EU Taxonomy

Regulation (EU) 2020/852 (“Taxonomy Regulation”), which entered into force on 12 July 2020, establishes the criteria for determining whether an economic activity qualifies as environmentally sustainable. It provides the legal basis for sustainable investments as a way to swiftly implement the European Green Deal. The aim of the regulation is to introduce a uniform classification system (“EU Taxonomy”) in order to steer capital flows into environmentally sustainable sectors.

For this purpose, the Taxonomy identifies economic activities that have a significant impact on the EU’s environmental objectives.

These six environmental objectives are:

1. climate change mitigation (CCM)
2. climate change adaptation (CCA)
3. the sustainable use and protection of water and marine resources (WTR)
4. the transition to a circular economy (CE)
5. pollution prevention and control (PPC)
6. the protection and restoration of biodiversity and ecosystems (BIO)

For each of these environmental objectives, economic activities and technical screening criteria are defined by means of EU Delegated Regulations.

If one of our business activities falls under the definition of the respective economic activity, it is a Taxonomy-eligible activity; if not, it is a Taxonomy-non-eligible activity. Many of the STRABAG Group’s business activities, in particular new road construction, infrastructure project development, building materials production, and property and facility services, are currently not defined as Taxonomy-eligible, i.e., they are not an economic activity as defined by the EU Taxonomy.

Based on this classification of economic activities into those that are Taxonomy-eligible and those that are Taxonomy-non-eligible, the degree to which the activities are environmentally sustainable is assessed on the basis of the technical screening criteria. An economic activity is considered environmentally sustainable if it contributes substantially to one or more environmental objectives, causes no significant harm to any of the other environmental objectives, and is carried out in compliance with certain minimum safeguards. Whether an economic activity makes a substantial contribution or causes no significant harm (DNSH) to an environmental objective is determined on the basis of the technical screening criteria specified in detail by the European Commission.

The criteria and requirements must all be fulfilled cumulatively.

Article 8 of Commission Delegated Regulation (EU) 2021/2178 of 6 July 2021 supplementing Regulation (EU) 2020/852 requires non-financial undertakings to disclose information on the following in their sustainability report:

• proportion and absolute value of the Taxonomy-aligned, the Taxonomy-eligible but not Taxonomy-aligned, and the Taxonomy-non-eligible turnover (revenue) related to products or services
• proportion and absolute value of the Taxonomy-aligned, the Taxonomy-eligible but not Taxonomy-aligned, and the Taxonomy-non-eligible capital expenditures and operating expenditures related to assets or processes

The detailed calculation of these individual values is described below in the sections on turnover, capital expenditures and operating expenditures.

Applicable provisions for the 2024 financial year

The transitional provisions applicable in the previous year have expired. Consequently, the provisions of the EU Taxonomy applied in full for the 2024 financial year, and the economic activities related to the four environmental objectives – sustainable use and protection of water and marine resources, transition to a circular economy, pollution prevention and control, and protection and restoration of biodiversity and ecosystems – that were not previously reviewed for Taxonomy alignment now also had to be reviewed for Taxonomy alignment on the basis of the technical screening criteria established in Commission Delegated Regulation (EU) 2023/3851 of 27 June 2023.

Management approach

Assessment of Taxonomy eligibility

The mapping of turnover to the economic activities detailed in the EU Taxonomy is based on the business activities and types of works included in the central controlling system. When an order is placed, the project is assigned to a certain business activity with opening of the cost centre. This ensures a clear classification of an economic activity. As the economic activity may be relevant to several environmental objectives, however, it is assessed for Taxonomy alignment according to the technical screening criteria for each environmental objective

STRABAG’s Taxonomy-eligible economic activities in relation to the environmental objectives of climate change mitigation, climate change adaption, sustainable use and protection of water and marine resources, transition to a circular economy, pollution prevention and control, and protection and restoration of biodiversity and ecosystems are listed below. The environmental objectives and the numbering of the respective delegated regulation are given in brackets.

1. Electricity generation using solar photovoltaic technology (CCM 4.1)
2. Electricity generation from wind power (CCM 4.3)
3. Electricity generation from hydropower (CCM 4.5)
4. Electricity generation from geothermal energy (CCM 4.6)
5. Electricity generation from biogas (CCM 4.7)
6. Electricity generation from bioenergy (CCM 4.8)
7. Transmission and distribution of electricity (CCM 4.9)
8. District heating/cooling distribution (CCM 4.15)
9. Construction and extension of water supply systems (CCM 5.1 / WTR 2.1)
10. Construction and extension of waste water collection and treatment (CCM 5.3 / WTR 2.2)
11. Infrastructure for personal mobility, cycle logistics (CCM 6.13)
12. Infrastructure for rail transport (CCM 6.14)
13. Construction of new buildings (as general contractor) (CCM 7.1 / CE 3.1)
14. Renovation of existing buildings (CCM 7.2 / CE 3.2)
15. Flood risk prevention and protection infrastructure (CCA 14.12)
16. Sustainable urban drainage systems (WTR 2.3)
17. Sorting and material recovery of non-hazardous wastes (CE 2.7)
18. Demolition and wrecking of buildings and other structures (CE 3.3)
19. Maintenance of roads and motorways (CE 3.4)
20. Use of concrete in civil engineering (CE 3.5)

The economic activities related to energy (1 through 8) and to water supply and waste water management (9 and 10) are included as Taxonomy-eligible because the construction of such facilities and systems is included in the respective definitions. As a rule, STRABAG Group is only active in the construction of these facilities but does not operate them. In individual cases, such facilities are operated as part of the project development business.

This also applies to the economic activities related to transport (11 and 12). The definition includes the construction of infrastructure for rail transport and for personal mobility carried out by the STRABAG Group.

As the construction of new buildings (13) is defined as the development of building projects for residential and non-residential buildings and the construction of complete residential or non-residential buildings on contract basis, only those building construction projects in which the STRABAG Group acts as general contractor or erects entire buildings as part of a project development are included under this activity.

The renovation of existing buildings (14) is defined in the EU Taxonomy as construction and civil engineering works or preparation thereof, which is why the STRABAG Group’s renovation and conversion activities in building construction are recorded here.

The maintenance of roads and motorways (19) as defined by the EU Taxonomy includes routine maintenance, preventive maintenance and rehabilitation of asphalt and concrete roads. The maintenance operation mainly concerns the binder course, surface course and concrete slabs. STRABAG’s road construction activities, which include maintenance and rehabilitation as types of work, are covered by this definition.

The economic activity “use of concrete in civil engineering” (20) encompasses the use of concrete for new construction, reconstruction or maintenance of civil engineering objects, except concrete road surfaces and maintenance services that are already covered by “maintenance of roads and motorways” (19). The projects of the business areas concerned, in which concrete, reinforced concrete or prestressed concrete is used as the main construction material, fall under this economic activity.

Assessment of Taxonomy alignment

As the STRABAG Group’s revenue (turnover) stems from a large number of very different individual projects, the examination of the technical criteria of the Taxonomy-eligible economic activities cannot be carried out at the level of the activity itself but only at the individual project level. With regard to the six environmental objectives, approximately 9,200 projects were Taxonomy-eligible in the 2024 financial year, whereby some of these are to be reviewed in relation to multiple environmental objectives. The assessment requires a considerable administrative effort due to the extensive and detailed criteria involved. In addition, a wide variety of technical screening criteria were defined for each economic activity within the framework of the delegated regulations.

For this reason, the detailed assessment for Taxonomy alignment is carried out per individual project for the five economic activities with the highest turnover: construction of new buildings (as general contractor) (CCM, CE), renovation of existing buildings (CCM, CE), infrastructure for rail transport (CCM), maintenance of roads and motorways (CE) and use of concrete in civil engineering (CE).

These five economic activities account for a consolidated 88% of the total Taxonomy-eligible turnover and comprise more than 7,090 individual projects, which is why only projects with an annual output volume of more than € 5 million were examined in detail.

A special software application, the STRABAG-Taxonomiemonitor, was therefore created to carry out the assessment of the individual projects using questionnaires for assessing Taxonomy alignment for the five economic activities listed above. The questions are to be answered by the project managers with verification to document the answers to be uploaded to the system. The questionnaires cover the criteria for making a significant contribution and for ensuring the DNSH criteria at the individual project level.

For the economic activities not examined at the individual project level, an analysis of the technical screening criteria was carried out using typified construction site organisations and structures.

As the required evidence, in particular the climate risk analysis for these projects, is not fully available, these projects are only shown as Taxonomy-eligible but not Taxonomy-aligned.

The existence of a robust climate risk analysis is the DNSH criterion for climate change adaptation in the relevant activities to which the projects have been assigned.

The absence of climate risk and vulnerability analyses is contrary to the DNSH criterion for climate change adaptation. As Taxonomy-alignment requires not only a material contribution to an environmental objective but also compliance with the DNSH principle for the remaining environmental objectives, non-compliance with the criterion prevents Taxonomy-alignment for the projects concerned.

For economic activities in the energy, water supply, waste water and waste disposal sectors, the definitions of the EU Taxonomy Regulation are met as Taxonomy-eligible economic activities for the construction work alone. The technical screening criteria apply to the operation and equipment used, however, about which STRABAG has no information as these are outside the scope of services. These economic activities are therefore shown as not Taxonomy-aligned.

STRABAG SE is a leading European technology group for construction services. These services are provided on the basis of public tenders or specifications from private clients. Sustainable solutions are offered. STRABAG has an influence on the ecological design of buildings only in rare cases or within the scope of its own project developments. In public tenders in particular, the company is usually only commissioned to carry out the construction work.

The review of the individual projects has shown that many criteria specified by the EU Taxonomy are not yet taken into account as standard practice in construction projects. We expect that an increasing number of tenders will meet the EU Taxonomy criteria in the future.

Turnover (revenue)

Determination of the denominator according to Article 8 Annex 1:

The turnover comprises revenue that was recognised in accordance with IAS 1.82(a), determined on the basis of IFRS 15. It includes revenue from construction contracts, revenue from construction materials, revenue from facility management, revenue from project developments and other revenue.

Determination of the numerator according to Article 8 Annex 1:

In line with the management approach described above, the Taxonomy-eligible projects were assessed at the individual project level or through analytical reviews for Taxonomy alignment.

The Taxonomy-aligned projects exclusively involve the economic activities “construction of new buildings” and “infrastructure for rail transport” in relation to the environmental objective of climate change mitigation. With “construction of new buildings”, the criteria for primary energy demand, air-tightness and thermal integrity are met and the life-cycle global warming potential has been calculated. With “infrastructure for rail transport”, the substantial contribution of electrification is met.

With the economic activities “renovation of existing buildings”, “maintenance of roads and motorways” and “use of concrete in civil engineering”, no project was able to fulfil all the technical screening criteria for Taxonomy alignment. While “renovation of existing buildings” failed on various criteria, “use of concrete in civil engineering” and “maintenance of roads and motorways” were unable to meet the required waste treatment and recycling rates. In asphalt road construction, this can be explained by the fact that the existing asphalt mixing plants have lower recycling rates.

The individual economic activities can be Taxonomy-aligned or Taxonomy-eligible with regard to several environmental objectives. The share of the total turnover of Taxonomy-aligned and Taxonomy-eligible economic activities per environmental objective is shown in the overview tables in the Notes. Care must be taken to avoid redundancies when determining the Taxonomy-aligned or Taxonomy-eligible turnover.

The turnover is as follows:

A detailed presentation by economic activity in accordance with the reporting templates from Annex II is available in the Notes.

Turnover (revenue)

The Taxonomy-aligned turnover compared to the previous year is roughly the same and relates exclusively to the environmental objective of climate change mitigation. With regard to the other environmental objectives that were assessed for alignment for the first time in the 2024 financial year, the technical screening criteria could not be met for the projects examined.

All turnover reported in the numerator relate to revenue in accordance with IFRS 15 and are reported as revenue in the consolidated financial statements of STRABAG SE.

The result shows that 39.19% of the STRABAG Group’s business activities are not covered by the EU Taxonomy. This applies in particular to property and facility services, building materials production and the new road construction. As a result, there are no technical screening criteria laid out in the regulation to assess their degree of sustainability.

A large proportion of building construction also does not fall under the Taxonomy-eligible economic activities, as the definition is aimed at the construction of complete residential and non-residential buildings. In many cases, however, STRABAG is only responsible for individual parts of buildings.

Nevertheless, sustainable solutions in essential business activities are key for a successful transition to a sustainable economy. STRABAG relies on relevant standards in this area and pursues a comprehensive sustainability strategy. Detailed information can be found elsewhere in this Sustainability Report.

The EU Taxonomy is constantly evolving. An adaptation and expansion of the economic activities and the screening criteria is to be expected.

Capital expenditures (CapEx)

Determination of the denominator according to Article 8 Annex 1:

Capital expenditures as defined by the EU Taxonomy include additions to tangible and intangible fixed assets, including business combinations. Also included are additions to right-of-use assets in accordance with IFRS 16. The disclosures are made before depreciation, amortisation, impairment or other changes in value. The total capital expenditures in intangible and tangible assets reported in the IFRS consolidated financial statements form the starting point for determining the investments.

Determination of the numerator according to Article 8 Annex 1:

Taxonomy-eligible and Taxonomy-aligned expenditures can be divided into three categories:

• Capital expenditures related to assets that are associated with Taxonomy-eligible or Taxonomy-aligned economic activities
• Acquisition of assets related to Taxonomy-eligible or Taxonomy-aligned economic activities or individual measures that reduce greenhouse gas emissions
• Capital expenditures incurred as part of a plan to expand Taxonomy-aligned economic activities or to allow Taxonomy-eligible economic activities to become Taxonomy-aligned (CapEx plan)

Capital expenditures related to assets that are associated with Taxonomy-eligible or Taxonomy-aligned economic activities

The STRABAG Group has a central equipment management function that controls the procurement, servicing, maintenance, repair, deployment and utilisation of construction machinery, mechanical equipment and vehicles throughout the Group.

A clear allocation of construction equipment and the vehicle fleet to individual projects and thus to economic activities is not possible. In the case of mixed-use assets, these are assigned to Taxonomy-eligible or Taxonomy-aligned economic activities by means of a suitable classification key. STRABAG assigns technical equipment, machinery, the vehicle fleet, and operating and office equipment to this category. The acquisition of these assets through business combinations is also included here.

The equipment intensity in construction projects varies greatly; especially in projects with a high level of subcontractor services, equipment use differs considerably compared to services performed using the company’s own personnel.

The metric of equipment costs, recorded in the management reporting for each project, is used to assign investments as Taxonomy-aligned or Taxonomy-eligible. The percentage of the total equipment costs that is attributable to Taxonomy-aligned and Taxonomy-eligible projects is presented as Taxonomy-aligned and Taxonomy-eligible investments.

Acquisition of assets related to Taxonomy-eligible or Taxonomy-aligned economic activities or individual measures that reduce greenhouse gas emissions

Capital expenditures that are not directly attributable to the provision of services are not allocated on the basis of equipment costs.

Buildings and photovoltaic systems constructed by STRABAG for its own use are recognised as Taxonomy-eligible economic activities. Any real estate or photovoltaic array that was acquired or built in-house in a certain financial year will be reviewed for compliance with the technical screening criteria and thus for Taxonomy alignment. The acquisition or construction of these buildings is reported in the Consolidated Statement of Fixed Assets under “Properties and buildings” or “Facilities under construction”.

The right-of-use assets from leases involve a large number of real estate leases for office locations. These are Taxonomy-eligible in accordance with CCM 7.7 and, due to a lack of available information for assessing Taxonomy alignment, are reported in their entirety as not Taxonomy-aligned. The previous year’s figure has been adjusted accordingly.

The acquisition of vehicles also represents an acquisition of assets related to a Taxonomy-eligible economic activity. Capital expenditures for passenger cars that are not directly attributable to the provision of services are therefore included under this item. When assessing Taxonomy alignment, the technical screening criteria must be verified by the manufacturer or supplier. This evidence has not yet been provided to the STRABAG Group for vehicle investments in the 2024 financial year, which is why only Taxonomy-eligible investments are shown here.

Capital expenditures incurred as part of a plan to expand Taxonomy-aligned economic activities or to allow Taxonomy-eligible economic activities to become Taxonomy-aligned (CapEx plan)

STRABAG is rethinking the future of construction. With numerous innovation and sustainability projects, the Group is working to reduce CO₂ emissions in administration and construction projects in order to achieve the goal of becoming climate neutral in 2040. The circular economy, or circularity, was also defined as one of the six key strategic topics of our Strategy 2030. Detailed information can be found elsewhere in this Sustainability Report.

Whether and to what extent an economic activity can be classified as Taxonomy-aligned is to be assessed on the basis of the screening criteria for the individual construction projects. Since STRABAG essentially provides construction services on the basis of public tenders or specifications from clients, Taxonomy-aligned economic activities can only be expanded together with the clients. Therefore, no investment plans currently exist in this regard.

It should be noted that capital expenditures to expand Taxonomy-aligned turnover are to be reported in this category. Since the technical screening criteria usually refer to the building and not to the construction process, there is no direct connection between capital expenditures and Taxonomy-aligned turnover.

Capital expenditures for Taxonomy-non-eligible economic activities

This category comprises capital expenditures that cannot be allocated to Taxonomy-eligible economic activities. The calculation is based on the total additions to intangible assets and to property, plant and equipment according to the IFRS consolidated financial statements. First, the capital expenditures for the acquisition of assets related to Taxonomy-eligible or Taxonomy-aligned economic activities as well as the Taxonomy-non-eligible expenditures are determined. The remaining expenditures are allocated on the basis of the Taxonomy-aligned and Taxonomy-eligible turnover.

Capital expenditures that are associated with Taxonomy-eligible or Taxonomy-aligned economic activities may be Taxonomy-aligned or Taxonomy-eligible with regard to several environmental objectives due to the allocation according to turnover. The share of the total capital expenditures of Taxonomy-aligned and Taxonomy-aligned economic activities per environmental objective is shown in the overview tables in the Notes. Care must be taken to avoid redundancies when determining the Taxonomy-aligned or Taxonomy-eligible capital expenditures.

The total capital expenditures are as follows:

A detailed presentation by economic activity in accordance with the reporting templates from Annex II is available in the Notes.

CapEx

The increase in Taxonomy-aligned capital expenditure, amounting to € 143.30 million or 15.12%, is attributable to the acquisition of investment property. There were no investments of this kind in the previous year.

The remaining Taxonomy-aligned capital expenditures results exclusively from the allocation of the Taxonomy-aligned turnover, so that the development essentially follows that of the turnover. Slight shifts are possible due to the projects’ different equipment costs.

The Taxonomy-aligned capital expenditures include € 143.30 million (previous year: € 0.00) related to investment property; € 15.62 million (previous year: € 12.15 million) related to technical equipment and machinery; € 17.84 million (previous year: € 13.51 million) related to other facilities, furniture and fixtures and office equipment; € 2.23 million (previous year: € 1.23 million) related to facilities under construction; and € 0.73 million (previous year: € 2.49 million) related to business combinations. The capital expenditures are shown in the statement of fixed assets under “development of investment property”.

Operating expenditures (OpEx)

Determination of the denominator according to Article 8 Annex 1:

Operating expenditures as defined by the EU Taxonomy are, in addition to non-capitalisable research and development activities, all maintenance and repair expenditures as well as short-term leasing expenses, building renovation activities and other directly attributable costs relevant to the ongoing maintenance and preservation of the functionality of intangible and tangible assets.

Determination of the numerator according to Article 8 Annex 1:

Analogous to the procedure for capital expenditures, the repair and maintenance costs for technical equipment, machinery, the vehicle fleet, and furniture and fixtures are allocated to Taxonomy-aligned, Taxonomy-eligible and Taxonomy-non-eligible operating expenditures in proportion to the equipment costs.

The maintenance expenses for real estate can be partially allocated to the economic activity “renovation of existing buildings” or to “maintenance and repair of energy efficiency equipment”. These individual measures are therefore Taxonomy-eligible and, if the screening criteria are met, Taxonomy-aligned operating expenditures.

A detailed examination of the maintenance of real estate with regard to the technical screening criteria is only carried out, however, if the individual measure exceeds the expenditure of € 3 million. In the 2024 financial year, this value was not exceeded, which is why the entire allocation was made under Taxonomy-non-eligible operating expenditures.

The basis for determining the operating expenditures are the respective expense items according to the IFRS consolidated balance sheet. First, the individual measures are subtracted from the total and only then is the residual size assigned on the basis of the equipment costs.

Operating expenditures that are associated with Taxonomy-eligible or Taxonomy-aligned economic activities may be Taxonomy-aligned or Taxonomy-eligible with regard to several environmental objectives due to the allocation according to turnover. The share of the total operating expenditures of Taxonomy-aligned and Taxonomy-aligned economic activities per environmental objective is shown in the overview tables in the Notes. Care must be taken to avoid redundancies when determining the Taxonomy-aligned or Taxonomy-eligible capital expenditures.

The operating expenditures are as follows:

A detailed presentation by economic activity in accordance with the reporting templates from Annex II is available in the Notes.

OpEx

As the Taxonomy-aligned operating expenditures result exclusively from the allocation of the Taxonomy-aligned turnover, the development essentially follows that of the turnover. Slight shifts are possible due to the projects’ different equipment costs.

The Taxonomy-aligned operating expenditures include € 17.04 million (previous year: € 13.08 million) related to maintenance of construction equipment and € 4.76 million (previous year: € 3.79 million) related to maintenance of the vehicle fleet. Recognition in the IFRS consolidated financial statements is made under the item “Other services used”.

The STRABAG SE Group is not active in the economic activities 4.26 through 4.31 of the Delegated Regulation with regard to the environmental objectives of climate change mitigation and climate change adaptation, which is why the reporting forms relating to nuclear energy and fossil gas activities only contain blank reports.

Minimum safeguards

Assessing Taxonomy alignment in accordance with Articles 3 and 18 of the EU Taxonomy Regulation (EU 2020/852) also requires compliance with minimum social safeguards. The EU Taxonomy thus combines economic, environmental and social criteria for classifying sustainable economic activities. The minimum safeguards included in the EU Taxonomy are there to ensure that companies, when carrying out their economic activities, have procedures in place that protect human and workers’ rights and which guarantee compliance with standards relating to taxation and fair competition. The safeguards are also designed to prevent serious offences with regard to these issues. An economic activity is carried out in alignment with the minimum safeguards if the following minimum social safeguards are followed in its implementation:

• OECD Guidelines for Multinational Enterprises
• United Nations (UN) Guiding Principles on Business and Human Rights
• Core Conventions of the International Labour Organization (ILO)

These international frameworks comprise principles and guidelines for corporate responsibility in relation to the four previously mentioned topics of human rights, corruption, taxation and fair competition. The Final Report on Minimum Safeguards published by the Platform on Sustainable Finance in October 2022 and the FAQs issued by the European Commission in June 2023 provide comprehensive guidance on interpreting the minimum safeguards requirements, which STRABAG took into account during implementation.

STRABAG has implemented various processes and procedures to ensure compliance with minimum social safeguards. These apply to all Group companies and take into account the upstream and downstream value chain with regard to human rights and anti-bribery compliance. We use various control mechanisms to monitor the processes and procedures, including audits, internal and external reviews, and ongoing risk analyses. Our monitoring systems also include the implementation of corrective measures in the event of non-compliance.

The topics of human rights, corruption and fair competition are covered in the sustainability statement. The topic of taxation, on the other hand, does not form part of the sustainability statement. The principles of STRABAG’s tax policy call for compliance with all applicable tax laws and other relevant regulations internationally. Numerous directives, organisational instructions and controls have been implemented in the individual countries to ensure appropriate taxation and compliance with the relevant regulations.

When assessing compliance with the minimum social safeguards, STRABAG also takes into account the relevant Principal Adverse Impacts (PAI) indicators contained in the European Sustainable Finance Disclosure Regulation (EU) 2019/2088 (SFDR) and set out in the European Commission FAQs from June 2023. These include the unadjusted gender pay gap and board gender diversity. Both indicators are included in this report.

The following table provides an overview of the most important Group Directives and policies that were analysed and of the chapters in the sustainability statement where these are explained in more detail:

Overview

Proportion of turnover / Total turnover

Proportion of CapEx / Total CapEx

Proportion of OpEx / Total OpEx

Template 1: Nuclear and fossil gas related activities