In Feb. 2022, the EU platform for sustainable finance published the final report on social taxonomy. The report proposed a structure for a social taxonomy within the current EU legislative environment:
- The EU Taxonomy
- The proposed Corporate sustainability reporting directive (CSRD)
- The Sustainable Finance Disclosures Regulation (SFDR)
- The sustainable corporate-governance (SCG) initiative
Similar to the environmental taxonomy, the proposed structure of social taxonomy includes the below aspects:
You could find the final report here. A record of the presentation from the EU platform can be found in Youtube.
- The development of social objectives
- Type of substantial contributions
- Do no significant harm (DNSH) criteria
- Minimum safeguards
The development of social objectives
The social taxonomy expands the three social objectives to sub-objectives, which address the different aspects of the objectives.
- Decent work (including for value-chain workers)
- Social dialogue
- Living wages
- Health and safety
- Lifelong training
- Adequate living standards and wellbeing for end-users
- Health care
- Social housing
- Long-term care
- Inclusive and sustainable communities and societies
- Address to basic economic infrastructure
- Inclusion of people with disabilities
The structure tends to cover the three stakeholder groups affected by business activities, and each objective addresses a different group of stakeholders, which are an entity's:
Types of substantial contributions
- Own workforce including value-chain workers
- Affected communities (directly or through the value chain)
The presentation of the EU platform mainly discussed two types of substantial contributions: (i) avoiding and addressing negative impact; (ii) enhancing the positive impact inherit in economic activities. Whereas the final report proposed a third type which is enabling activities which enable other activities to provide social benefits.
Do no significant harm criteria and minimum safeguards
The DNSH criteria tends to ensure that when an activity is contributing to one of the social objectives, it is not doing harm to any of the other objectives. For topics which cannot be linked to the activity but must be linked to the entities, then minimum safeguards will be employed.
Balance between environmental taxonomy and social taxonomy
To gain a balance between the environmental taxonomy and the social taxonomy, the report suggests to include minimum environmental safeguard as part of the future social taxonomy and to integrate the environmental and social DNSH criteria to both social and environmental activities.
The current structure provides the market certain guidance and general direction of the social taxonomy. At this stage there are few details on what to disclose, measure or monitor, neither any concrete KPIs. We wait for further development of the social taxonomy at the EU level.