Using NACE Code Comparison to Examine Greenwashing

Regulatory Compliance November 20, 2021

As organizations begin to classify EU Taxonomy activities there is a natural tendency to overestimate eligibility. If you don’t examine each activity in thorough detail you run the risk of greenwashing the technical criteria associated with the activity.

When you look at the regulatory text provided with the EU Taxonomy, there are very specific definitions associated with each activity, below you will find an example. 

This example regarding data processing, hosting and related activities is a great example that if you were to look at the activity as a stand alone you may see an eligible activity but if you dig into the details there is further assessment that needs to be done. One way of doing that is to leverage the NACE code associated with the regulatory activity. 

The NACE code is the Statistical Classification of Economic Activities in the European Community, the industry standard used in the EU. Each activity within the EU Taxonomy will tell you the NACE code that the activity can be associated with. One thing to keep in mind is that the EU Taxonomy and the NACE code were created based on different motivations and drivers so although it is helpful to relate associated activities and even use them as a proxy when appropriate we must remember that they are not a perfect match. 

Clarity AI goes beyond the surface to not just assume a one for one match between the two regulatory texts. We look at which activity could be associated with each specific code, but keeping in mind that they may not be exactly the same. To return to this example, you will see that when using the activities listed under the NACE code some activities will match for single eligible activity but other need further assessment to avoid greenwashing.

 

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