EnBW audited almost its entire business portfolio based on the criteria of the EU taxonomy for the first time in the 2021 financial year – without being obligated to do so. Why?
Dr. Lothar Rieth, Head of Sustainability at EnBW
It’s important to say upfront that implementing the EU taxonomy is without doubt a strenuous and complex process that involves numerous teams and lots of overtime, and requires some convincing and persuasion here and there – but it is all worth it in the end. We have to keep in mind that this initial effort is something that we will benefit from in subsequent years when the process becomes anchored in the company. We were in the fortunate position that we had already been publishing an integrated annual report since 2014. This meant that we were able to build on existing cross-functional structures.
Irrespective of the specific requirements, however, we have been strongly committed to pushing forward the development of the EU taxonomy since the very beginning. The EU’s basic idea of introducing a classification system for sustainable business activities is not only a good one but something that is urgently required. The EU will not be able to secure the amount of investment necessary to make the continent climate neutral by 2050 without the private sector.
This means, on the one hand, that financial market players will have to offer sustainable financial products to both private and institutional investors, while on the other hand, they will be reliant on the real economy actually working in a sustainable way and providing correspondingly robust data. If unified standards are developed in this area, it will bring greater transparency and less greenwashing. All sides will benefit from it in the end.
Where is there potential for optimization?
Of course, the regulations themselves and how each of them is interpreted are still in flux, which is in the nature of these things. Based on our experience, we can safely say that with a healthy dose of pragmatism it is still possible to apply the rules despite the high level of complexity. For the energy industry, in particular, a clearly defined catalog of requirements is already largely available. Above all, we warmly welcome the most recent decision to recognize gas as a transition technology on the path to a hydrogen economy. However, we do fear that there is a danger of overregulation in a few areas: the testing specifications with respect to the “” requirements go a little too far in some areas. We are accompanying developments with a constructive mindset and also sharing our experiences, both at related events and through our comprehensive reports on the EU sustainable finance taxonomy.
And how is EnBW performing?
If we look at the two most important performance indicators for our reporting, 63 percent of adjusted EBITDA – a voluntarily reported KPI – and 68 percent of capex are taxonomy-aligned and therefore considered sustainable. We are delighted by this result and believe it shows that we are on the right track overall, but we still want to improve in the future.
The most important thing in this context is that we can use these figures to verify that our business strategy is forward-looking. We emphasize this aspect in all of our discussions with other companies and those interested in the taxonomy, and can show them that by applying the EU taxonomy they can disclose their sustainable activities in black and white, and audited, as is the case at EnBW. You can’t really provide more credible information than that.
Do no significant harm
The actual business activity must make a substantial contribution to an EU environmental objective, such as climate change mitigation. At the same time, it must do no significant harm to any other environmental objective.