The EU Taxonomy is a classification system for determining sustainable economic activities in the real economy. The following disclosures are the mandatory disclosures of the Continental Group in accordance with Art. 8 of EU Taxonomy Regulation 2020/852.
Specific information on the implementation of disclosure requirements in accordance with the EU Taxonomy Regulation
There continues to be uncertainty for Continental with respect to the reporting to be carried out as per the EU Taxonomy Regulation and the application of the regulations concerning Taxonomy-aligned economic activities. This is mainly because unclear wording continues to be used in the regulations and notes on determining Taxonomy-eligible – and in particular Taxonomy-aligned – economic activities as well as the calculations for key performance indicators for turnover, capital expenditure and operating expenditure. As a result, these regulations and notes are still open to interpretation.
From Continental’s perspective, there is also uncertainty about the interaction between the various regulations, delegated acts and official answers to frequently asked questions. Furthermore, the short implementation period granted by the EU Taxonomy Regulation and the published delegated acts means that many questions of interpretation related to implementation have not yet been conclusively clarified. The EU Platform on Sustainable Finance, a permanent expert group set up by the European Commission, also explicitly points toward this in its report to the Commission dated October 2022. In interpreting the regulation, we also take into consideration the publicly communicated assessments of industry associations in the supplier and automotive industries as well as the reporting practices of European suppliers for 2021.
For the supplier industry, the European Commission additionally determined in its preliminary answers to frequently asked questions dated December 19, 2022, that the explicit handling of components – for the transport sector, for example – would be governed in more detail in later revisions of the delegated regulation. Continental therefore continues to explicitly stress the difficulty of classifying suppliers within the framework of the EU Taxonomy.
Taxonomy-eligible economic activities
As part of our sustainability ambition, we strive for carbon neutrality and emission-free mobility and industries by 2050 at the latest (see also the sections on carbon neutrality and on emission-free mobility and industries in this combined non-financial statement) and thus for the expansion of clean and carbon-neutral mobility. With this in mind, we have introduced performance indicators at a corporate level as part of our sustainability scorecard, with the aim of monitoring our progress. From this scorecard, we classify the allocated business with emission-free mobility and industries as the indicator that comprises all economic activities to be disclosed for Continental as Taxonomy-eligible with respect to the environmental target of climate change mitigation in accordance with the EU Taxonomy Regulation. It consists of allocated business with zero-tailpipe-emission vehicles and allocated low-carbon business beyond business with zero-tailpipe-emission vehicles. These activities are not identified as Taxonomy-eligible under Annex II to the delegated climate act (climate change adaptation).
All other economic activities of the Continental Group that are not included in the aforementioned economic activities are classified as Taxonomy-non-eligible for the reporting year.
In particular, the allocation of the economic activity is a decisive factor for this classification, since a direct connection should be demonstrated for economic activities upstream in the value chain, as stated by the Platform on Sustainable Finance in its report to the Commission dated October 2022.
We therefore classify the allocated business with zero-tailpipe-emission vehicles under category 3.6 (“Manufacture of other low-carbon technologies”) of the delegated regulation for climate change mitigation (EU 2021/2139, Annex I), since it makes a substantial contribution toward increasing “clean or climate-neutral mobility” in accordance with Art. 10 (1) c) in conjunction with Art. 10 (1) i) of the EU Taxonomy Regulation. From Continental’s perspective, it additionally meets the conditions for enabling activities as defined in Art. 16 of the EU Taxonomy Regulation, since this economic activity does not lead to lock-in effects and has a substantial positive environmental impact, on the basis of life-cycle considerations. The majority of CO2 emissions from vehicles and vehicle components occur during the use phase, whereby a substantial positive environmental impact can generally be assumed for zero-tailpipe-emission vehicles and their components, as stated by Annex I to the delegated regulation for climate change mitigation in relation to vehicles.
This classification is also based on the European Commission’s answer in its frequently asked questions dated December 2022, which states that the manufacture of specific car and vehicle components cannot be classified under the activity “Manufacture of low-carbon technologies for transport” (3.3) as standard, since the EU Taxonomy does not provide for any general regulation for upstream activities.
Furthermore, the allocated low-carbon business beyond business with zero-tailpipe-emission vehicles is reported as Taxonomy-eligible. In addition to various industrial businesses, it covers for the first time the replacement business with highly efficient tires with low rolling resistance for the existing fleet of vehicles already on the market. This tire market business with the two highest label classes of A and B is classified under category 3.6 (“Manufacture of other low-carbon technologies”). Label classes A and B are currently clearly above the market average and – compared with lower label classes – aim at relevant reductions of emissions in the transport sector.
For the replacement business, the condition that the substantial reductions be achieved without so-called lock-in effects is also met, since the improvement is achieved for the fleet that is already on the market. Conversely, the original-equipment business, with highly efficient tires for vehicles with combustion engines, is likewise considered to be pursuing substantial reductions, but is not considered to be compatible with the principle of avoiding lock-in effects that is relevant to enabling activities as defined in Art. 16 of the EU Taxonomy Regulation. This classification is also supported by the Platform on Sustainable Finance, even if this assessment is not binding. As a result of this, in its report to the Commission dated October 2022 concerning lock-in effects, it is assumed that there would be lock-in effects for enabling technologies for vehicles with combustion engines and for hybrid vehicles in the original equipment business, which are still Taxonomy-eligible until 2025, and that these lock-in effects would not be incurred for electric or emission-free vehicles.
The various industrial businesses reported by Continental as Taxonomy- eligible economic activities primarily comprise the manufacture of components for wind turbines and photovoltaic systems and, for the first time, the manufacture of materials for industrial plant insulation. Contrary to the reporting for fiscal 2021, Continental is also allocating these businesses to category 3.6 (“Manufacture of other low-carbon technologies”), since the economic activities pursue substantial reductions and therefore make significant contributions to the expansion of renewable energies and energy saving, for example through insulation in industrial plants. This classification can be justified by the European Commission’s answer in its frequently asked questions dated December 2022, which states that the intermediate steps in the value chain are not automatically Taxonomy-eligible if the description relates only to the manufacture of end products. In addition, the description of the economic activities in accordance with categories 3.1 to 3.5 does not recognize these components.
For all classifications presented under category 3.6, Continental believes it is irrelevant which functions the supplier technologies in emission-free vehicles or other end products fulfill, as long as they facilitate the goals set out in Art. 10 (1) and pursue the aim set out in the activity description for category 3.6 of achieving substantial reductions in CO2 emissions over their entire life cycle.
We base the classification on the information publicly available at the time the report was prepared.
The information on turnover is prepared in accordance with section 1.1.1 of Annex 1 to the delegated regulation on disclosure obligations (2021/2178) and in compliance with IFRS accounting regulations (see tables at the end of this non-financial statement). The method of determination selected by Continental ensures that double counting is avoided.
Information on the Continental Group’s total turnover (the denominator of the key figure calculation) can be found in the consolidated statement of income of this annual report under “Sales.”
Taxonomy-eligible capital expenditure and operating expenditure
Taxonomy-eligible capital expenditure and operating expenditure have been recorded in accordance with the delegated regulation on disclosure obligations (2021/2178) and taking into account the clarifications made by the European Commission in October 2022.
The figures for Taxonomy-eligible capital expenditure and operating expenditure under category a are allocations based on the proportion of Taxonomy-eligible turnover. For reasons connected to the business model, the equipment, machinery and buildings of the Continental Group are thus used both for Taxonomy-eligible activities and for other activities. This applies both to capital expenditure and operating expenditure for assets or processes associated with Taxonomy-eligible activities (category a).
The allocation takes place at business area level for capital expenditure and at group sector level for operating expenditure, and not according to the individual locations, in order to avoid double counting, take into account internal business and consolidation effects and reflect the Continental Group’s matrix structure. Such an allocation approach is also recommended in principle by the Platform on Sustainable Finance in its report to the Commission dated October 2022, which states, for enabling activities, that capital expenditure and operating expenditure should be reported on the basis of their proportion of turnover, provided the activities are Taxonomy-eligible and that they not do not include activities that are Taxonomy-non-eligible.
The individual measures assessed as Taxonomy-eligible as well as the acquisition of products from Taxonomy-eligible economic activities under category c were recorded separately and deducted prior to allocation. The allocation selected by Continental and the prior deduction from category c ensures that double counting for capital expenditure and operating expenditure is avoided.
In assessing category c, Continental assumes that Taxonomy-eligible capital expenditure and operating expenditure may result from the acquisition of products from Taxonomy-eligible economic activities and the implementation of individual measures that enable Continental’s business activities to become low-carbon or reduce their greenhouse gas emissions. These products and measures include economic activities that actively contribute to achieving our decarbonization roadmap. They comprise the following economic activities listed in Annex I to the delegated regulation for climate change mitigation:
- 3.3 Manufacture of low-carbon technologies for transport through the purchase of vehicles
- 7.3 Installation, maintenance and repair of energy efficiency equipment, which specifically includes equipment insulation, building insulation and installation and replacement of energyefficient light sources
- 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, such as photovoltaic systems
The information on capital expenditure is prepared in accordance with section 1.1.2 of Annex 1 to the delegated regulation on disclosure obligations (2021/2178) in compliance with IFRS accounting regulations. Information on the Continental Group’s total capital expenditure can be found in the notes to the consolidated financial statements in the segment reporting (Note 1) of this annual report. The information refers to capital expenditure in the intangible assets (Note 14), property, plant and equipment (Note 15), leases (Note 16) and investment property (Note 17) presented in the notes to the consolidated financial statements.
Operating expenditure is defined in accordance with section 1.1.3 of Annex 1 to the delegated regulation on disclosure obligations (2021/2178) and has been calculated on an imputed basis as described above. For the denominator of the key figure calculation for operating expenditure, Continental takes into account direct, noncapitalized costs incurred in the fiscal year as a result of research and development (net), building refurbishment measures, shor-term leasing, and maintenance and repairs.
Continental notes that, from its perspective, various interpretations with respect to the requirements concerning capital expenditure and operating expenditure, particularly for category c and for operating expenditure more generally, continue to result in uncertainty when determining Taxonomy-related information.
Taxonomy-aligned economic activities
Continental does not currently report any economic activities as being Taxonomy-aligned.
For all economic activities that are reported under category 3.6, specific comparative life-cycle assessments are required in order to also report these as being Taxonomy-aligned. These must demonstrate substantial savings to life-cycle emissions compared with the highest-performing alternative technology or solution available on the market or the highest-performing alternative product available on the market. External verification of the life-cycle assessments must also take place in accordance with predefined standards. A simplified life-cycle consideration, as called for by the Taxonomy Regulation (2020/852) itself, is no longer sufficient in accordance with the delegated regulation for climate change mitigation (2021/2139) for category 3.6.
These specific comparative life-cycle assessments are currently not possible from Continental’s perspective for a number of reasons:
- The allocated business with zero-tailpipe-emission vehicles is defined by the fact that the end products are zero-tailpipe-emission vehicles. Through the reported Taxonomy-eligible economic activities, Continental facilitates the manufacture of such vehicles as a supplier. Vehicle emissions are not reduced here, however, since by definition they are already considered to be emission-free. Even if a life-cycle assessment were feasible, it would therefore not be able to demonstrate any substantial savings. Continental has also come to the same conclusion for all components within allocated low-carbon business beyond business with zero-tailpipe-emission vehicles, provided the respective end products are not associated with direct emissions. This applies to components of renewable energy technologies, for example.
- For further allocated low-carbon business beyond business with zero-tailpipe-emission vehicles, such life-cycle assessments would theoretically be possible but, from Continental’s perspective, both for practical reasons and because of unclear requirements for economic activities reported as Taxonomy-eligible, they cannot be verifiably implemented in compliance with the regulation.
- Practical reasons for this include the fact that the economic activities concerned consist of a large number of products that can be found in a wide range of applications. Assuming that individual products were a permitted functional unit for the life-cycle assessment, life-cycle assessments would theoretically be possible for individual applications of these products. For the entire scope of economic activities, however, this would be neither appropriate nor feasible within the specified time.
- According to Continental’s analysis, a potentially simplified consideration at product group level or comparable aggregations has thus far been governed neither by the delegated regulation nor by the EU Commission’s answers to frequently asked questions such that an external verifier has been able to verifiably ascertain the calculation in compliance with the regulation.
- In addition, the Commission provided its first and – from Continental’s perspective – not very clear answers for the assessment of the “substantial saving” to be demonstrated as well as the definition of comparable technologies and their performance for the first time in its answers to frequently asked questions dated December 2022. From Continental’s perspective, due to their short-term nature, the Commission’s comments can no longer be taken into consideration, are not yet sufficiently binding prior to publication in the Official Journal and also still do not offer a sufficiently reliable framework for comparable lifecycle assessments.
In all cases, the Commission’s statement in its answers to frequently asked questions dated December 2022 that the detailed clarification of classification for suppliers is still pending also applies. From Continental’s perspective, this also includes the more reliable clarification relating to life-cycle considerations by suppliers.
Since Continental is not currently reporting any activities as Taxonomy- aligned, no Taxonomy-aligned capital expenditure or operating expenditure has been reported either. The reporting of Taxonomy-aligned capital expenditure and operating expenditure under category c is currently not possible from Continental’s perspective, since sufficient proof of compliance with the technical assessment criteria and minimum protection requirements along the value chain cannot currently be provided.
Information to be disclosed in accordance with the EU Taxonomy Regulation
For the following overviews of Taxonomy information, it should be noted that these were prepared in accordance with the guidelines for the templates in Annex 2 to the delegated regulation on disclosure obligations (2021/2178).
Given the uncertainties and interpretations of the Taxonomy Regulation, this restriction is relevant since it means, for example, that the designations as environmentally sustainable or non-environmentally sustainable activities only relate to the assessment as per the EU Taxonomy Regulation and not more generally.
Continental has no economic activities according to the complementary delegated regulation for gas and nuclear activities (2022/1214) and therefore does not provide the specific templates.
Templates in Accordance with the EU Taxonomy Regulation | PDF