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 the EU’s 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 addressed in this report. With regard to the environmental targets “Climate protection” and “Adaptation to climate change,” the economic activities of NORMA Group were to be examined and analyzed in fiscal year 2021 with regard to their Taxonomy-eligibility and from fiscal year 2022 with regard to their Taxonomy-eligibility and Taxonomy-alignment. Taxonomy-eligibility is met if a company’s economic activities are described in the Climate Delegated Act (Annex 1 and 2). 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 fulfilment of certain technical screening criteria as well as minimum safeguards.

Taxonomy-eligible economic activities of NORMA Group

NORMA Group has identified the following economic activities as defined in Annex I of the Delegated Act of the EU Taxonomy (EU 2021/2139) on climate-related environmental objectives. Climate target 1 is relevant for NORMA Group, while the requirements of climate target 2 are not met.

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. The activity is considered to be a separate business activity.

Economic activity 6.4 is defined by the EU as: “The sale, purchase, financing, leasing, rental and operation of personal mobility devices or personal transport equipment powered by the user’s muscle power, a zero-emission engine or a combination of zero-emission engine and muscle power. This also includes goods transport services with (cargo) bicycles.” NORMA Group offers its employees bicycle leasing at the Maintal and Marsberg sites. Overall, NORMA Group’s activities thus correspond to the economic activity described in Annex 1 of the Delegated Act of the EU Taxonomy (EU 2021/2139) 6.4.

Economic activity 6.5 is defined by the EU as: “The purchase, financing, hiring, leasing and operation of vehicles of categories M1, N1, both covered by Regulation (EC) No 715/2007 of the European Parliament and of the Council, or L (two- and three-wheeled vehicles and four-wheeled vehicles).” The leasing of company cars by employees can be assigned to this category. Overall, NORMA Group’s activities thus correspond to the economic activity described in Annex 1 of the Delegated Act of the EU Taxonomy (EU 2021/2139) 6.5.

Economic activity 7.1 Construction of new buildings

Economic activity 7.1 is defined by the EU as: “Development of construction projects for residential and non-residential buildings by bringing together financial, technical and material resources to realize the construction projects for subsequent sale, as well as construction of complete residential or non-residential buildings for own account for resale or on a fee or contract basis.” NORMA Group fulfills the description of economic activity 7.1 “Construction of new buildings” with the construction of buildings and can allocate itself to the economic activity of Annex 1 of the Delegated Act of the EU Taxonomy (EU 2021/2139) in fiscal year 2022.

Economic activity 7.2 Renovation of existing buildings

Economic activity 7.2 is defined by the EU as: “Building and civil engineering works or their preparation.” NORMA Group fulfills the description of economic activity 7.2 “Renovation of existing buildings” with its renovation work on buildings and can assign itself to the economic activity of Annex 1 of the Delegated Act of the EU Taxonomy (EU 2021/2139) in fiscal year 2022.

Economic activity 7.3 is defined by the EU as: “Individual renovation activities consisting in the installation, maintenance or repair of energy-efficient equipment.” NORMA Group fulfills the description of economic activity 7.3 “Installation, maintenance and repair of energy efficiency equipment” with its maintenance and repair work on energy-efficient equipment and can assign itself to the economic activity of Annex 1 of the Delegated Act of the EU Taxonomy (EU 2021/2139) in fiscal year 2022.

Economic activity 7.4 is defined by the EU as: “Installation, maintenance and repair of charging stations for electric vehicles in buildings (and parking spaces attached to buildings).” NORMA Group fulfills the description of the economic activity 7.4 “Installation, maintenance and repair of charging stations for electric vehicles in buildings (and parking spaces attached to buildings)” with the installation as well as maintenance and repair work on charging stations for electric vehicles and can assign itself to the economic activity of Annex 1 of the Delegated Act of the EU Taxonomy (EU 2021/2139) in fiscal year 2022.

Economic activity 7.5 is defined by the EU as: “Installation, maintenance and repair of instruments and devices for measuring, regulation and controlling energy performance of buildings.” NORMA Group fulfills the description of economic activity 7.5 “Installation, maintenance and repair of instruments and devices for measuring, regulation and controlling energy performance of buildings” with the installation as well as maintenance and repair work on equipment for the measurement, regulation and control of the energy performance of buildings and can be assigned to the economic activity of Annex 1 of the Delegated Act of the EU Taxonomy (EU 2021/2139) in fiscal year 2022.

NORMA Group has assessed the Taxonomy-eligible economic activities listed above for Taxonomy alignment in fiscal year 2022. This includes the fulfillment of the technical assessment criteria as well as the minimum safeguards. The audit has shown that NORMA Group does not meet the alignment requirements in fiscal year 2022. Activity 3.6 cannot meet the substantial contribution criteria per se, as the electromobility sector is already classified as emission-free by definition of the Taxonomy. The activities that are to be assigned to CapEx and OpEx category c) are “Purchase of Output.” The activities classified as CapEx and OpEx category c) are purchases of output, as NORMA purchases the main services and products in connection with these activities from third parties. It is not possible to report a Taxonomy-aligned share here in fiscal year 2022, as this is dependent on the information available from suppliers. A process for communicating with and querying suppliers to obtain the relevant information was already started in fiscal year 2022. The implementation of this process will be continued in fiscal year 2023 so that the Taxonomy-aligned CapEx and OpEx category c) can be determined and reported in the future, subject to the proviso that the suppliers also implement corresponding Taxonomy-aligned processes.

In fiscal year 2021, NORMA Group has classified the manufacturing processes of the product area Water Management as Taxonomy-eligible under the economic activity 5.1 described in Annex 1 and 2 of the Delegated Act of the EU taxonomy (EU 2021/2139). With the publication “Draft Commission Notice” (FAQs Batch 2) of December 19, 2022, and the clarification in question 66 on the Climate Act, these manufacturing processes are no longer classified as taxonomy-eligible in fiscal year 2022. More specifically, the products must be used to provide potable water and in wastewater treatment. NORMA Group’s Water Management products are used to treat water, but not wastewater within the meaning of the clarification by the European Commission. In the area of Drip Irrigation, the systems treat either drinking water or wastewater by filtering it before it can be reused for landscape and agricultural irrigation. Drip Irrigation systems have a proven positive impact on climate change mitigation, as drip irrigation systems can dramatically reduce greenhouse gas emissions from the soil. The systems in the Stormwater product group protect against drinking water contamination. Thus, although NORMA Group’s Water Management products fall outside economic activity 5.1 due to the stricter definitions, they still have a positive impact on climate protection.

The following section presents Group sales, capital expenditures (Capex) and operating expenses (Opex) for the reporting period 2022, broken down into Taxonomy-eligible and non-Taxonomy-eligible as well as Taxonomy-aligned and non-Taxonomy-aligned components.

Sales KPI (Key Performance Indicator) definition

The Taxonomy-aligned share of Group sales is defined as the share of net sales in fiscal year 2022 derived from products and services related to Taxonomy-aligned economic activities (numerator) divided by net sales in 2022 (denominator) (Total sales correspond to sales from the CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME). The taxonomy-eligible share of Group sales is defined as the share of net sales in fiscal year 2022 derived from products and services related to Taxonomy-eligible economic activity (numerator) divided by net sales in 2022 (denominator). This numerator for NORMA Group results from 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 in fiscal year 2022 from the income statement. In determining sales, the system ensured that no sales were recorded twice.

2 NORMA Group does not fill in the specific reporting forms for the gas and nuclear activities as they are irrelevant.

The Capex KPI is defined as the share of Taxonomy-aligned 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 2022 in the denominator. (Compare the corresponding additions under table TABLE 094 “GOODWILL AND OTHER INTANGIBLE ASSETS” and  TABLE 095 ”ROPERTY, PLANT AND EQUIPMENT”). In determining Capex, the system has ensured that no expenses have been recorded twice.

Capex category a) is defined according to the EU as “capital expenditures for assets or processes related to Taxonomy-aligned economic activities.” As NORMA Group cannot report Taxonomy-aligned activities in this fiscal year 2022, no Taxonomy-aligned Capex is reported. However, we do, report our Taxonomy-eligible activities.

Capex category b) is defined by the EU as “investments that are part of a Capex plan to expand Taxonomy-aligned economic activities or enable Taxonomy-eligible economic activities to become Taxonomy-aligned.” No such investments were made in fiscal year 2022.

Capex category c) is defined according to the EU as capital expenditures related to the purchase of products and services from Taxonomy-aligned economic activities and individual measures that enable the target activities to become low-carbon or lead to greenhouse gas reductions. Since NORMA Group has not yet been able to identify any Taxonomy-aligned activities in this fiscal year 2022, as described in section "Taxonomy-aligned economic activities of NORMA Group," the company is still in the process of implementing the process, no Taxonomy-aligned capex can be reported. However, we do report our Taxonomy-eligible activities.

The Opex KPI is defined as the share of Taxonomy-aligned 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 b) is defined by the EU as “operating expenses that are part of a Capex plan to expand Taxonomy-aligned economic activities or enable Taxonomy-eligible economic activities to become Taxonomy-aligned.” No such operating expenses were incurred in fiscal year 2022.

Opex category c) is defined according to the EU as operating expenses that relate to the purchase of products and services from Taxonomy-eligible or Taxonomy-aligned economic activities and individual measures that enable the target activities to become low-carbon or lead to greenhouse gas reductions. Since NORMA Group has not yet been able to identify any Taxonomy-aligned activities in fiscal year 2022, because, as described above, the company is still in the process of implementing the process, no Taxonomy-aligned Opex can be reported. However, we do report our Taxonomy-eligible activities.