Challenges and Opportunities of Reporting on the EU Taxonomy: A Danish Perspective

Abstract

This thesis investigates what challenges and opportunities Danish companies are facing in relation to the mandatory reporting on the EU Taxonomy. The EU Taxonomy is a classification system created by the European Union to determine which activities can be considered sustainable. The purpose is to create a unified approach to sustainability, which can be used by companies, investors and the public sector, in order to combat greenwashing and promote sustainable finance to achieve the green transition.

The study follows an inductive approach and employs Grounded Theory in an attempt to generate a conceptual framework based on patterns discovered in the empirical data. This approach was carefully chosen, as the literature revealed that while there is a vast body of literature on the EU Taxonomy, this is primarily investment-oriented, while close to no academic works addresses the implications for the business community. The findings are based on qualitative, semi-structured interviews conducted with 11 Danish companies currently reporting on the EU Taxonomy. The interview transcripts are initially processed in Nvivo, then in a manual, collaborative, focused coding, before being clustered over several rounds to digest the findings into consolidated themes.

The thesis examines how companies have approached the EU Taxonomy, how this has been done in terms of interpretation, as well as how companies have organised their teams and sustainability leadership. Second, we look at the compatibility and accessibility of the framework for companies in specific sectors, how it is used by companies, as well as how it relates to other EU frameworks. Third, we look at how stakeholders have been included in the implementation process, as well as how external pressure from customers and investors is affecting company reporting on the EU Taxonomy, as well as to what extent it adds value. Finally, we look at due diligence, how greenwashing concerns play a role, and how lack of political inaction might lead to opportunity seeking.

After presenting the findings, the thesis discusses their relevance in connection with the research process, to illustrate how we ended up with our empirical data. We then move on to discuss the various implications our findings have for companies, in connection with their interpretation of the EU Taxonomy and their internal structures; for the public sector in Denmark, in terms of what can be done by the state to facilitate the EU Taxonomy and enforce it; for the EU, in terms of the controversies surround the EU Taxonomy, as well as its compatibility with the Corporate Sustainability Reporting Directive (CSRD), and the future outlook of the EU Taxonomy; and finally for external stakeholders with a focus on auditors and investors.

In conclusion, we find that while the EU Taxonomy is a new and complicated topic, making it difficult to produce a clear-cut framework to explain it, our findings suggest that companies can overcome the difficulties and challenges that they have encountered whilst reporting on the EU Taxonomy through different processes. This thesis is amongst the first of its kind in the field and contributes with novel insights into the implications, challenges and opportunities Danish companies as they are adapting to this new reporting requirement. Hence, it lays the ground for further research in the field, which could focus on the implications on a broader group of companies subject to reporting, a similar study in other EU member states, as well as a comparative analysis of the implications, challenges and opportunities across the EU member states.