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ERA is advocating for the broad inclusion of rental in EU Taxonomy list of sustainable activities

ERA is advocating for the broad inclusion of rental in EU Taxonomy list of sustainable activities
ERA Europe
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ERA is advocating for the broad inclusion of rental in EU Taxonomy list of sustainable activities

IMAGE SOURCE: ERA, the European Rental Association

ERA is preparing a position paper to push for the broadest possible inclusion of equipment rental in an upcoming delegated act to the EU Taxonomy Regulation and will request meetings with the European Commission to discuss how rental could be fully taken into account in the EU Taxonomy.

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The Taxonomy Regulation tasks the European Commission with establishing a list of environmentally sustainable activities by defining technical screening criteria for each environmental objective through delegated acts. 

On 30 March, the expert group advising the European Commission on taxonomy (Platform on Sustainable Finance – PSF) released its final report recommending the adoption of technical screening criteria on 4 environmental objectives of the Taxonomy Regulation, including for circular economy.

In the first draft of the expert report, the equipment rental sector was included in a very limited way (for example as rental of specific electric machinery only). The final report includes a broader scope, with the entire NACE code 77 – Rental and leasing activities included as significantly contributing to the transition to a circular economy.

However, it is limited to the rental of certain products, such as electrical equipment, lifting and handling equipment, and power-driven hand tools, and under strict rules related to product lifespan and use intensity. Construction machinery is not included in the list.

After a period of public consultation, the Commission will adopt these criteria in a new delegated act.

The EU Taxonomy is a European classification system for sustainable economic activities that aims to direct investments towards sustainable projects and activities. This system should prevent greenwashing and will guide investors when investing in projects and economic activities that have a substantial positive impact on the climate and the environment.

The EU Taxonomy Regulation entered into force on 12 July 2020, establishing six environmental objectives:

  1. Climate change mitigation

  2. Climate change adaptation

  3. The sustainable use and protection of water and marine resources

  4. The transition to a circular economy

  5. Pollution prevention and control

  6. The protection and restoration of biodiversity and ecosystems

Under the Taxonomy Regulation, large companies (large undertakings that are Public Interest Entities - PIE) with over 500 employees will have to disclose in their non-financial reporting (annual report or sustainability report) the following KPIs:

  • Taxonomy-compliant share of turnover

  • Capital expenditure (CapEx) aligned with the EU taxonomy

  • Operating expenses (OpEx) aligned with the EU taxonomy

The first company reports and investor disclosures using the EU Taxonomy for the first two environmental objectives are due at the start of 2022, covering the financial year 2021. The reporting requirements covering all 6 objectives will apply from the start of 2024.

The first delegated act, related to climate change mitigation and adaptation, was adopted on 9 December 2021. For the four other environmental objectives, the taxonomy rules will be established by another delegated act. This delegated act will be published by the Commission in the first half of 2022 and will be applied from 1 January 2023.

 

Source: ERA, the European Rental Association