Final Report on Social Taxonomy

The EC published in 2019 the European Green Deal, which sets out a series of climate and energy targets for 2030 and contains a commitment for Europe to become climate neutral by 2050. Furthermore, in 2020 the EC published the Taxonomy Regulation which provides uniform criteria for companies and investors to determine which economic activities can be considered environmentally sustainable. The taxonomy initially only covers environmental activities and objectives and contained only limited reference to social sustainability. For this reason, the EC mandate the Platform on Sustainable Finance to also work on extending the taxonomy to social objectives. In this context, this platform has published a Final Report on Social Taxonomy that summarises the main initial observations and recommendations on this mandated task.

Final Report on Social Taxonomy

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Executive summary

The Platform on Sustainable Finance has published its Final Report on Social Taxonomy in which outlines the key elements of a social taxonomy in the current EU legislative environment on sustainable finance and sustainable governance: i) the social objectives and sub-objectives; ii) what types of substantial contribution the activities can make to become socially sustainable; iii) ideas of a structure of Do No Significant Harm; iv) methodology for selecting sectors for these objectives; v) list of desirable characteristics on qualitative and quantitative metrics for Technical Screening Criteria.

Main content

This Technical Note summarizes the main aspects of the report:

• Social objectives and sub-objectives. The Sustainable Finance Platform suggests three objectives for a social taxonomy, each of these has a list of sub-objectives:
  • Decent work (including value-chain workers). This objective focuses on people, in their working lives or as workers.
  • Adequate living standards and wellbeing for end-users. This objective focuses on people, in their role as end-users of certain products and services that either pose heightened health or safety risks or that have the potential to help people to meet basic human needs.
  • Inclusive and sustainable communities and societies. This objective will emphasize respecting and supporting human rights by paying attention to the impacts of activities on communities and the wider society.
• Types of substantial contribution. Activities that could be considered socially sustainable should be those that make substantial contribution to one of the three objectives: i) if it avoids negative impacts on high-risk sectors; ii) if it increases or addresses the positive impact inherent in the economic activity; or iii) if the economic activity has the potential to reduce risk in another sector.
• “Do no significant harm” (DNSH) criteria in social taxonomy. The Report provides ideas on what the DNSH criteria should look like, which ensure that when an activity makes a substantial contribution to one social objective, it does not harm the other social objectives. 
• Rationale for selecting sectors. A methodology has been developed based on the NACE.
• Qualitative and quantitative metrics. Stakeholder-centric technical screening criteria would ultimately include qualitative and quantitative metrics and thresholds.

Next Steps

The objectives presented in this report will constitute an input for the definition of the final objectives by the EC.

Download the technical note by clicking here.