Companies reveal how much it’s costing them to comply with the EU Taxonomy

Companies are assigning up to 50 staff to EU Taxonomy compliance, and spending hundreds-of-thousands on consultancy bills.

That’s what the UK Government has said in a report based on interviews with 39 firms covered by the regulation, which requires them to explain the proportion of their revenues and spending that aligns with Europe’s sustainability objectives.

“Reporting corporates shared that the Taxonomy reporting requirements could be covered by two team members at the lowest end, and up to 50 people at the highest end,” said the Department for Business & Trade in its findings, published last week.

It pointed out that, although these staffing levels seem high, in reality the same people usually cover other reporting requirements too, and don’t spend more than half of their total working hours on taxonomy.

Larger corporates that participated in the study estimated that staff costs would reach between £350,000 and £600,000 over the near term.

But it’s consultancy fees that have reportedly created the biggest bills so far when it comes to Taxonomy compliance.

“The approach to use of consultancies differed across reporting corporates to fulfil different needs, but the most common method of engagement in the first reporting year (or the year preceding the first reporting year) is to use a consultancy to conduct gap analysis, map the data requirements with internal systems and establish eligibility,” observed the report.

“These consultancy teams were commonly from the Big Four and could include small external teams of two to five people.”

15 of the firms interviewed said consultants cost them between £50,000 and £100,000 during their first year of Taxonomy reporting.

“They shared that this cost would often sit within the wider context of [the EU’s Corporate Sustainability Reporting Directive], where a large multinational could expect to pay £50-100,000 for a readiness assessment and £200-600,000 for implementation,” the paper explained.

“However, in our interviews, the very large corporates reported having significant amounts of information to process and quoted estimates of hundreds of thousands for Taxonomy reporting alone.”

One of the bigger participating firms estimated £200,000 for the first year and £80,000 annually thereafter.

The most expensive way to use consultancies was to pay them to conduct specialist taxonomy-related tasks like life cycle analysis.

“On a site-by-site basis, a European energy company estimated nuclear and gas assets to cost €30,000-€50,000 each and for smaller assets to cost €10,000 each,” said the report.

Lots of the companies interviewed expect the costs to go down once they’ve establish the taxonomy-compliance process, with some planning to use consultancies to build internal knowledge in the first few years before taking the process in-house.

“However, in an interview, a Director at a Big Four consultancy was sceptical about the viability of these types of corporates being able to do this independently given the many future reporting stages that are to come, as well as the changes that are incrementally rolled out by the EU in FAQs and clarifications,” said the paper.

Financial institutions and service providers were also among those interviewed during the research, which took place last year.

The previous UK government had cooled on the idea of creating a national equivalent to the EU Taxonomy, so the results of the study were put on hold. But the new government has just launched a consultation on whether it should pick the project back up.