As the business world further expands, many opportunities for investment make themselves known. You can find quite countless business deals that make sense and will beat fruit. In Europe, the creation of the EU taxonomy is getting popular today.
Let’s get a proper idea of what the taxonomy solution is according to Celsia. See how it can apply to your business and how taxonomy will be going forward. Perhaps you may even want to participate in what appears to be a promising future for your company and investments. You can gain profit and get a chance to do sustainability reporting. Actually, every industrial player needs to know about the EU taxonomy.
Table of Contents
Before getting into the best taxonomy solution, we have to talk about what exactly it is. Anyone with even the smallest amount of knowledge of secondary school biology knows a little about taxonomy. To put it short, taxonomy is just a fancy way of saying classification. In the case of biology, animals, plants and all living things are put into categories that deepen until we reach a specific organism.
Business wise, taxonomy is also a way to classify businesses and investments, only according to how sustainable they are. The European Union has made it clear that it intends to make itself carbon-neutral by 2030. The general encouragement it gives the public to live greener lives is a way to hit this goal.
Applying the same concepts to the business world is a much larger step forward. Though it is in its early stages, those at the helm of the EU hope that by 2030, most if not all businesses are greener. If that becomes the case, the monetary rewards will likely be on par with the climate’s.
How Taxonomy Works
We now know what taxonomy is and have an idea of its ultimate goal. This does make one wonder just how it is all going to function. To better understand this, we have to look at taxonomy as if it is a manual that gives people an idea of where they fit.
One of the most important aspects of this manual is the screening criteria. This is a guideline that has all the objectives the EU needs for businesses to meet in order to become carbon-neutral. These general objectives include the following:
- Mitigating the ongoing climate crisis
- Building and using innovative technology to combat climate change
- Protecting water and avoiding its waste
- Reducing and eventually eliminate pollution
- To look after the ecosystem
Companies of all sizes and types will also be encouraged to change their ways in order to be placed under the green umbrella. This applies especially to operations that are prone to destroying the environment such as construction and energy.
If your company falls under the green umbrella according to the taxonomy, it is considered to be aligned. The hope is that terms of the taxonomy are made final and are universally accepted. When this happens, companies in alignment will get the best financial deals and investment positions.
As this process furthers, there will no doubt be businesses that pretend to be greener than they are. Such businesses take part in a practice called greenwashing. This false activity creates a persona of a green company and does not help the EU and it’s goals.
The taxonomy is also built to exclude such companies as they do not meet their standards. This will become the case even more as the taxonomy reaches the mandatory state. When this happens, checking in on companies claiming to be green will be the norm.
Taxonomy and its Benefits
The intent of taxonomy is the preservation of the natural world as well as the growth of a green economy. This in of itself carries quite a few benefits for those already in on the whole thing. Without further hesitation, here are just a few of the main benefits of taxonomy:
1. Interest Rates
If the growth of a green economy goes in the way those at the helm have planned, it will have a great effect on banking. Interest rates especially on loans will be favorable for those with affiliations to green businesses.
2. Attracting Investors
This is probably the biggest benefit as all others point to it. Things such as low interest rates that will come with taxonomy alignment are just among the things that will attract investors. Equally there is something about the excitement surrounding innovation that will do the same.
3. Gaining a Better Reputation
It is clear as day to see that climate change is one of the world’s biggest problems. This is so true that some would even call it a crisis. As such, any involvement in activities that fight climate change are held in high regard. This means that companies that have green aspects have good reputations and attract further investment.
As mentioned earlier, if things go according to plan and taxonomy is widely accepted, all businesses will flock to becoming green. Which means that all green sectors will be rife with competition. This could mean that some businesses will suffer if they don’t make the cut.
However, there are ways to gain a competitive edge and it entails involvement in as much green activity as possible. Dipping your toes in many sustainable projects increases your chances of gaining more investment. In turn the likeliness of success also increases.
As 2030 approaches, you can see that there is a bit of a race against time to reach a carbon-neutral state. That said, this period leading up to that deadline is rather exciting especially for those involved in green technology. Investors are always keeping their eyes peeled looking for the next big thing.
If green energy for example makes a breakthrough, early investors will no doubt see great returns. As it stands, there aren’t many solid advancements that make the taxonomy more mandatory. In fact, only one delegated act has been passed, something that will be checked in the future.