified by delegated acts, defining the new fundamentals of reporting and disclosure system in the union. The EU Taxonomy interacts with the Non-Financial Reporting Directive (NFRD) or proposed Corporate Sustainability Reporting Directive (CSRD) and Sustainable Finance Disclosure Regulation (SFDR). Considering all the new features and proposals of the EU’s new reporting and disclosure initiative, it can be said that the EU introduced a new bedrock for its financial system to change the course of financial flows. This study focuses on the EU’s new reporting and disclosure system by discussing and answering the question “how will the EU Taxonomy affect the sustainability reporting and disclosure system in the EU” by elaborating on the current taxonomy regulations and new sustainability standard-setter organizations and envisaged financial system