EU Taxonomy

The EU 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 EU Taxonomy represents an important step towards achieving carbon neutrality by 2050 in line with the EU’s objectives. In the reporting year 2023, the two new legal acts “Amended Climate Delegated Regulation (EU 2023/2485)” and “Environmental Delegated Regulation (EU 2023/2486)” were adopted, resulting in new economic activities. In the section below, we report on the following environmental objectives:

Climate-related environmental objectives:

1) Climate change mitigation

2) Climate change adaptation to climate change

Non-climate-related environmental objectives:

1) Sustainable use and protection of water and marine resources

2) Transition to a circular economy

3) Pollution prevention and control

4) Protection and restoration of biodiversity and ecosystems

NORMA Group's economic activities were examined and analyzed for their taxonomy eligibility and alignment with regard to the climate-related environmental objectives, as was already the case in the reporting year 2022. The four non-climate-related environmental objectives were required to be examined and analyzed in terms of their taxonomy eligibility for the first time in the reporting year. A transitional period also applies to the newly added economic activities in the climate-related environmental objectives, as a result of which only taxonomy eligibility needs be reported for the reporting year 2023. From the reporting year 2024, taxonomy alignment also needs be reported for the non-climate-related environmental objectives.

Taxonomy eligibility is met if a company’s economic activities are described in the Climate Delegated Act or the Environmental Delegated Act. An economic activity is also considered Taxonomy-aligned if it makes a substantial contribution to at least one of the climate-related and non-climate-related environmental objectives, complies with minimum social safeguards such as human rights and does not significantly harm the other climate-related and non-climate-related environmental objectives (“do no significant harm”). Economic activities that are not covered by the EU Taxonomy and are therefore not relevant according to the EU Taxonomy are identified in the delegated acts as not Taxonomy-eligible across the board.

From the reporting year 2024, the EU Taxonomy will be implemented as part of the new CSRD legislation and included in the Management Report.

Taxonomy-eligible economic activities of NORMA Group

In the reporting year 2023, a comprehensive relevance analysis was carried out to identify potentially Taxonomy-eligible economic activities of NORMA Group and to derive the financial KPIs in accordance with the requirements of the EU Taxonomy. The economic activities of NORMA Group that have been identified and are Taxonomy-eligible are presented in the following sections.

Climate-related environmental objectives:

NORMA Group has identified the following economic activities as defined in Annex I of the Delegated Act of the EU Taxonomy (EU 2021/2139) as climate-related environmental objectives. The “Climate change mitigation” objective is relevant for NORMA Group, the requirements of the “Climate change adaptation” objecitve are not met.

Economic activity 3.18 Manufacture of automotive and mobility components

Economic activity 3.18 “Manufacture of automotive and mobility components” refers, among other things, to the “manufacture of automotive and mobility components. NORMA Group’s activities to manufacture electromobility products (connectors, dry brake valves and flex systems) meet this activity description. Certain products can only be installed and used in electric vehicles. NORMA Group’s products are designed to mitigate climate change through their use in electric vehicles and the associated zero-emission automotive and mobility systems and components. Overall, the manufacturing processes thus correspond to economic activity 3.18 described in Annex 1 of the Delegated Act of the EU Taxonomy (2021/2139) in the version adopted on November 21, 2023. The activity is considered to be a separate business activity.

Based on the newly conducted relevance analysis, economic activity 3.18 “Manufacture of automotive and mobility components”, which was newly included in the Climate Delegate Act, was classified as relevant in the reporting year 2023. This results in new opportunities for NORMA Group on the path to taxonomy alignment and the products of economic activity 3.6 could be assigned to economic activity 3.18 in the reporting year. Taxonomy-eligible turnover, CapEx and OpEx are reported in this regard.

Economic activity 4.1 Electricity generation using solar photovoltaic technology

Economic activity 4.1 “Electricity generation using solar photovoltaic technology” is defined by the EU as: “Construction or operation of electricity generation facilities that produce electricity using solar photovoltaic (PV) technology.” NORMA Group installs photovoltaic systems and solar panels for projects to generate energy. Overall, the activities of NORMA Group thus correspond to economic activity 4.1 described in Annex 1 of the Delegated Act of the EU Taxonomy (2021/2139). This activity is classified as an ancillary activity.

Based on the newly conducted relevance analysis, the economic activities for “4.1 Electricity generation using solar photovoltaic technology” were classified as relevant for the first time in the reporting year 2023. The distinction to economic activity 7.6 was made on the basis of the building component required therein, which did not exist in the reporting year. The Taxonomy-eligible CapEx is reported in this regard.

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

Economic activity 5.1 is defined by the EU as: “Construction, extension and operation of water collection, treatment and supply systems.” In the Water Management product area, NORMA Group manufactures systems that are used to collect and distribute water, and in some cases also to treat it. The “Drip Irrigation” product category comprises solutions for efficient irrigation and the “Flow Management” product area includes a variety of valves and couplings for a wide range of irrigation and wastewater applications. In both areas, the aim is to find joining solutions for treating and draining wastewater. Overall, the manufacturing processes thus correspond to economic activity 5.1 described in Annex 1 of the Delegated Act of the EU Taxonomy (2021/2139). The activity is considered to be a separate business activity.

With the publication of the “Draft Commission Notice” in the Official Journal of the EU on October 23, 2023, the water management products allocated to the reporting year 2021 were no longer reported as Taxonomy-eligible in the reporting year 2022 due to the clarification on question 66 of the Climate Delegated Act, which was consequently published in the Commission Notice (C/2023/267).

Further analyses were carried out with product experts in the reporting year 2023 and a new approach to the allocation of certain product groups was applied. This made it possible to meet the criteria of activity 5.1 with the products from the "Drip Irrigation and Flow Management" group in the reporting year 2023 and to exclude non-Taxonomy-eligible revenue from the analysis. Taxonomy-eligible turnover, CapEx and OpEx are reported in this regard.

Economic activity 6.4 Operation of personal mobility devices, cycle logistics

Economic activity 6.4 is defined by the EU as: “Selling, purchasing, financing, leasing, renting and operation of personal mobility or transport devices where the propulsion comes from the physical activity of the user, from a zero-emissions motor, or a mix of zero-emissions motor and physical activity. This includes the provision of freight transport services by (cargo) bicycles.” NORMA Group offers bicycle leasing to its employees at several locations. Overall, the activities of NORMA Group thus correspond to economic activity 6.4 described in Annex 1 of the Delegated Act of the EU Taxonomy (2021/2139). This activity is classified as an ancillary activity. Expenses from short-term leases arise in connection with bicycle leasing for employees. The Taxonomy-eligible OpEx is reported in this regard.

Economic activity 6.5 Transport by motorbikes, passenger cars and light commercial vehicles

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, the activities of NORMA Group thus correspond to economic activity 6.5 described in Annex 1 of the Delegated Act of the EU Taxonomy (2021/2139). This activity is classified as an ancillary activity. Additions to property, plant and equipment and expenses from short-term leases arise in connection with company car leasing for employees. Taxonomy-eligible CapEx and OpEx are reported in this regard.

Economic activity 6.13 Infrastructure for personal mobility, cycling logistics

Economic activity 6.13 is defined by the EU as: “Construction, modernization, maintenance and operation of infrastructure for personal mobility, including the construction of roads, motorways bridges and tunnels and other infrastructure that are dedicated to pedestrians and bicycles, with or without electric assist.” NORMA Group manufactures so-called “Landscape Barrier”, which are used in the construction of new roads, bridges, tunnels or other infrastructure and protect infrastructure for personal mobility. Overall, the activities of NORMA Group thus correspond to economic activity 6.13 described in Annex 1 of the Delegated Act of the EU Taxonomy (2021/2139). These activities are considered to be a separate business activity.

Based on the newly conducted relevance analysis, the economic activities “6.13 Infrastructure for personal mobility, cycling logistics” were classified as relevant for the first time in the reporting year 2023. Taxonomy-eligible turnover, CapEx and OpEx are reported in this regard.

Economic activity 7.2 Renovation of existing buildings

Economic activity 7.2 is defined by the EU as: “Construction and civil engineering works or preparation thereof.” 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 the reporting year 2023. This activity is classified as an ancillary activity. The Taxonomy-eligible CapEx is reported in this regard.

With regard to renovation activities on existing buildings, activity 3.2 of the non-climate-related environmental target “Sustainable use and protection of water and marine resources” was also taken into consideration and examined. Investment expenditure can be allocated to both activity CCM 7.2 and activity CE 3.2. NORMA sees the more significant contribution in CCM 7.2. When allocating expenditure to the objectives, the amount under both objectives is shown, as required by the EU Commission.

Economic activity 7.3 Installation, maintenance and repair of energy efficiency equipment

Economic activity 7.3 is defined by the EU as: “Individual renovation measures consisting of the installation, maintenance or repair of energy efficiency 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). This activity is classified as an ancillary activity. The Taxonomy-eligible CapEx is reported in this regard.

Non-climate-related environmental objectives:

NORMA Group has identified the following economic activities as defined in Annex I of the Delegated Act of the EU Taxonomy (EU 2023/2486) as non-climate-related environmental objectives. The non-climate-related target “Sustainable use and protection of water and marine resources” is relevant for NORMA Group; the requirements of the other three environmental objectives are not met.

Economic activity 2.3 “Sustainable urban drainage systems (SUDS)”

Economic activity 2.3 “Sustainable urban drainage systems (SUDS)” is defined by the EU as: “Construction, extension, operation and renewal of urban drainage systems facilities that mitigate pollution and flood hazards due to discharges of urban runoff and improve the urban water quality and quantity, by harnessing natural processes, such as infiltration and retention.” NORMA Group’s activities for the production of “Stormwater product solutions” fulfill this activity description in the sections “Construction, expansion and renovation of facilities.” This product category aims to increase the amount of water that can be used and to protect drinking water from contamination. Overall, the manufacturing processes thus correspond to economic activity 2.3 described in the Annex of the Environmental Delegated Act of the EU Taxonomy (EU 2023/2486). The activity is considered to be a separate business activity.

Based on the newly conducted relevance analysis, the “Stormwater” product group was assigned to the new economic activity “2.3 Sustainable urban drainage systems (SUDS)” within the non-climate-related environmental objectives in the reporting year 2023. Taxonomy-eligible turnover, CapEx and OpEx are reported in this regard.

Special features in relation to the climate-related environmental objectives

As reported in the reporting year 2022, activity 3.6 cannot meet the substantial contribution criteria as part of the Climate Protection target per se, as the electromobility sector is already classified as emission-free by definition of the EU Taxonomy. For this reason, the applicable e-mobility products from NORMA Group have been reclassified from economic activity 3.6 to economic activity 3.18, and activity 3.6 is no longer applicable.

Activity 6.3 was identified for the first time within NORMA Group in the reporting year 2023, but the impact was classified as immaterial during the data collection and validation process. For this reason, a materiality threshold of EUR 10,000 was defined within activity 6.3.

Based on the newly conducted relevance analysis, the economic activities “7.1 Construction of new buildings” and “7.5 Installation, maintenance and repair of instruments and devices for measuring, regulating and controlling energy performance of buildings” were classified as not relevant within the “Climate change mitigation” target in the reporting year 2023.

Taxonomy-aligned economic activities of NORMA Group

NORMA Group initially reviewed the identified Taxonomy-eligible economic activities for the climate-related environmental objectives under the Climate Delegated Act for taxonomy alignment in the reporting year 2022 and extended this review to the non-climate-related environmental objectives in the reporting year 2023. This included meeting the technical evaluation criteria (substantial contribution and “do no significant harm” criteria), as well as the minimum safeguards. Prior to the start of the alignment review, the issues to be examined were prioritized, giving priority to the criteria that were perceived as significant at the time. The results were reviewed in the reporting year to ensure that they were up to date. The audit has shown that NORMA Group still does not meet the alignment requirements.

Performance indicators according to EU Taxonomy

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The following section presents Group turnover, capital expenditures (CapEx) and operating expenses (OpEx) for the reporting period 2023, broken down into Taxonomy-aligned, Taxonomy-eligible as well as not Taxonomy-aligned and not Taxonomy-eligible components.

Turnover KPI (Key Performance Indicator) definition

The Taxonomy-aligned share of Group turnover is defined as the share of net turnover in the reporting year 2023 derived from products and services related to Taxonomy-aligned economic activities (numerator) divided by net turnover (denominator) (Total turnover correspond to turnover from TABLE T061: CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME). 2023 [denominator]). The Taxonomy-eligible share of Group turnover is defined as the share of net turnover in the reporting year 2023 derived from products and services related to Taxonomy-eligible economic activities (numerator) divided by net turnover in 2023 (denominator).

For NORMA Group, this numerator results from turnover of certain products of the strategic business unit Mobility & New Energy, which can only be installed in electric vehicles (economic activity CCM 3.18), and from turnover of certain products of the strategic business unit Water Management (economic activity CCM 5.1, CCM 6.13, WTR 2.3). An analysis of the Water Management products was carried out in relation to the NORMA Group sites NDS (USA), Malaysia and Kimplas (India), as the relevant Water Management products are manufactured at these sites. As the system can only evaluate turnover by product category on a gross basis, i.e. without taking into account subsequent discounts etc., an imputed key was used to calculate the percentage difference between the gross and net turnover of the respective entities in order to calculate the Taxonomy-eligible net turnover.

The denominator corresponds to NORMA Group’s total net turnover in the fiscal year 2023 from the income statement. When calculating turnover, it was ensured that no turnover were recorded twice by clearly allocating the products to the respective activity.

Information of the following tables in relation to Turnover, CapEx and OpEx

(a) The code consists of the abbreviation of the relevant target to which the economic activity can make a significant contribution and the number of the section of the activity in the relevant Annex that covers the target;

8 NORMA Group does not complete the specific reporting forms for gas and nuclear activities as they are not relevant.

for example, the activity “Reforestation” would have the following code: CCM 1.1. If activities can make a significant contribution to more than one target, the codes for all target should be indicated. For example, if the company reports that the activity “Construction of new buildings” makes a significant contribution to climate protection and the circular economy, the code would read as follows: CCM 7.1./CE 3.1.

(b) The abbreviations in the tables have the following meaning:

•Y - Yes, Taxonomy-eligible and Taxonomy-aligned activity with regard to the relevant environmental objective

•N - No, Taxonomy-eligible activity, but not Taxonomy-aligned with regard to the relevant environmental objective

•N/EL - not eligible, i.e. non-Taxonomy-eligible activity with regard to the relevant environmental target, non Taxonomy-aligned activity

Capex KPI definition

The CapEx KPI is defined as the share of Taxonomy-aligned capital expenditure (CapEx) in the numerator, which is broken down into three categories (a-c) as defined by the EU, divided by total Group CapEx (see the corresponding additions to property, plant and equipment and intangible assets before depreciation, amortization and impairment losses and remeasurements excluding goodwill) under  TABLE 098 GOODWILL AND OTHER INTANGIBLE ASSETS and TABLE 095 DEVELOPMENT OF PROPERTY, PLANT AND EQUIPMENT for the reporting year 2023 as a denominator.

Based on the relevance analysis, new economic activities were identified across the Group, which is why it was necessary to expand the CapEx process. The total CapEx in category (c) was calculated on the basis of the CapEx requests approved for the reporting year by assigning the CapEx requests to an economic activity. As the system-side expansion of the newly identified economic activities was implemented in November, all CapEx requests were checked retroactively for the reporting year 2023 using a keyword search and assigned to the identified economic activities, namely CCM 3.18, CCM 4.1, CCM 6.5, CCM 7.2 and CCM 7.3.

In addition to the direct allocation of capitalized costs, the imputed turnover key “Technical machine equipment” was used to determine CapEx in relation to activity CCM 3.18 on a pro rata basis.

To calculate CapEx in relation to the Taxonomy-eligible Water Management products, an imputed turnover key was applied to the capitalized costs of the Water Management sites and allocated to CCM 5.1, CCM 6.13 and WTR 2.3. A report was created in the accounting system and corresponding formulas were stored to avoid accounting for investments twice.

Capex category a)

CapEx category a) is defined according to the EU as capital expenditures “related to assets or processes that are associated with Taxonomy-aligned economic activities;” As NORMA Group cannot report Taxonomy-aligned activities in the reporting year 2023, no Taxonomy-aligned CapEx is reported. However, we have reported on our Taxonomy-eligible activities CCM 3.18, CCM 5.1, CCM 6.13, WTR 2.3.

Capex category b)

CapEx category b) is defined by the EU as capital expenditures as “part of a plan to expand Taxonomy-aligned economic activities or to allow Taxonomy-eligible economic activities to become Taxonomy-aligned” No such investments were made in the reporting year 2023.

Capex category c)

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. As NORMA Group has not yet been able to identify any Taxonomy-aligned activities among third parties in this reporting year, Taxonomy-aligned CapEx cannot be reported. However, we have reported on our Taxonomy-eligible activities CCM 4.1, CCM 5.1, CCM 6.5, CCM 7.2 and CCM 7.3.

Opex KPI definition

The OpEx KPI is defined as the share of Taxonomy-aligned operating expenses (OpEx), which is broken down into three categories (a-c) in accordance with the EU definition (see more detailed explanation in the following sections). Direct, non-capitalized expenses, in particular for research and development, building renovation measures, short-term leasing and maintenance and repairs, are to be included in the denominator and proportionately in the numerator. Based on the relevance analysis, account mapping was carried out and the OpEx for category (c) comprising the activities CCM 6.4 and CCM 6.5 was verified by manual queries.

In order to determine the OpEx in relation to the activity CCM 3.18, the operating expenses for the maintenance of production equipment were also taken into account on a pro rata basis using the imputed turnover key in addition to the allocation of the calculated average R&D costs.

To calculate OpEx in relation to the Taxonomy-eligible Water Management products, an imputed turnover key was applied to the capitalized costs of the Water Management sites and allocated to CCM 5.1, CCM 6.13 and WTR 2.3. A report was created in the accounting system and corresponding formulas were stored to avoid accounting for investments twice.

Opex category a)

OpEx category a) is defined by the EU as operational expenditures “related to assets or processes associated with Taxonomy-aligned economic activities, including training and other human resource adaptation requirements and direct non-capitalised costs that represent research and development;” Since NORMA Group cannot report any Taxonomy-aligned activities in 2023, no Taxonomy-aligned OpEx is reported. However, we have reported on our Taxonomy-eligible activities CCM 3.18, CCM 5.1, CCM 6.13 and WTR 2.3.

Opex category b)

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 the reporting year 2023.

Opex category c)

OpEx category c) is defined by the EU as operational expenditures “related to the purchase of output from Taxonomy-aligned economic activities and to individual measures enabling the target activities to become low-carbon or to lead to greenhouse gas reductions as well as individual building renovation measures as identified in the delegated acts” As NORMA Group has not yet been able to identify any Taxonomy-aligned activities among third parties in this reporting year, Taxonomy-aligned OpEx cannot be reported. However, we have reported on our Taxonomy-eligible activities CCM 6.4 and CCM 6.5.

Global Reporting Initiative (GRI) and UN Global Compact