Green Taxonomy Quick Guide: Understanding the EU Taxonomy vs. Indian Sustainable Finance Framework

C² Team
3 days ago
10 min read

A Comprehensive Comparison for Businesses Navigating Cross-Border Sustainable Finance

As sustainable finance regulations evolve globally, businesses are increasingly finding themselves at the intersection of multiple frameworks. At Csquare, we've worked with numerous organizations grappling with a critical question: How do the EU Taxonomy and India's sustainable finance framework compare, and what does this mean for our operations?

The answer isn't straightforward, but understanding these differences is crucial for any business operating across borders or seeking international green capital. Let's break it down.

Why EU Taxonomy vs. Indian Sustainable Finance Framework Comparison Matters

Before diving into the specifics, let's address why this matters to your business. Whether you're an Indian company seeking European investment, an EU-based firm expanding to India, or a multinational navigating both markets, understanding these frameworks is no longer optional it's essential for:

Access to green capital from international investors
Compliance with evolving disclosure requirements
Strategic planning around sustainability initiatives
Competitive positioning in increasingly ESG-conscious markets

At Csquare, we've seen firsthand how early preparation in understanding these frameworks can save companies months of retrofitting and millions in compliance costs.

The EU Taxonomy: Comprehensive by Design

What Makes It Tick

The EU Taxonomy for Sustainable Activities is arguably the most detailed sustainable finance classification system in the world. Launched to direct capital toward genuinely sustainable activities and combat greenwashing, it's built on rigorous scientific foundations.

Core Components:

Six Environmental Objectives:

Climate change mitigation
Climate change adaptation
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

Technical Screening Criteria: The EU Taxonomy covers 88+ economic activities across multiple sectors, each with specific technical criteria. For an activity to be "taxonomy-aligned," it must:

Substantially contribute to at least one of the six environmental objectives
Do No Significant Harm (DNSH) to any of the other five objectives
Meet minimum social safeguards (aligned with OECD Guidelines and UN Guiding Principles)
Comply with technical screening criteria specific to that activity

The Devil's in the Details

Here's where it gets complex—and where Csquare's expertise becomes invaluable. Let's take a real example: renewable energy generation.

For solar power to be taxonomy-aligned, it's not enough to simply operate solar panels. The EU Taxonomy specifies lifecycle emissions thresholds (100g CO2e/kWh), manufacturing standards, end-of-life management requirements, and even supply chain considerations.

Our team at Csquare has helped companies navigate these technical requirements, mapping their activities against the detailed criteria and identifying gaps in data collection and reporting systems.

Strengths and Challenges

Strengths:

Science-based, reducing subjectivity
Comprehensive coverage across sectors
Strong anti-greenwashing provisions
Legally binding disclosure requirements for large companies

Challenges:

High complexity in implementation
Significant data requirements
Limited recognition of transition activities
May not account for regional differences in development stages

In our work at Csquare, we've found that companies typically need 6-12 months to properly implement EU Taxonomy reporting, assuming adequate data systems are in place.

India's Sustainable Finance Framework: Pragmatic and Evolving

Building Blocks of India's Approach

India's sustainable finance framework is rapidly evolving, reflecting the country's unique position as a developing economy with ambitious climate commitments. The key components include:

SEBI's Business Responsibility and Sustainability Reporting (BRSR):

Mandatory for top 1,000 listed companies
BRSR Core with reasonable assurance requirements
Focus on material ESG issues relevant to Indian context

The Proposed Indian Green Taxonomy:

Being developed by the Reserve Bank of India and other regulators
Expected to align with India's Nationally Determined Contributions (NDCs)
Sector-specific guidance reflecting India's economic priorities

Green Bonds Framework:

SEBI guidelines for green debt securities
Use of proceeds tracked against specific green activities

The Indian Philosophy: Context Matters

What sets India's framework apart—and what Csquare emphasizes when advising clients—is its recognition that sustainability is contextual. India's framework acknowledges:

Transition Activities: Unlike the EU's binary approach, India's framework recognizes activities that may not be perfectly "green" today but represent significant improvement and movement toward sustainability goals.

Sectoral Priorities: Alignment with national priorities like coal transition, water management, and renewable energy expansion specific to India's development stage.

Phased Implementation: A more gradual approach that allows companies to build capabilities over time.

Practical Application

Csquare recently worked with a manufacturing client navigating BRSR Core requirements. Unlike the EU Taxonomy's rigid thresholds, the BRSR framework allowed the company to demonstrate their sustainability journey—showing year-on-year improvements in energy efficiency, water conservation, and emissions reduction, even while not yet meeting "net zero" standards.

This pragmatic approach doesn't mean lower standards—it means recognizing that progress matters.

Head-to-Head Comparison

Philosophical Approach

EU Taxonomy vs. Indian Sustainable Finance Framework

Aspect	EU Taxonomy	Indian Framework
Core Philosophy	Prescriptive, threshold-based	Adaptive, progress-oriented
Green Definition	Binary (aligned or not)	Spectrum (including transition)
Geographic Context	Developed economy standards	Emerging market realities
Implementation	Big bang, comprehensive	Phased, scalable

Technical Requirements

EU Taxonomy:

88+ activities with detailed technical criteria
Quantitative thresholds (e.g., emissions per kWh)
Mandatory DNSH assessment across all six objectives
Strict evidence requirements

Indian Framework:

Sector-specific guidance evolving
More qualitative assessments alongside quantitative
Focus on material impacts relevant to business
Disclosure emphasis with building verification requirements

Verification and Assurance

Both frameworks require third-party verification, but with nuances:

EU: External audit mandatory for taxonomy-aligned revenue, CAPEX, and OPEX disclosures. High bar for assurance providers.

India: BRSR Core requires reasonable assurance. Growing ecosystem of assurance providers. Csquare assists companies in preparing for this verification process, ensuring documentation and evidence are audit-ready.

Flexibility vs. Rigor

Here's a question we get at Csquare frequently: "Which framework is more rigorous?"

The answer: They're rigorous in different ways.

The EU Taxonomy is rigorous in its technical specificity—there's little room for interpretation once criteria are set.

India's framework is rigorous in its contextual application—companies must demonstrate genuine sustainability progress relevant to their sector and geography.

Overlaps and Synergies

Despite differences, significant common ground exists:

Shared Core Principles

Climate focus: Both prioritize climate change mitigation and adaptation
Anti-greenwashing: Both aim to ensure genuine sustainability claims
Transparency: Both require detailed disclosure
Third-party verification: Both moving toward mandatory assurance

Environmental Objectives Alignment

The six EU environmental objectives find parallels in India's framework:

Climate action aligns with India's NDC commitments
Water management reflects India's water stress priorities
Circular economy mirrors India's Swachh Bharat and waste management initiatives
Pollution control aligns with National Clean Air Programme
Biodiversity protection connects to India's forest conservation goals

At Csquare, we help clients identify these overlaps to build unified sustainability strategies rather than maintaining separate compliance tracks.

Navigating Both Frameworks: A Strategic Approach

For Indian Companies Seeking European Capital

If you're an Indian business targeting EU investors or green bond markets, here's the roadmap Csquare recommends:

Step 1: Baseline Assessment Map your current activities against both frameworks. Identify which activities could potentially qualify under EU Taxonomy and which align with Indian framework requirements.

Step 2: Data Infrastructure Implement robust data collection systems that capture granular metrics required for EU Taxonomy while also meeting BRSR Core requirements. This is critical—retrofitting data is expensive and time-consuming.

Step 3: Gap Analysis Identify technical gaps between your current operations and EU Taxonomy thresholds. Csquare conducts detailed gap analyses that prioritize improvements based on materiality and ROI.

Step 4: Transition Planning Develop a phased approach to achieving taxonomy alignment where feasible, while maintaining compliance with Indian requirements.

Step 5: Disclosure Strategy Create a disclosure framework that satisfies both EU and Indian stakeholders without duplicating efforts.

For European Companies Operating in India

EU-based firms expanding to India should:

Understand Local Context: India's framework reflects local priorities (water stress, energy access, coal transition). Your sustainability strategy must address these realities.

Leverage Existing Systems: Your EU Taxonomy compliance infrastructure provides a strong foundation. Csquare helps adapt these systems for Indian requirements rather than building from scratch.

Recognize Transition Value: Activities that may not be taxonomy-aligned in the EU might represent significant sustainability progress in the Indian context.

Build Local Partnerships: Working with Indian sustainability experts like Csquare ensures you navigate local regulations, reporting requirements, and stakeholder expectations effectively.

Real-World Case Studies from Csquare's Experience

Case 1: Renewable Energy Developer

Challenge: An Indian renewable energy company needed to attract European green bond investors while complying with SEBI guidelines.

Csquare's Solution:

Conducted dual taxonomy mapping across EU and Indian frameworks
Identified areas where projects fully aligned with EU Taxonomy (100g CO2e/kWh threshold)
For projects not fully aligned, created disclosure showing transition pathway
Implemented data systems capturing both framework requirements
Result: Successful €200M green bond issuance with strong European institutional participation

Case 2: Manufacturing Conglomerate

Challenge: Large Indian manufacturing group needed to comply with BRSR Core while exploring European market entry.

Csquare's Approach:

Baseline sustainability assessment across all business units
Prioritized BRSR Core compliance with eye toward EU Taxonomy alignment
Identified "quick wins" where minor operational changes could achieve taxonomy alignment
Built scalable ESG data management system
Result: BRSR Core compliance achieved 6 months ahead of deadline; 30% of revenue identified as potentially taxonomy-aligned within 24 months

Case 3: Infrastructure Fund

Challenge: Infrastructure fund investing across India-Europe needed unified sustainability assessment framework.

Csquare's Solution:

Created hybrid assessment methodology incorporating both frameworks
Developed scoring system for projects based on dual alignment
Established minimum thresholds while recognizing transition activities
Result: Portfolio strategy that maximizes green credentials in both markets

Common Pitfalls and How to Avoid Them

Through Csquare's work with dozens of organizations, we've identified recurring mistakes:

Pitfall 1: Treating Frameworks as Interchangeable

The Mistake: Assuming EU Taxonomy compliance automatically satisfies Indian requirements (or vice versa).

The Fix: Recognize both frameworks as complementary but distinct. Build compliance strategies that address both explicitly.

Pitfall 2: Underestimating Data Requirements

The Mistake: Starting taxonomy alignment work without robust data infrastructure.

The Fix: Invest in data systems early. Csquare recommends implementing comprehensive ESG data management platforms before attempting detailed taxonomy mapping.

Pitfall 3: Ignoring Transition Pathways

The Mistake: Dismissing activities that don't currently meet taxonomy thresholds.

The Fix: Develop transition plans showing how sub-threshold activities will improve. This is especially valuable in the Indian context and can attract transition finance.

Pitfall 4: Siloed Approach

The Mistake: Treating sustainability compliance as purely a reporting exercise separate from strategy.

The Fix: Integrate taxonomy alignment into capital allocation, M&A decisions, and operational planning. Csquare works with C-suite and boards to embed sustainability into core decision-making.

Pitfall 5: DIY Without Expertise

The Mistake: Attempting complex taxonomy interpretation without specialized knowledge.

The Fix: Engage experts. The cost of errors in taxonomy reporting (reputational risk, regulatory penalties, investor trust) far exceeds advisory investment. Csquare's team brings deep technical expertise across both frameworks.

The Future: Convergence or Divergence?

Global Trends

Sustainable finance frameworks worldwide are evolving, and several trends suggest increasing alignment:

International Platform on Sustainable Finance (IPSF): Working toward interoperability between taxonomies, including EU and emerging Asian frameworks.

Common Ground Taxonomy: Identifying areas of alignment between EU and Chinese taxonomies—India's framework will likely reference this work.

Climate Disclosure Standards: ISSB (International Sustainability Standards Board) standards provide a common reporting foundation that both EU and Indian frameworks increasingly reference.

At Csquare, we monitor these developments closely, advising clients on how emerging standards will impact their compliance strategies.

India-EU Collaboration

Recent dialogues between Indian and European regulators suggest potential harmonization efforts:

Joint working groups on sustainable finance
Technical capacity building programs
Alignment discussions on key sectors (renewable energy, green hydrogen, sustainable transport)

Csquare predicts substantial convergence in core climate-related activities over the next 3-5 years, while sector-specific differences may persist.

Making the Choice: Which Framework for Your Business?

Decision Criteria

Choose EU Taxonomy Focus If:

Primary capital sources are European
Operations are concentrated in high-income markets
Technical capacity for detailed reporting exists
Activities align well with existing taxonomy criteria

Choose Indian Framework Focus If:

Operations primarily in India
Domestic capital markets are primary funding source
Business is in transition phase of sustainability journey
Sector-specific Indian guidance better fits your activities

Choose Dual Compliance If:

Operating in both markets
Diverse investor base across geographies
Seeking to position as sustainability leader
Resources exist for comprehensive reporting

Csquare's Recommendation

For most businesses with any cross-border element, we recommend a unified baseline approach:

Build comprehensive sustainability data infrastructure capturing metrics for both frameworks
Achieve full compliance with mandatory requirements in your primary market
Map voluntary alignment with secondary framework
Develop transition plan toward alignment in both frameworks where material to stakeholders

This approach maximizes flexibility while minimizing redundant effort.

Practical Next Steps with Csquare

Getting Started

Phase 1: Assessment (Month 1-2)

Csquare conducts materiality assessment
Map existing activities against both taxonomies
Identify data gaps and quick wins
Deliverable: Comprehensive taxonomy position report

Phase 2: Infrastructure (Month 2-4)

Implement or upgrade ESG data systems
Establish governance and internal controls
Train internal teams on taxonomy requirements
Deliverable: Operational data collection framework

Phase 3: Alignment (Month 4-8)

Detail technical criteria analysis for priority activities
Develop evidence packages for taxonomy alignment
Create transition plans for sub-threshold activities
Deliverable: Taxonomy alignment roadmap

Phase 4: Disclosure (Month 8-12)

Prepare disclosure templates for both frameworks
Coordinate third-party assurance process
Integrate into annual reporting cycle
Deliverable: Verified taxonomy disclosures

Csquare's Service Offerings

Taxonomy Advisory:

Framework interpretation and application
Technical criteria assessment
Gap analysis and transition planning
Dual compliance strategy development

Data & Technology:

ESG data platform selection and implementation
Custom data collection solutions
Integration with existing ERP/financial systems
Automated reporting dashboards

Assurance Readiness:

Pre-assurance gap remediation
Evidence package development
Internal control design
Coordination with external auditors

Strategic Integration:

Board and C-suite education
Capital allocation framework integration
M&A sustainability due diligence
Investor communication strategy

Why Partner with Csquare?

Deep Technical Expertise: Our team includes former regulators, sustainability auditors, and industry practitioners with hands-on experience in both EU and Indian frameworks.

Cross-Border Experience: We've supported taxonomy compliance across jurisdictions, understanding nuances that pure-play local advisors might miss.

Technology-Enabled: Csquare leverages proprietary tools and partnerships with leading ESG data platforms to streamline compliance.

Sector Specialists: Our industry-focused teams understand sector-specific challenges in renewable energy, manufacturing, infrastructure, financial services, and more.

End-to-End Support: From strategy to implementation to assurance, Csquare provides comprehensive support throughout your taxonomy journey.

Conclusion: Navigating Complexity with Confidence

The EU Taxonomy and Indian sustainable finance framework represent different approaches to the same fundamental goal: directing capital toward genuine sustainability. Neither is "better"—they reflect different contexts, development stages, and regulatory philosophies.

For businesses operating in today's interconnected global economy, understanding both frameworks isn't about choosing sides—it's about building resilient, adaptable sustainability strategies that create value across stakeholder groups.

The complexity is real. The stakes are high. But with the right approach and expert guidance, taxonomy compliance transforms from a regulatory burden into a strategic advantage.

Csquare has guided hundreds of organizations through this complexity, helping them turn sustainable finance requirements into opportunities for growth, innovation, and competitive differentiation.

Whether you're just beginning your taxonomy journey or looking to optimize existing compliance efforts, we're here to help you navigate with confidence.

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