EU Taxonomy

The Taxonomy Regulation is a key element of the European Commission’s action plan to redirect capital flows towards a more sustainable economy. As a classification system for environmentally sustainable economic activities, the Taxonomy represents an important step towards achieving carbon neutrality by 2050 in line with EU targets. The initial focus is on the following six environmental objectives:

• Climate protection
• Adaptation to climate change
• Sustainable use and protection of water and marine resources
• Transition to a circular economy
• Pollution prevention and control
• Protection and restoration of biodiversity and ecosystems

Only the first two environmental objectives are to be covered in this report. The other four objectives are to be applied to reports published after January 1, 2023. With regard to the environmental targets “Climate protection” and “Adaptation to climate change,” the economic activities of NORMA Group are to be examined and analyzed in the first reporting year with regard to their Taxonomy-eligibility and from the following reporting year with regard to their Taxonomy-alignment. In the following reporting periods, Taxonomy-eligibility and -alignment are to be reported simultaneously for the remaining environmental objectives. Taxonomy-eligibility is met if a company’s economic activities are to be regarded as relevant for the environmental objectives listed by the EU. Taxonomy-alignment, on the other hand, only exists if Taxonomy-eligible economic activities, or parts thereof, can be assessed as positive for the achievement of the EU’s environmental objectives due to the fulfillment of certain technical screening criteria.

Taxonomy-eligible economic activities of NORMA Group

NORMA Group has identified the following economic activities as defined in Annexes I and II of the Delegated Act of the EU Taxonomy on climate-related environmental objectives.

Economic activity 3.6 – Manufacture of other low carbon technologies

Economic activity 3.6 “Manufacture of other low carbon technologies” is defined by the EU as: “Manufacturing of technologies aiming at a significant reduction of greenhouse gas emissions in other sectors of the economy.” NORMA Group’s activities to manufacture electric mobility products (connectors, dry brake valves and flex systems) meet this activity description. Certain products can only be installed in and are required in electric vehicles. Through their use in electric vehicles and, in turn, their use in the transport sector and the associated CO2 emission-free mobility, NORMA Group’s products are aimed at significantly reducing greenhouse gas emissions in another sector of the economy. Overall, the manufacturing processes thus correspond to economic activity 3.6 described in Annex 1 of the Delegated Act of the EU Taxonomy.

Economic activity 5.1 – Construction, expansion and operation of water collection, treatment and supply systems

Economic activity 5.1 is defined by the EU as: “Construction, expansion and operation of water collection, treatment and supply systems.” In the product area of water management, NORMA Group manufactures systems that are used for the collection and distribution and, in some cases, also the treatment of water. These systems can be used, for example, to irrigate gardens, landscapes and residential areas, to drain excess water or to increase water quality through filtration systems. Overall, the respective manufacturing processes can thus be classified under economic activity 5.1 described in both annexes of the Delegated Act of the EU Taxonomy.

Performance indicators according to EU Taxonomy

The following section presents Group sales, capital expenditures (Capex) and operating expenses (Opex) for the reporting period 2021, broken down into Taxonomy-eligible and non-Taxonomy-eligible components.

Sales KPI (Key Performance Indicator) definition

The Taxonomy-eligible share of Group sales is defined as the portion of net sales for fiscal year 2021 derived from products and services related to Taxonomy-eligible economic activities (numerator) divided by net sales in 2021 (denominator). This numerator for NORMA Group results from the sales of the four subsidiaries National Diversified Sales (USA), NORMA Products Malaysia, NORMA Australia and Kimplas (India), which mainly comprise the Strategic Business Unit Water Management, as well as the sales of certain products from the Strategic Business Field Mobility and New Energy, which can only be installed in electric vehicles. The denominator corresponds to NORMA Group's total sales for the fiscal year 2021 from the income statement. In determining the sales, the system ensured that no sales were recorded twice.

Table 1: Sales KPI (Key Performance Indicator)

*Total revenue corresponds to revenue from CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME.

Capex KPI definition

The Capex KPI is defined as the share of Taxonomy-eligible capital expenditures (Capex) in the numerator, divided into three categories (a – c) as defined by the EU, divided by the total Group Capex for fiscal year 2021 in the denominator. In determining Capex, the system has ensured that no expenses have been recorded twice.

Capex category a)

Capex category a) is defined according to the EU as “capital expenditures for assets or processes related to Taxonomy-eligible economic activities” (sales-related Capex). For NORMA Group, this Capex results from capitalized investments in the four subsidiaries of the Water Management segment on the one hand. On the other hand, parts of the Capex to the Mobility and New Energy segment were allocated according to sales, as well as in Water Management in the Kimplas division. Certain capital expenditures do not exclusively target the production of electromobility products. Therefore, this Capex was allocated to the electromobility products based on the generated share of sales.

Capex category b)

Capex category b) is defined by the EU as “investments that are part of a Capex plan to expand Taxonomy-eligible economic activities or enable Taxonomy-eligible economic activities to become Taxonomy-align.” No such investments were made in fiscal year 2021.

Capex category c)

Capex category c) is defined according to the EU as capital expenditures related to the acquisition of production from Taxonomy-eligible economic activities and individual measures that enable the target activities to become low-carbon or lead to greenhouse gas reductions (non-sales-related Capex).

These for NORMA Group non-sales-related investments are defined in economic activities 7.1 to 7.7 of the Delegated Act as “Investments in new construction, renovation of existing buildings, installation, maintenance and repair of energy-efficient equipment, charging stations for electric vehicles in buildings (and in parking lots belonging to buildings), and equipment for measuring, regulating and controlling the energy performance of buildings, renewable energy technologies, and investments in the acquisition and ownership of buildings.”

Using this final list, non-sales related investments of the three regions were identified based on the ERP systems and subsequently validated against the Capex register.

Table 2: Capex KPI

*Compare the corresponding additions under 18. Goodwill and other intangible assets and 19. Property, plant and equipment.

Opex KPI definition

The Opex KPI is defined as the share of Taxonomy-eligible operating expenses (Opex) in the numerator, broken down into three categories (a – c) as defined by the EU, divided by direct non-capitalized expenses, in particular for research and development, building refurbishment measures, short-term rental as well as maintenance and repair in the denominator. In determining Opex, the system ensured that no expenses were recorded twice.

Opex category a)

Opex category a) is defined according to the EU as “operating expenses related to assets or processes associated with Taxonomy-eligible economic activities, including training and other human resource adaptation requirements, as well as research and development costs”. The following NORMA Group Opex accounts have been identified as Taxonomy-eligible according to category a): Maintenance of production facilities, technical equipment, machinery, forklifts, maintenance (general) and research and development. In fiscal year 2021, the Opex in the area of Water Management were determined using these accounts. Due to the low Taxonomy-eligible share of sales of electromobility products, the related Opex can be classified as immaterial.

Opex category b)

Opex category b) is defined by the EU as “operating expenses that are part of a Capex plan to expand Taxonomy-eligible economic activities or enable Taxonomy-eligible economic activities to become Taxonomy-align.” No such operating expenses were incurred in fiscal year 2021.

Opex category c)

Opex category c) is defined according to the EU as operating expenses that relate to the purchase of production from Taxonomy-eligible economic activities and individual measures that enable the target activities to become low-carbon or lead to greenhouse gas reductions. NORMA Group has identified four Opex accounts as taxonomy-eligible according to category c), which are to be included in the short-term leasing area of the EU taxonomy. In fiscal year 2021, the Opex in the Water Management segment were determined based on these accounts and turned out to be immaterial (EUR 10 thousand). In the area of electromobility products, no values could be determined on the system side due to the short-term changes or clarifications of the EU. Due to the low Taxonomy-eligible share of sales of electromobility products, the related Opex can also be classified as immaterial

Table 3: Opex KPI