EU Taxonomy Review 2026: What Changes to Technical Screening Criteria Could Mean for Companies

Two separate EU Taxonomy revisions are running at once, on different timetables, and companies tracking one frequently miss the other.

The first concerns the technical screening criteria themselves, the conditions an economic activity must meet to count as sustainable. Draft amendments to the Climate and Environmental Delegated Acts were published on 17 March 2026 and feedback closed on 14 April.

Read the application timing carefully, because it is more immediate than it first appears. The Commission aims to adopt the amendments in the third quarter of 2026. After a scrutiny period of up to six months, they could enter into force by 1 January 2027 and apply from 2026 reporting periods, with no transitional reliefs currently proposed. In other words, the financial year now running is expected to be reported against the revised criteria, not the current ones.

The second track concerns disclosures, meaning what has to be reported under Article 8 and in what format. The Commission issued its call for technical advice on 5 March 2026, the European Supervisory Authorities ran three consultations from 1 July closing 12 August 2026, final advice is due by October 2026, the Commission aims to complete its review in the first quarter of 2027, and the revised requirements are expected to enter into force in the third quarter of 2027.

A company that prepares for new criteria but not new reporting formats, or the reverse, will be half ready. Here is what each track does.

What The March 2026 Draft Actually Does

The Commission published two draft delegated acts on 17 March 2026, one amending the Climate Delegated Act and one amending the Environmental Delegated Act. Together they cover the criteria for alignment with all six environmental objectives: climate change mitigation, climate change adaptation, sustainable use and protection of water and marine resources, transition to a circular economy, pollution prevention and control, and protection and restoration of biodiversity and ecosystems.

They emerged from a Call for Evidence run from November to December 2025, which placed particular emphasis on usability, simplification and legal clarity, and they build on stakeholder input gathered through consultations and workshops.

Four things the drafts do. They streamline criteria that had become unnecessarily complex. They clarify how compliance is to be demonstrated, which is the area generating the most disputes in practice. They align criteria with EU legislation that has been updated since the original acts were written. And they update criteria to reflect technological progress, which matters in sectors where the original thresholds have been overtaken by what is now commercially available.

The stated objectives are to boost taxonomy adoption by making it easier to use, improve access to green finance and enhance market transparency through clearer disclosures.

What The Draft Deliberately Does Not Do

Three exclusions define the scope of this exercise, and understanding them prevents wasted effort.

Core policy choices are not being reopened. The intention is to make the criteria clear, coherent and workable in practice without lowering environmental ambition. Companies hoping the review would relax substantive thresholds will be disappointed, and those fearing it would tighten them can relax.

New economic activities are not included. Adding activities to the taxonomy is deferred to subsequent initiatives. If your activity is not currently covered, this revision does not change that.

Substantial revisions requiring further technical analysis or policy consideration are deferred. Where a criterion is genuinely contested rather than merely awkward, the Commission has pushed it into later work rather than resolving it now.

So this is a usability exercise. It should make compliance cheaper and less ambiguous for activities already in scope. It will not expand the universe of eligible activities or change the underlying ambition level.

Which Activities Are Affected

The changes reach most activities under both delegated acts, spanning forestry and environmental protection, manufacturing, energy, transport and construction.

Critically, they also cover all the generic do no significant harm criteria. That is the part with the broadest reach, because DNSH applies across every activity regardless of sector. A company assessing alignment for any activity has to satisfy DNSH against the five objectives it is not substantially contributing to, and the generic criteria are where much of the practical difficulty has concentrated.

For most reporting companies, the DNSH changes will matter more than any sector-specific amendment, simply because they touch every assessment.

The Usability Problem Being Addressed

The review exists because of a specific and well-documented failure. Feedback from companies has consistently shown that proving taxonomy alignment is overly complex and duplicative, creating substantial administrative burden that is disproportionate to the value of the resulting disclosure.

Three patterns recur in that feedback.

Compliance demonstration is unclear. Criteria specify what must be achieved but not always what evidence suffices. Companies over-document defensively, and auditors and assurers apply inconsistent expectations.

Criteria have drifted from other EU law. The delegated acts were written at a point in time, and subsequent legislation has moved. Where a criterion references an outdated legal standard, companies face a choice between literal compliance with the taxonomy and compliance with current law.

Thresholds have been overtaken by technology. In fast-moving sectors, criteria calibrated several years ago no longer describe best available technique.

The Platform on Sustainable Finance has separately noted that Article 19 of the Taxonomy Regulation requires the Commission to review and amend criteria in line with scientific and technological developments, with transitional activity criteria reviewed every three years. So this review is partly a statutory obligation being discharged, not purely a political simplification exercise.

The Second Track: Disclosures

Running alongside the criteria work is a separate revision of what has to be reported.

Some of this is already done. A delegated act adopted on 4 July 2025 amending the Disclosures, Climate and Environmental Delegated Acts cleared scrutiny on 5 January 2026, was published in the Official Journal on 8 January and entered into force on 28 January 2026. It simplified reporting, cut the number of datapoints substantially, introduced shorter templates, postponed certain bank KPIs, streamlined the do no significant harm criteria on chemical use, and exempted financial undertakings from assessing eligibility and alignment where the relevant assets account for less than 10 per cent of loans and investments.

The current review picks up the technical items that act left out. Following the Commission's call for technical advice on 5 March 2026, the European Supervisory Authorities launched three consultations on 1 July 2026 covering non-financial undertakings, asset managers, banks and insurers, closing 12 August. Final advice is due by October 2026, the Commission aims to complete its review of the Disclosures Delegated Act in the first quarter of 2027, and the new measures are expected to enter into force in the third quarter of 2027.

That Q3 2027 target is not arbitrary. It falls before 31 December 2027, when the transitional relief given to financial undertakings in the earlier omnibus delegated act expires.

The proposals go further than a tidy-up. Around fifteen additional simplification measures are under consideration across the three consultations, including new reporting reliefs, simplified templates and datapoints, and refinements to KPI methodologies. Notably, ESMA has proposed making voluntary the reporting of certain more complex KPI elements, including capital expenditure related to the purchase of taxonomy-eligible or aligned output, turnover from internal activities, and the adjusted turnover KPI used in green bond issuance.

For companies, this track is arguably the more consequential of the two, because it determines the shape of the reporting exercise rather than the substance of the assessment.

Who Still Has To Report

Scope changed before either of these revisions, and it changed substantially.

The Omnibus I package introduced changes to the taxonomy focused primarily on disclosures, with only very targeted adjustments to the technical screening criteria at that stage. The practical effect, combined with the narrowing of CSRD scope, is that materially fewer companies are required to disclose taxonomy KPIs than under the original framework.

That produces a divided response across the market. Companies that have dropped out of mandatory reporting are deciding whether to continue voluntarily. Companies that remain in scope face a criteria set and a disclosure framework both being rewritten around them.

For those out of scope, taxonomy alignment retains value independent of the reporting obligation. It remains the reference point for green bond frameworks, sustainability-linked financing, and lender and investor assessment of transition credibility. The reporting requirement has narrowed. The market use of the classification has not.

What Companies Should Monitor

Track adoption of the two criteria delegated acts closely, because it is imminent. Adoption is targeted for the third quarter of 2026, followed by a scrutiny period of up to six months. Confirm the final text against the March draft, since consultation responses can move detail.

Assume the current financial year is affected. The amendments are expected to apply from 2026 reporting periods with no transitional reliefs currently proposed. That means the assessment you are performing now for the year in progress may need to be redone against revised criteria. Do not defer the comparison until the final text lands.

Focus first on the generic DNSH changes. These affect every activity assessment you perform, whereas sector-specific amendments affect only the activities you conduct.

Re-run your alignment assessment against the revised criteria before they apply. Activities currently assessed as eligible but not aligned may become aligned under clarified criteria, and the reverse is possible where a clarification tightens an interpretation you had read generously. Either outcome changes your reported KPIs.

Watch the ESAs' technical advice in October 2026. That advice will shape the revised Disclosures Delegated Act, and it is the last substantive opportunity to see the direction before the Commission adopts.

Plan for two years of moving targets. Financial year 2026 is expected to be reported under revised criteria, and the disclosure framework will change again with effect from the third quarter of 2027. Build flexibility into your data collection rather than hard-coding to current templates.

Watch ESMA's proposals to make certain KPI elements voluntary, including capital expenditure on purchased taxonomy-aligned output, turnover from internal activities, and the adjusted turnover KPI. If adopted, these remove some of the most burdensome calculations.

Reassess whether you are still in scope. The combination of Omnibus and narrowed CSRD scope has removed many companies from mandatory taxonomy reporting. Establish your position under national law rather than assuming, since CSRD transposition varies by Member State.

Use the Stakeholder Request Mechanism if your activity is not covered. New activities are being handled through subsequent initiatives rather than this review, and the mechanism is the formal route. A total of 161 requests were submitted by the second cut-off date in September 2025, which indicates it is being used actively.

Follow the Platform on Sustainable Finance. Its third mandate runs from February 2026 to the end of 2027 and covers revising existing criteria, developing new criteria across all six objectives, improving usability and monitoring capital flows. Its published reports are the earliest visible signal of where criteria are heading.

The Realistic Assessment

The 2026 review is a genuine attempt to fix a real problem. Taxonomy alignment has been expensive to demonstrate relative to the information it produces, and the fix being attempted, clearer compliance evidence and better alignment with current law, addresses the actual complaints rather than a political caricature of them.

What it will not do is make the taxonomy simple. The classification is inherently detailed, DNSH assessment across five objectives remains demanding, and the deferral of contested criteria to later work means some of the hardest questions stay open.

For companies still in scope, the practical implication is that 2026 is a year to re-examine assessments rather than repeat them. Criteria you found unworkable may have been clarified. Interpretations you adopted defensively may no longer be necessary. The revision is worth reading properly against your own activity list rather than waiting for advisers to summarise it, because the value sits in the detail of how compliance can now be demonstrated.

Monitoring Checklist

Note the two tracks: revised technical screening criteria, and a revised Disclosures Delegated Act on a later timetable.
Track adoption of the criteria amendments, targeted for the third quarter of 2026, followed by scrutiny of up to six months.
Plan on the criteria applying from 2026 reporting periods with no transitional reliefs currently proposed, which affects the financial year now running.
Confirm the final adopted text against the March 2026 draft, since consultation can move detail.
Prioritise the generic do no significant harm changes, which affect every activity assessment.
Review sector amendments relevant to you across forestry and environmental protection, manufacturing, energy, transport and construction.
Re-run your eligibility and alignment assessment against revised criteria before the application date.
Expect no new economic activities in this revision, since additions are deferred to subsequent initiatives.
Expect no relaxation of substantive ambition, since core policy choices are not being reopened.
Watch for the European Supervisory Authorities technical advice on taxonomy disclosures due by October 2026, following consultations that closed on 12 August.
Note that the revised Disclosures Delegated Act is targeted for completion in the first quarter of 2027 with entry into force in the third quarter, ahead of the 31 December 2027 expiry of transitional relief for financial undertakings.
Watch ESMA's proposals to make certain KPI elements voluntary, including purchased taxonomy-aligned output CapEx, internal activity turnover and the adjusted turnover KPI.
Avoid hard-coding data collection to current templates, given changes across both 2026 and 2027.
Confirm whether you remain in scope for mandatory taxonomy reporting following Omnibus and narrowed CSRD scope, checking national transposition.
If out of scope, decide deliberately whether to continue voluntarily, given continued use in green bonds and sustainable finance.
Use the Stakeholder Request Mechanism to propose activities not currently covered.
Follow Platform on Sustainable Finance outputs under its third mandate running to the end of 2027.

Position as of August 2026. The draft delegated acts amending the Climate and Environmental Delegated Acts had not been formally adopted at the time of writing, and the revised Taxonomy Disclosures Delegated Act was not expected until early 2027. Application dates and content may change on adoption. Confirm current requirements against the European Commission and take professional advice for your circumstances.

Sources

Regulation (EU) 2020/852, Platform on Sustainable Finance, European Securities and Markets Authority, Taxonomy Disclosures Delegated Act, European Commission, KPMG International, Linklaters, PwC, Herbert Smith Freehills Kramer, Nordea, Harneys, Eurosif, European Circular Economy Stakeholder Platform

This article is intended for general professional information and does not constitute legal, financial, or investment advice.