What else can be simplified in the Taxonomy?

Last week, on 23 March 2026, I had the pleasure of participating in a meeting organised as part of the ESMA Sustainability Standing Committee Consultative Working Group. It was devoted to gathering initial ideas from market practitioners on what else could be simplified in Taxonomy reporting. ESMA is conducting this work in response to a question from the European Commission addressed to the three EU supervisory authorities for capital markets, banks and insurance companies. 

After collecting initial ideas, each authority (ESMA, EBA and EIOPA) will launch a public consultation. Once that is concluded, they will prepare proposals for the Commission and submit them by October 2026. Whether and to what extent the Commission intends to use them remains, of course, to be seen. What is certain is that simplified rules will not apply in reporting for 2026 –there is simply not enough time for that. Most likely, changes to the so-called Disclosure Delegated Act (Commission Delegated Regulation 2021/2178) will be presented on a timeline that would allow them to be applied in reports for the year 2027. 

The proposals I put forward last week partly address the Commission’s questions, and partly go beyond their scope. My specific proposals were as follows: 

1. Revise the definition of OpEx (operating expenditure). This is currently one of the greatest challenges for companies, because while turnover and CapEx are defined by reference to international financial reporting standards, OpEx has a descriptive definition that generates ambiguity and is interpreted differently by companies and auditors. As a result, OpEx is frequently confused with operating costs, and audit practice is inconsistent – particularly when audit firms rotate. 
2. OpEx should be defined either by reference to specific line items in the financial statements, or through a closed descriptive list setting out the items that can always be treated as operating expenditure. For certain sectors, sector-specific add-ons should also exist to reflect their particular characteristics (e.g. for production industry, real estate, transport and energy). 
3. Additionally, companies should be able to include purchases of products and services originating from environmentally sustainable activities in their OpEx. This would strengthen the business case for companies that produce or provide such products and services. 
4. The disclosure on compliance with Minimum Safeguards should be reduced to a single sentence, simply confirming that the due diligence processes applied by the company confirm such compliance. In ESRS-based reports, companies already describe their due diligence processes in sufficient detail; there is no point in repeating those descriptions in the Taxonomy disclosure. 
5. The current requirements for CapEx plans are too rigid. A capital expenditure plan must, for example, be approved by the management board and have a fixed five-year time horizon. What is the point of such bureaucracy? I know many companies that prepare CapEx plans solely for the purpose of having them signed off by the auditor examining the Taxonomy disclosure. The sustainable nature of capital expenditure should be demonstrated by the investments themselves; my proposal therefore comes down to making CapEx plans voluntary. 

I also put forward one further proposal that goes beyond the scope of the Commission’s questions: to get rid entirely of the disclosure of which activities are transitional and which are enabling. This was initially met with resistance, but I asked representatives of banks and investment firms to indicate how much they actually use this information. After the first few responses, it turned out that almost nobody uses it. If nobody needs it, perhaps there is no good reason for companies to spend time identifying which activity falls into which category? 

The simplifications the Commission introduced to the Taxonomy in 2025/2026 were (alongside the ESRS revision) one of the few genuinely sensible elements of the Omnibus. But there is still room for further simplification. Those improvements should be developed through exactly the kind of process currently under way: gather proposals from practitioners, analyse them carefully, and only then develop a legislative proposal. The fact that at least some simplification processes are being conducted in an orderly manner is, I think, grounds for a degree of optimism ? 😊 

P.S. P.S. Spring is a great time to build new skills! MATERIALITY ACADEMY has two courses we recently published. I explain what has changed in the simplified ESRS standards, while Artur Gazda gives a clear account, with numerous examples, of, what due diligence processes involve.You are warmly invited 😊