EU Taxonomy

Sustainable business is an important element in achieving the climate and energy goals of the European Union (EU). So far, there has not been a common classification system to identify sustainable economic activities in order for the EU to target investments in companies that operate sustainably. Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020 on the establishment of a framework to facilitate sustainable investment, and amending Regulation (EU) 2019/2088, also known as the EU Taxonomy, constitutes such a framework. It defines which economic activities are considered environmentally sustainable.

As a starting point, the economic activities of certain sectors that account for a large share of the CO₂ emissions were categorised in terms of their level of environmental sustainability.

Companies issuing a non-financial statement must report on the extent to which their economic activities are environmentally sustainable, which means that they must explain how they contribute significantly to the environmental objectives set out in the EU taxonomy. They must also show that they do not significantly harm other environmental objectives, meet requirements for minimum protection and fulfil the technical assessment criteria set out in specific delegated acts.

The EU taxonomy includes the following 6 environmental objectives:

1. climate change mitigation,
2. climate change adaptation,
3. sustainable use and protection of water and marine resources,
4. transition to a circular economy,
5. pollution prevention and control,
6. protection and restoration of biodiversity and ecosystems.

Currently, only the assessment criteria of the 2 objectives ‘climate change mitigation’ and ‘climate change adaptation’ are specified by the Delegated Regulation (EU) 2021/2139 dated 4 June 2021 supplementing Regulation (EU) 2020/852 Annex I and Annex II of the Delegated Act on the Climate Targets of the EU Taxonomy (in short: Annex I and Annex II of the Delegated Act on the Climate Targets of the EU Taxonomy). They define technical screening criteria that help identify economic activities for specific sectors that have the greatest impact on greenhouse gas emissions. Economic activities for which assessment criteria have been defined in delegated acts are per se eligible for taxonomy. The economic activities are only taxonomy-aligned when the aforementioned requirements for environmentally sustainable economic activities are also fulfilled.

METRO taxonomy reporting

In general terms, METRO’s activities within the sustainability priority Climate + carbon contribute to the achievement of the EU climate and energy targets at European as well as global level. METRO’s climate protection target particularly addresses both climate change mitigation and adaptation.

• Further information can be found in the section on environmental concerns

This financial year, METRO is reporting for the first time based on the requirements of Article 8 (1) and (2) of the EU Taxonomy and Article 10 (1) of the Delegated Regulation (EU) 2021/2178 dated 6 July 2021 supplementing Regulation (EU) 2020/852 (‘Delegated Act to Article 8 on the content and presentation of information to be disclosed’). Accordingly, METRO, as a non-financial company, is required to disclose the share of taxonomy-eligible and taxonomy-non-eligible economic activities in turnover, capital expenditure (CapEx) and operating expenditure (OpEx) by applying the relief provision in financial year 2021/22. Reporting of taxonomy-aligned figures will start in financial year 2022/23. The determination of this year’s values is based on the figures reported in the consolidated financial statements, which means that the same accounting and measurement methods are applied here.

Turnover

The share of taxonomy-eligible net turnover is determined as follows: Net turnover from products or services related to taxonomy-eligible economic activities divided by total net turnover. Total net turnover for financial year 2021/22 forms the denominator of the turnover ratio and can be derived from the consolidated income statement. Allocation of the respective turnover to the taxonomy-eligible economic activities was examined through a detailed analysis of the items included in the turnover. The sum of the identified turnover revenues of the taxonomy-eligible economic activities for financial year 2021/22 forms the numerator.

Based on the content of the EU taxonomy at this point in time, the economic activities related to METRO’s core business (wholesale of food and non-food products) do not fall under the specific criteria of Annex I and Annex II of the Delegated Act on the Climate Targets of the EU taxonomy. Accordingly, the turnover is taxonomy-non-eligible. Correspondingly, the ratio of the sales from taxonomy-eligible economic activities of a financial year to the turnover of that financial year is zero.

Capital expenditure and operating expenditure

The share of capital or operating expenditure on assets or processes associated with economic activities that are classified as taxonomy-eligible is determined as follows:

KPI Capital Expenditure = Share of total capital expenditure that is taxonomy-eligible divided by total capital expenditure according to the EU Taxonomy Regulation.

KPI Operating Expenditure = Share of total operating expenditure that is taxonomy-eligible divided by total operating expenditure according to the EU Taxonomy Regulation.

Capital expenditure is based on the additions to tangible and intangible assets during the relevant financial year before depreciation, amortisation and any re-measurements; this also includes additions resulting from revaluation and impairments for the relevant financial year and excludes fair value changes. The denominator must also include additions to tangible and intangible assets resulting from business combinations (application of IFRS [IAS 16, 38, 40, IFRS 16]). Allocation of the respective investment expenses to the taxonomy-eligible economic activities was examined through a detailed analysis of the items included in the capital expenditures. The sum of the identified capital expenditures of the taxonomy-eligible economic activities for financial year 2021/22 forms the numerator of the key figure.

The basis for operating expenses includes direct, non-capitalised costs related to research and development, building renovation measures, short-term leasing, maintenance and repair. It also includes any other direct expenses related to the day-to-day servicing of property, plant and equipment assets by the company or third parties to whom activities are outsourced that are necessary to ensure the continued and effective functioning of those assets. Allocation of the respective operating expenditures to the taxonomy-eligible economic activities was examined through an analysis of the items included in the operating expenditures.

The taxonomy distinguishes between 3 different types of taxonomy-eligible capital and operating expenditures (numerator) respectively. The numerator corresponds to the part of the capital expenditures or operating expenditures included in the denominator that

• relates to assets or processes associated with taxonomy-eligible economic activities, meaning that they fall within the scope of the EU taxonomy and the corresponding delegated acts,
• is part of a plan to expand taxonomy-aligned economic activities or enables the transformation of taxonomy-eligible economic activities into taxonomy-aligned economic activities within a predefined period, or
• relates to the purchase of output from taxonomy-eligible economic activities or individual measures enabling the target activities to become low-carbon or to lead to greenhouse gas reductions and provided that these measures are implemented and operational within 18 months.

As explained in relation to turnover, METRO’s core business and all related economic activities currently fall outside the scope of the EU Taxonomy with regard to the first 2 environmental targets. Accordingly, it is not possible to invest in assets or processes to expand taxonomy-aligned economic activities or to enable taxonomy-eligible economic activities within the core business. Therefore, no assets or processes could be identified that fall under the first 2 categories of taxonomy-eligible capital expenditures.

We have identified the following activities as taxonomy-eligible economic activities and thus as environmentally sustainable:

• Manufacturing
  • 3.6 Manufacture of other low carbon technologies¹
• Energy
  • 4.25 Production of heat/cool using waste heat
• Water supply, sewerage, waste management and remediation
  • 5.5 Collection and transport of non-hazardous waste in source segregated fractions
• Transport
  • 6.5 Transport by motorbikes, passenger cars and light commercial vehicles
  • 6.6 Freight transport services by road
• Construction and real estate activities
  • 7.2 Renovation of existing buildings
  • 7.3 Installation, maintenance and repair of energy efficiency equipment
  • 7.4 Installation, maintenance and repair of charging stations for electric vehicles in buildings (and parking spaces attached to buildings)
  • 7.5 Installation, maintenance and repair of instruments and devices for measuring, regulation and controlling energy performance of buildings
  • 7.6 Installation, maintenance and repair of renewable energy technologies
  • 7.7 Acquisition and ownership of buildings

Currently, 51% of METRO’s capital expenditure is associated with taxonomy-eligible economic activities.

Taxonomy-eligible share of METRO’s total operating expenditures: Currently, METRO’s total operating expenses according to the EU taxonomy definition amount to €250 million. With respect to METRO’s total operating expenditure, only a small share of the expenditure can be attributed to the EU taxonomy operating expenditure KPI. The main parts of the expenses included in the operating expenditure denominator, such as building maintenance and other maintenance expenses, are not related to METRO’s core business activities. Therefore, we do not consider the operating expenses according to EU Taxonomy to be material to METRO’s business model. Hence, we make use of the exemption clause in Annex I of the Delegated Regulation (EU) 2021/2178 dated 6 July 2021 supplementing Regulation (EU) 2020/852 by reporting the numerator of the KPI ‘Operating Expenses’ as zero.