Yara International : EU Taxonomy Report 2021

EU Taxonomy Report 2021

Growing a Nature- Positive Food Future

EU Taxonomy Report 2021

EU Taxonomy Report 2021

Yara is committed to transparency and accountability, with adherence to non-financial reporting requirements where it operates. While the EU Taxonomy Regulation has not entered into force in Norway at Year End 2021, Yara provides voluntary disclosures based on expected interest.  

The EU Taxonomy report for 2021 has been prepared in accordance with regulation EU (2020/852) and the supplementing delegated acts; 'Climate Delegated Act' (2021/2800) and 'Disclosure Delegated Act' (2021/4987).  

Basis of preparation

Purpose

EU Taxonomy is a classification system that establishes a list of environmentally sustainable economic activities. The purpose of EU Taxonomy is to scale up sustainable investments to these environmentally sustainable activities and further, help in reaching the EU's climate and environmental targets for 2030 and the objectives of European Green deal.

Scope

Yara is in scope for the EU Taxonomy regulation, on the basis of the regulation covering large public interest entities with over 500 employees that are within the scope of non-financial reporting directive (NFRD) EU (2014/95).

Economic activities are considered regardless of their geographical location, whether inside or outside of European Union.

Reporting principles

Financial data is based on IFRS and is linked to group financials. The group activities are presented as USD.

Yara notes that the EU Taxonomy is still under develop- ment, and Yara's current disclosures have been prepared based on existing guidance. Yara follows the development of the regulation closely. Accordingly, any further changes or clarification to the regulation with a material impact on current disclosures will be transparently explained.

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EU Taxonomy Report 2021

Yara EU Taxonomy disclosures

About the EU Taxonomy on Sustainable activities

Yara has for the annual reporting period 2021 adopted the reporting requirements set out in European Union Regulation 2020/852 ("EU Taxonomy regulation") on the establishment of a framework to facilitate sustainable investment, including delegated acts developed under the Regulation which are effective on the reporting date.⁜1)

The main goal of the EU Taxonomy Regulation is to help investors and companies in making informed investment decisions on environmentally sustainable economic activities. It establishes criteria for determining whether an economic activity qualifies as environmentally sustainable. For the purpose of the EU Taxonomy Regulation, the following are defined as environmental objectives:

• climate change mitigation;
• climate change adaptation;
• the sustainable use and protection of water and marine resources;
• the transition to a circular economy;
• pollution prevention and control;
• the protection and restoration of biodiversity and ecosystems.

Under the EU Taxonomy Regulation, an economic activity qualifies as environmentally sustainable and is taxonomy-aligned if that activity

• Contributes substantially to one or more of the above objectives
• Does not significantly harm any of the remaining objectives

• Is carried out in compliance with specified minimum safeguards⁜2)

• Complies with technical screening criteria set out in delegated acts developed under the Regulation

As of Year End 2021, the effective delegated acts under the EU Taxonomy Regulation were the delegated

act for climate change mitigation and climate change adaption ("Climate Delegated Act") and the delegated act on taxonomy-related disclosures ("Disclosure Delegated Act"). A delegated act for other environmental objectives ("Environmental Delegated Act") is expected to become effective in 1st of January 2023.

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1)	The EU Taxonomy Regulation has not entered into force in Norway at Year End 2021. A proposed law implementing the Regulation will come into force after the Regulation has been incorporated into the EEA Agreement. The Norwegian Ministry of Finance	expects EEA incorporation to take
	place in the first half of 2022.
2)	The minimum safeguards refers alignment with the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights, including the principles and rights set out in the eight fundamental conventions identified in the	Declaration of the International
	Labour Organisation on Fundamental Principles and Rights at Work and the International Bill of Human Rights.

1. EUR-Lex - C(2021)2800 - EN - EUR-Lex (europa.eu)
2. taxonomy-regulation-delegated-act-2021-4987_en.pdf (europa.eu)

EU Taxonomy Report 2021

Disclosure requirements

The EU Taxonomy regulation requires non-financial undertakings like Yara to disclose to what extent the undertaking performs economic activities that are described under the Regulation ("Taxonomy- eligible"). In addition, non-financial undertakings shall disclose the following on an annual basis:⁜5)

1. the proportion of their turnover (revenue) derived from products or services associated with economic activities that qualify as environmentally sustainable ("Taxonomy-aligned") under the requirements mentioned⁜6); and
2. the proportion of their capital expenditure (CapEx) and the proportion of their operating expenditure (OpEx) related to assets or processes associated with economic activities that qualify as environmentally sustainable ("Taxonomy- aligned") under the requirements mentioned⁜7).

These disclosure requirements are to be implemented based on the following two-step transition period:

1. From 1 January 2022 until 31 December 2022 The proportion of Taxonomy-eligibleand Taxonomy non-eligibleeconomic activities in the undertaking's total turnover (revenue), CapEx and OpEx as well as related relevant qualitative information.
2. From 1 January 2023
   Disclose the proportion of Taxonomy-aligned turnover (revenue), CapEx and OpEx as outlined in a) and b) above together with related mandatory tabular forms and related qualitative information.

Disclosed information shall cover the annual reporting period from the previous calendar year of the date of disclosure. This means that disclosures published in 2022 shall include information for the calendar year 2021.

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1. Regulation (EU) 2020/852, article 8
2. Regulation (EU) 2020/852, articles 3 and 9
3. Regulation (EU) 2020/852, articles 3 and 9
4. Disclosure delegated act article 1

EU Taxonomy Report 2021

Yara Taxonomy-eligible activities in 2021

A Taxonomy-eligible economic activity is an economic activity that is described in the delegated acts adopted under the EU Taxonomy regulation irrespective of whether that economic activity meets any or all of the technical screening criteria laid down in those delegated acts.⁜8) A Taxonomy-non-eligible economic activity is any activity that is not described in those delegated acts. Eligible activities to be disclosed for 2021 only refer to the environmental objectives

of climate change mitigation and climate change adaption. A Delegated Act for the remaining four environmental objectives has not been published, and thus, is not yet effective.

The EU has prioritized the economic activities that can make the most relevant contribution to the EU's climate and energy targets. Priority activities are subject to technical screening criteria set out in delegated acts developed under the Regulation. Not all economic activities are eligible to the taxonomy. However, it is expected that the taxonomy will develop over time and more sectors and activities will be added in the future.

The economic activities of Yara are mainly manufacturing of fertilizers and nitrogen compounds. However, the Climate Delegated Act defines technical screening criteria only for manufacturing of anhydrous ammonia and manufacturing of nitric acid.⁜9) As a result, Yara considers the Group's own production of ammonia (OPP ammonia) and nitric acid (OPP nitric acid) to be Taxonomy-eligible economic activities.

In addition, Yara has Taxonomy-eligible activities related to sea and coastal freight water transport, vessels for port operations and auxiliary activities.⁜10) These activities refer to Yara's fleet of own and time-chartered vessels in the Group's ammonia trade and shipping business reported in the Clean Ammonia segment. They also include Yara Birkeland, a fully electric and autonomous container vessel with zero emissions. Yara Birkeland is reported in the segment Global Plants & Operational Excellence and will be put into operation in 2022.

For KPI reporting related to Revenue, CapEx and OpEx, Yara has defined activities as eligible if the

economic activities they relate to can be assessed against technical screening criteria set out in the Climate Delegated Act and potentially can become EU Taxonomy-aligned. The definitions may deviate from the same or similar expressions used in Yara's Consolidated Financial Statements and Alternative Performance Measures. More specifically Yara has defined eligible Revenue, CapEx and OpEx as follows:

• Definition of Yara eligible Revenue
  Yara eligible Revenue refers to IFRS 15⁜11) revenues from external sales of OPP Ammonia

and OPP Nitric Acid as well as freight/insurance revenues derived from external sale of ammonia using Yara's fleet of own and leased vessels⁜12).

• Definition of Yara eligible CapEx
  Yara eligible CapEx refers to additions to capitalized property, plant and equipment⁜13), intangible assets⁜14) and right-of-use assets⁜15). This constitutes OPP ammonia and OPP nitric acid production assets and other assets which refers directly to such production

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		12)	Refer to Yara Consolidated Financial Statements 2021 note⁜2.1
8)	Disclosure delegated act article 1		Revenue from contracts with customers
9)	Refer to EU Taxonomy activity 3.15 and 3.16	13)	Refer to IAS 16	Property, plant and equipment
10)	Refer to EU Taxonomy activity 6.10	14)	Refer to IAS 38	Intangible assets
11)	Refer to IFRS 15 Revenue from Contracts with Customers	15)	Refer to IFRS 16 Leases