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What do the Olympics and the EU taxonomy for sustainable activities have in common? More than you think

The European Union’s new taxonomy for sustainable activities went into effect on January 1, bringing with it a deluge of reporting requirements that determine if a company’s activities can be labeled sustainable.

To make sense of what the new reporting requirements mean for European companies and the wider green finance movement, we sat down with Petter Reistad, CEO of the sustainability scoring startup Celsia.

Sustainability reporting is a bit like the Olympics, Reistad explained. Coming in first and climbing to the top of the podium feels amazing, but just participating is an experience in itself. What you don’t want to do, however, is finish last.

Reistad knows what he’s talking about. A former professional skier, Reistad won a gold medal at the 2014 Nordic Junior World Ski Championships, and success at the Olympics runs in his family. Reistad’s great grandfather won a gold medal at the 1928 Winter Olympics, while his sister branched out of winter sports to win the bronze medal in 2021 with the Norwegian women’s handball team.

2022 is a big year, both for the Olympics and sustainability reporting. If you’re a European company, what do you need to know?

Petter Reistad: The EU has put in place a sustainable finance framework called the taxonomy. It defines criteria for a set of activities that the EU believes will contribute substantially to the union’s sustainability goals. The EU has called the taxonomy one of the most important initiatives that need to succeed for the union to reach carbon neutrality by 2050. 

As a European company of almost any size, this will affect you. 2022 can be considered the mass start. Large publicly listed companies will have to start assessing and disclosing their sustainability score already this year, while small and medium-sized companies have another two years before the requirements hit them. 

Companies may see that getting a high score may boost their access to capital and investor attractiveness, as we’ve seen both green loans and green investments increasing in popularity over the last few years. 

At the very least, companies should assess how they’ll score under the new framework to avoid surprises and consider taking action to improve their score. Sustainability is not an area that you’d like to be the laggard in.

The road to the rollout has at times seemed more grueling than the 50-kilometer cross-country competition. What have we learned since the taxonomy was unveiled? What has changed?

PR: One of the most fascinating things we’ve seen is that there haven’t been that many major changes. There’s been lots of debate and discussion, including about how to classify natural gas and nuclear power. Never before has the EU received this much feedback on proposed legislation, but the union has stuck to its schedule. It’s been a real sprint to reach the January 1 finish line.

Another thing that’s significant is that, usually, companies and industries are lobbying against reporting requirements. In this case, it’s the complete opposite. Everybody’s working to be included—even the oil and gas industry. Companies and industries are realizing that everybody benefits when everybody competes on the same terms.

What company or industry deserves a gold medal so far for their work with sustainability reporting?

PR: The consumer industry is once again leading the way, just like it did with digital transformation. A lot of it is because of pressure from consumers. Think about it: When you’re searching for flights, you can see an estimate of your trip’s CO2 emissions. Some restaurants are even printing the environmental impact of each meal on their menus. 

What we’re seeing with sustainability reporting is the same as we saw in digital transformation—it starts in the consumer industry, and then it gradually catches on in the business-to-business sector.

European countries—once again—dominated the Winter Olympics. Europe is also leading the world in defining sustainable economic activities. How are other countries and regions working to catch up?

PR: Other regions are in hot pursuit. We’re seeing similar taxonomies pop up all over the world. Governments and industries are seeing what an effective tool it can be, and they’re skating to where the puck is going.

In cross-country skiing, you obviously want to take the lead and stay there, but when it comes to taxonomies, hanging out in second place isn’t a bad idea. Like a skier clearing the tracks for the pursuers on a snowy day, the EU is doing all the legwork. Other regions can hang back and adapt the skeleton that the EU has created—standards, criteria, methodology, and so on—and from that advantageous position, they could quickly make a move and go for the gold. 

In Europe, the idea for a common framework for sustainable economic activities has slalomed its way through the bureaucracy and been championed by the moguls of the European Commission, but in other parts of the world, companies, industries, and nongovernmental organizations are often the ones behind the push. Europe is an important market, and they don’t want to be sidelined in favor of European companies. I think that bodes well for wider, global adoption.

“Sportswashing”—the act of hosting a major sporting event to improve a country’s image—was named the 2021 word of the year in your native country of Norway. The EU taxonomy is meant to combat greenwashing. How does it do that?

PR: What I like about the taxonomy is that it’s tightly linked to business activities. It’s not about whether your company buys locally sourced food for the cafeteria or stops printing documents, but about how sustainable your core business activities are.

There seems to be a consensus forming that the taxonomy is going to have a major impact. If not, we wouldn’t have seen this kind of frenzy over what it covers and what it doesn’t. The growing sentiment is that what’s being decided today is going to shape our future energy mix and investment patterns—and help us reach net zero.

We get asked by many companies if we can help them improve their score. And yes, we certainly can. But in the end, EU taxonomy scoring is a bit like the Olympics. A solid training camp the last few weeks before the competition may boost your performance a bit, but to become a top performer you’ll need to start earlier—it’s a long game. Whatever your goal is, long- or short-term I recommend starting with a first round of scoring to see where you’re at and what you could do to improve.

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