Fundamentals
The EU taxonomy for sustainable activities (hereinafter “EU taxonomy”) is a classification system that translates the climate and environmental objectives of the European Union (EU) into criteria for sustainable economic activities. For this purpose, the EU taxonomy defines various key figures and qualitative information that the Group must disclose. The disclosure obligation under Article 8 of Regulation (EU) 2020/852 of the European Parliament and of the European Council dated June 18, 2020 on establishing a framework to facilitate sustainable investment and amending Regulation (EU) 2019/2088 (hereinafter “EU Taxonomy Regulation”) and the delegated acts adopted in this regard is being carried out in two phases:
- For 2021, key figures will be stated only for so-called taxonomy-eligible economic activities and will be limited to those that make a significant contribution to climate change mitigation or climate change adaptation as defined by the EU Taxonomy Regulation. An economic activity is considered taxonomy-eligible provided that it is within the scope of the EU taxonomy.
- As of 2022, four further environmental objectives of the EU will be included in the disclosure obligation: 1) sustainable use and protection of water and marine resources, 2) transition to a circular economy, 3) pollution prevention and control, and 4) protection and restoration of biodiversity and ecosystems. In addition to the degree of taxonomy eligibility, the share of taxonomy alignment of the identified economic activities will then also be disclosed. According to the EU taxonomy, an economic activity is considered taxonomy-aligned if it makes a significant contribution to at least one of the six environmental objectives while ensuring that such an activity does no significant harm to the remaining objectives or the social minimum safeguards.
For the environmental objective “pollution prevention and control,” which is to be disclosed for the first time for the 2022 reporting period, the Group expects a higher share of taxonomy-eligible economic activities than for the objectives “climate change mitigation” and “adaptation to climate change” that are reported for the 2021 reporting period. This assessment is based on proposals for technical assessment criteria by the “Technical Working Group of the EU Platform on Sustainable Finance” dated August 3, 2021, which, with respect to the environmental objective “pollution prevention and control”, list the production of chemicals, pharmaceutical and chemical products, and pharmaceutical preparations without further specification as taxonomy-relevant economic activities. These proposals will flow into the development of the delegated act through which the European Commission will define the technical evaluation criteria in 2022.
Approach
To ensure the timely and legally compliant fulfillment of its disclosure obligations, the Group established an interdisciplinary project team that is analyzing the existence of taxonomy-eligible activities in close coordination with the representatives of the business sectors and various Group functions. The identification of the taxonomy-eligible economic activities for the first two environmental objectives proceeded in line with a top-down approach using structured inquiries submitted to the relevant departments. The results of this analysis were confirmed by supplementary big-data supported analyses as part of a bottom-up approach. Among other things, information was used that can also be found in connection with the requirements of the REACH regulation as well as in the context of customs declarations.
The three key figures net sales, capital expenditure and operating expenditure were mainly derived from existing financial reporting systems. Double counting is excluded by the very nature of the procedure.
Accounting principles
To review the taxonomy-eligibility of an economic activity, for manufacturing-related activities, the Group applies an end-product oriented approach. This means that the end product must result from one of the economic activities named in the delegated act. In the case of chemical products, the corresponding economic activities are only considered taxonomy-eligible if the end product is an organic basic chemical within the meaning of the delegated acts for the environmental objectives “climate change mitigation” and “climate change adaptation”. The manufacture and distribution of specialty chemicals, which represent the core activities of the Life Science and Electronics business sectors, are not covered by this definition.
Furthermore, the Group only takes into consideration the manufacturing activities named in the delegated act if these are linked to a significant transformation process. In our interpretation, products that are merely passed on for sale, repackaged or mixed do not qualify as taxonomy-eligible within the meaning of the EU Taxonomy Regulation. In particular in the Life Science business sector, net sales from the sale of organic basic chemicals or plastic products are not taxonomy-eligible in the vast majority of cases due to the lack of a manufacturing process.
The economic activities specified in the delegated act are also considered taxonomy-eligible with respect to capital expenditure and operating expenditure if they are only performed for company-internal purposes and do not generate any sales with third parties. For example, this means that in the viewpoint of the Group, capital expenditure and operating expenditure incurred in conjunction with the renovation of buildings for own use are also within the scope of the EU Taxonomy Regulation. By contrast, the Group considers neither economic activities in the context of the construction of new buildings nor the acquisition and ownership of buildings to be taxonomy-eligible.
The definition of relevant net sales for the purposes of the EU Taxonomy Regulation corresponds to the definition of net sales in the consolidated financial statements (see Note (9) “Net sales” in the notes to the consolidated financial statements). Within the Group and within the meaning of the EU Taxonomy Regulation, capital expenditure in the reporting period comprises additions to property, plant and equipment (IAS 16), rights of use assets from leases (IFRS 16), and intangible assets (IAS 38) with the exception of goodwill. Apart from the additions, advance payments for the named assets are also included. Operating expenditure relevant within the scope of reporting under the EU Taxonomy Regulation include direct, non-capitalized research and development costs, low-value leases, building renovations, maintenance and repair, and all other direct internal and external expenses related to the day-to-day maintenance of property, plant and equipment that are necessary to ensure the continuous and effective functioning of these assets.
Key figures and qualitative information
The following overview presents the share of net sales, capital expenditure and operating expenditure attributable to taxonomy-eligible economic activities in respect of the environmental objective “Climate change mitigation”.
Key Performance Indicator |
|
Reference value in the reporting period 2021 |
|
Share of the taxonomy-eligible economic activities |
|
Share of the not taxonomy-eligible economic activities |
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|---|---|---|---|---|---|---|---|---|---|---|
Net sales |
|
19,687 |
|
< 1% |
|
> 99% |
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CapEx |
|
1,817 |
|
< 1% |
|
> 99% |
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OpEx1 |
|
2,692 |
|
< 1% |
|
> 99% |
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|
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The lower share of taxonomy-eligible net sales, capital expenditure and operating expenditure in connection with the environmental objective “climate change mitigation” is mainly due to the very limited conformity of the business activities of the Group with the economic activities stated in the EU Taxonomy Regulation. The low amount of net sales from taxonomy-eligible economic activities was generated in the manufacture of energy efficiency equipment for buildings. The share of taxonomy-eligible operating and capital expenditures was largely attributable to the renovation of existing buildings.
Research and development expenses accounted for € 2,408 million of the presented operating expenditure with € 1,712 million of this being attributable to the Healthcare business sector.
No additional taxonomy-eligible net sales, capital expenditure or operating expenditure were identified for the environmental objective “climate change adaptation”.