Key Takeaways
- Eligibility means the activity appears in the taxonomy's delegated acts; it does not mean the activity qualifies as environmentally sustainable.
- Companies report eligibility as a proportion of turnover, capital expenditure, and operational expenditure.
- The Omnibus delegated act (in force 28 January 2026) introduces a 10% materiality threshold below which activities need not be assessed for alignment.
- Confusing eligibility with alignment in the sustainability statement triggers misclassification that the assurance provider must flag.
What is Taxonomy-Eligible Activity?
The EU Taxonomy Regulation establishes a classification system for environmentally sustainable economic activities. Regulation 2020/852 Article 3 sets out three conditions an activity must satisfy to qualify as taxonomy-aligned: it must make a substantial contribution to at least one of the six environmental objectives, cause no significant harm (DNSH) to the remaining five, and comply with minimum safeguards. Taxonomy eligibility is the preliminary step. If an activity is described in the Climate Delegated Act (EU 2021/2139) or the Environment Delegated Act (EU 2023/2486), it is eligible. The company must then assess whether it also meets the technical screening criteria.
Delegated Regulation 2021/2178 Article 8 requires non-financial undertakings in scope for the CSRD to disclose three KPIs: the proportion of taxonomy-eligible turnover, capital expenditure (CapEx), and operational expenditure (OpEx). These KPIs appear in the sustainability statement alongside the ESRS disclosures. The Omnibus delegated act published in the Official Journal on 8 January 2026 introduced a materiality threshold: where taxonomy-eligible activities cumulatively represent less than 10% of total turnover, CapEx, or OpEx, the entity is not required to assess those activities for alignment. This threshold applies from financial year 2026, with optional early application for FY2025.
Worked example: Rossi Alimentari S.p.A.
Client: Italian food production company, FY2026, revenue EUR 67M, IFRS reporter. Rossi falls within CSRD scope (large undertaking) and must report taxonomy KPIs for the first time.
Step 1 — Identify eligible activities from the delegated acts
Rossi's finance team maps revenue streams against the Climate Delegated Act and Environment Delegated Act activity descriptions. Three activities match: installation of on-site solar panels at the Parma factory (Climate Delegated Act activity 7.6, "Installation, maintenance and repair of renewable energy technologies"), operation of a company-owned fleet of refrigerated trucks (activity 6.6, "Freight transport services by road"), and water recycling infrastructure at two production sites (Environment Delegated Act activity 2.1, "Water supply").
Documentation note: record the mapping of each revenue stream and capital expenditure line to the delegated act activity descriptions. Where an activity falls outside the delegated acts, document why it is taxonomy non-eligible. Retain the NACE code cross-reference for each eligible activity.
Step 2 — Calculate the eligibility KPIs
Solar panel CapEx totals EUR 1.2M out of total group CapEx of EUR 9.4M (12.8% eligible). Fleet-related turnover is EUR 0 (the fleet supports internal logistics, not third-party revenue). Water recycling CapEx is EUR 0.6M (6.4% eligible). Total taxonomy-eligible CapEx is EUR 1.8M (19.1%). Taxonomy-eligible turnover is nil because none of Rossi's external revenue derives from the eligible activities.
Documentation note: record the numerator and denominator for each KPI per Delegated Regulation 2021/2178 Annex I. Explain the treatment of internal logistics (fleet turnover excluded because no external revenue is generated). Cross-check for double counting across activities.
Step 3 — Apply the 10% materiality threshold
Taxonomy-eligible turnover is 0%, so no alignment assessment is required for the turnover KPI. Taxonomy-eligible CapEx is 19.1%, which exceeds 10%, so the entity must proceed to assess alignment for eligible CapEx activities. Taxonomy-eligible OpEx is EUR 0.4M out of EUR 3.1M total taxonomy-relevant OpEx (12.9%), also above the threshold.
Documentation note: record the materiality threshold assessment per the Omnibus delegated act. For each KPI below 10%, document the conclusion that alignment assessment is not required. For KPIs above 10%, document the decision to proceed with the alignment assessment.
Step 4 — Proceed to alignment assessment for above-threshold KPIs
For the solar panel CapEx (EUR 1.2M), the team evaluates the technical screening criteria under Climate Delegated Act activity 7.6, the DNSH criteria for the remaining five objectives, and compliance with minimum safeguards. The water recycling CapEx (EUR 0.6M) is assessed against Environment Delegated Act activity 2.1.
Documentation note: record the technical screening criteria evaluation for each eligible activity, the DNSH assessment against each of the five remaining environmental objectives, and the minimum safeguards verification. Cross-reference the double materiality assessment where the taxonomy disclosures interact with ESRS E1-E5 topics.
Conclusion: Rossi reports 19.1% taxonomy-eligible CapEx and 0% taxonomy-eligible turnover, with the alignment assessment performed only for CapEx activities above the 10% materiality threshold. The approach is defensible because each activity was mapped to a specific delegated act description and the materiality threshold was applied consistently across all three KPIs.
Why it matters in practice
Companies frequently report an activity as taxonomy-aligned when they have confirmed only eligibility. Eligibility requires matching the activity to a delegated act description. Alignment requires passing the technical screening criteria, the DNSH assessment, and the minimum safeguards test. Delegated Regulation 2021/2178 Article 8(2) requires separate disclosure of eligible and aligned proportions. Collapsing the two into a single figure overstates the entity's green credentials and creates a misstatement in the sustainability statement.
The Omnibus delegated act's 10% materiality threshold applies at the KPI level (turnover, CapEx, OpEx), not at the individual activity level. Some teams assess each activity in isolation against a 10% threshold and exclude activities that individually fall below it, even when the cumulative eligible proportion exceeds 10%. This misapplication reduces the scope of the alignment assessment below what the regulation requires.
Taxonomy-eligible activity vs. taxonomy-aligned activity
| Dimension | Taxonomy-eligible | Taxonomy-aligned |
|---|---|---|
| What it means | The activity appears in a delegated act under Regulation 2020/852 | The activity passes all three tests: technical screening criteria, DNSH, and minimum safeguards |
| What it proves | The activity falls within the taxonomy's scope | The activity qualifies as environmentally sustainable under EU law |
| Reporting obligation | Disclose the proportion of eligible turnover, CapEx, and OpEx | Disclose the proportion of aligned turnover, CapEx, and OpEx separately |
| Assessment effort | Low (match the activity description to the delegated act) | High (evaluate technical criteria, DNSH for five objectives, and minimum safeguards) |
| Materiality threshold (post-Omnibus) | Always disclosed regardless of proportion | Alignment assessment required only if cumulative eligible proportion exceeds 10% of the KPI |
The distinction matters on engagements because an assurance provider reviewing the sustainability statement must verify that eligible activities reported as aligned genuinely passed all three tests. Reporting eligibility as alignment is a classification error that inflates the entity's taxonomy KPIs and may constitute greenwashing under the EU's regulatory framework.
Related terms
Frequently asked questions
How do I determine whether an activity is taxonomy-eligible?
Check whether the economic activity matches a description in the Climate Delegated Act (EU 2021/2139) or the Environment Delegated Act (EU 2023/2486). The European Commission's Taxonomy Compass tool lists all eligible activities by NACE code. If the activity appears in the delegated acts, it is eligible regardless of whether it meets the technical screening criteria. Delegated Regulation 2021/2178 Article 8 requires disclosure of the eligible proportion even if the entity has not yet assessed alignment.
Does the 10% materiality threshold mean I can skip taxonomy reporting entirely?
No. The threshold introduced by the Omnibus delegated act (in force 28 January 2026) exempts the entity from the alignment assessment only. The entity must still calculate and disclose the proportion of taxonomy-eligible turnover, CapEx, and OpEx. If the eligible proportion falls below 10% for a given KPI, the entity reports the eligibility figure and states that no alignment assessment was performed, citing the materiality threshold.
When did the new materiality threshold take effect?
The Omnibus delegated act was published in the Official Journal on 8 January 2026 and entered into force on 28 January 2026. It applies to reports covering financial year 2026 onward. Entities reporting on FY2025 may choose to apply the amended rules early or continue under the previous requirements, and must state which set of rules they applied.