EU Taxonomy Reporting

As part of the European Commission’s Action Plan on Fi­nancing Sustainable Growth, Regulation (EU) 2020/852 established an EU classification system for environmentally sustainable economic activities (EU taxonomy) and came into force in 2020. 

The EU taxonomy is a key instrument for the European Union to redirect capital flows toward sustainable investments and to create market transparency. It encourages increased channeling of investments by companies, investors, and policymakers to where they are most needed for sustainable development. Therefore, the EU Taxonomy Regulation will play an important role in scaling up sustainable investments and implementing the European Green Deal.

OMV has been a member of the Platform on Sustainable Fi­nance, the permanent expert group of the European Commission that was established under Article 20 of the EU Taxonomy Regulation, until October 2022 and has assisted the Commission in developing its sustainable fi­nance policies, notably the further development of the EU taxonomy.

For the OMV Group, the EU taxonomy provides a means to assess which of our current and future economic activities can be classed as environmentally sustainable. According to the Taxonomy Regulation, any activity identified in this category must make a substantial contribution to at least one of the EU’s environmental objectives, in addition to not significantly harming any of the objectives and meeting the defined minimum social safeguards. The six relevant environmental objectives of the Taxonomy Regulation are:

1. Climate change mitigation
2. Climate change adaptation
3. The sustainable use and protection of water and marine resources
4. The transition to a circular economy
5. Pollution prevention and control
6. The protection and restoration of biodiversity and ecosystems

In June 2021, the Commission formally adopted the Climate Delegated Act, establishing the criteria that define which activities substantially contribute to climate change mitigation and adaptation, the first two out of the six envi­ronmental objectives. The disclosure requirements were effective for reports published since January 1, 2022, in relation to the aforementioned climate change objectives. In 2022, the Complementary Delegated Act was released, which extends the EU taxonomy framework to permit certain economic activities involving gas and nuclear energy to be classified as “environmentally sustainable” and applies from January 1, 2023. The EU taxonomy for the four remaining environmental objectives is still pending publication by the European Commission.

OMV’s Process for Identifying and Assessing EU Taxonomy Activities

EU Taxonomy Eligibility Assessment

An economic activity is considered to be taxonomy-eligible if it matches the description of the activity given in the EU taxonomy. In order to identify eligible activities/products at OMV, we performed a screening of the full portfolio of OMV activities and compared our activities to the description of the economic activities/products listed in Annex I or II of the EU Taxonomy Climate Delegated Act.

The assessment of eligible activities and products at OMV was carried out by an interdisciplinary project team, using both a bottom-up and a top-down approach. A series of internal meetings and training sessions with management and experts was held in order to give OMV businesses an introduction to the new EU taxonomy and disclosure requirements. A further series of workshops was held with all business segments and corporate entities to ensure the bottom-up identification of eligible activities, assets, processes, and related eligible CAPEX/OPEX/turnover. A final eligibility check of all identified activities/products was performed with an external party. OMV’s identified EU taxonomy-eligible economic activities are all related to the environmental objective of climate change mitigation. Analysis of all our economic activities is done on an annual basis, and includes an update of the assessment done in 2021.

EU Taxonomy Alignment Assessment

In 2022, OMV carried out an alignment assessment based on the EU taxonomy criteria. Being assessed was whether the identified eligible activities fulfill the criteria for substantial contribution to climate change mitigation, the do-no-significant-harm (DNSH) criteria of the other environmental objectives, and the criteria for minimum social safeguards.

Responsibility for the alignment checks and evidence gathering was clearly defined in the OMV Group EU Taxonomy Guidance. The project/asset managers for the respective eligible project/activity were responsible for assessing compliance with the criteria for substantial contribution to climate change mitigation and the DNSH criteria for water and marine resources, circular economy, pollution prevention and control, and biodiversity and ecosystems. Support was provided by the OMV Carbon, Energy & ESG Management team and sustainability experts from OMV Petrom and Borealis. The required physical climate risk and vulnerability assessments to comply with the DNSH climate change adaptation criteria were performed cen­trally by OMV Carbon, Energy & ESG Management jointly with Corporate Risk Management, and with the support of an external provider in line with the OMV Group’s Enterprise-Wide Risk Management approach.

The assessment of compliance with the minimum social safeguards and governance criteria was performed by OMV Carbon, Energy & ESG Management by assessing whether the clauses in relevant OMV policies (Human Rights Policy, Code of Conduct, Code of Business Ethics, Tax Strategy) are in line with the international standards referred to in the EU taxonomy. It was further assessed whether OMV’s human rights management system and its related processes (e.g., grievance mechanisms, community consultation) are established in line with these international standards. The detailed assessment showed no gaps between the OMV Group’s approach to human rights policies, addressing of impacts, due diligence and risk assessment procedures, communication, grievance mechanisms, consumer interests, anti-corruption, competition, or taxation and the social safeguard requirements laid out in the EU taxonomy.

No relevant final liability regarding breaches of the minimum safeguards have been identified at OMV in recent years, including breach of labor law or human rights, breach of corruption or competition laws, or breach of tax laws.

The economic activities that OMV identified as aligning with the EU taxonomy are all related to the environmental objective of climate change mitigation.

Definition of Financial KPIs

OMV’s values for the KPIs are derived from the figures reported in the Group’s consolidated IFRS financial statements.

The KPIs are calculated on the basis of the sales revenues, CAPEX, and OPEX of all fully consolidated subsidiaries of the OMV Group, with the following exceptions:

Disposal groups classified as held for sale according to IFRS 5 (see OMV Consolidated Financial Statements 2022, Note 20) have been fully excluded from the calculation of the KPIs because OMV took the decision to sell these parts of the Group. This means that disposal groups according to IFRS 5 have not been considered in the assessment of eligible and aligned activities and that they have been excluded from the denominator of the KPIs for the full 2022 reporting period, irrespective of when the reclassifi­cation to held for sale was carried out. The exclusion of disposal groups from the KPIs leads to a discrepancy with the financial report of the OMV Group.

Subsidiaries that are not consolidated, associated companies, and joint ventures were excluded from the calculation of KPIs as per the reporting requirements of the EU Taxonomy Regulation.

The proportion of taxonomy-aligned economic activities in the sales revenues, CAPEX, and OPEX (the “alignment ratio”) has been calculated as the part of sales revenues, CAPEX, and OPEX derived from products and services associated with taxonomy-aligned economic activities (numerator) divided by the total sales revenues, CAPEX, and OPEX (denominator). The same logic applies to the calculation of the “eligibility ratio.”

The denominators for the financial KPIs were defined and can be reconciled with the IFRS Group financial statements as follows:

The denominator of the turnover KPI is based on OMV’s consolidated sales revenues (OMV Consolidated Financial Statements 2022, Note 5) and adjusted for sales revenues coming from disposal groups according to IFRS 5. For further details on our accounting policies regarding consolidated sales revenues, see OMV Consolidated Financial Statements 2022, Note 2.2b.

The denominator for the CAPEX KPI consists of additions to intangible assets (including oil and gas properties with unproved reserves), tangible assets, and IFRS 16 right-of-use assets, and is adjusted to exclude any additions related to disposal groups according to IFRS 5 during the reporting period (see OMV Consolidated Financial Statements 2022, Notes 14 and 15). For further details on our accounting policies regarding the relevant assets, see OMV Consolidated Financial Statements 2022, Note 2.2g ff.

Total OPEX consists of R&D expenses, maintenance and repair costs, other direct expenditure related to day-to-day servicing of assets, and short-term leases. R&D expenses include the research and development expenses recognized according to IAS 38 and included in the line “Other operating expenses” in the income statement (see OMV Consolidated Financial Statements 2022, Note 9). Mainte­nance and repair costs and other direct expenditure related to day-to-day servicing of assets mainly include costs for external services, personnel expenses, and material costs related to regular and unplanned maintenance, repairs, and servicing measures. The related cost items can be found in the line items “Production and operating expenses” and “Selling, distribution, and administrative expenses” in the income statement. Expenses for short-term leases have been determined and included in line with IFRS 16. Direct costs for training and other human resources improvement needs are immaterial and therefore excluded from the denominator and the numerator.

For most of the activities, sales revenues, CAPEX, and OPEX for aligned and eligible activities could be allo­cated directly to individual activities listed in the taxonomy based on data available in the Group entities’ ERP systems. This ensured that there was no double counting of aligned or eligible sales revenues, CAPEX, and OPEX. In the refineries, CAPEX for assets used for the joint production of organic basic chemicals and fuels have been allocated to the taxonomy-eligible activity “production of organic basic chemicals” (activity 3.14) and to non-eligible activities using an allocation key reflecting the yield, size, and complexity of the different refinery plants used for this purpose. The same approach was used for repair and maintenance expenses for cost centers, which are involved in the production of organic basic chemicals and fuels.

Shortly before the reporting date, the European Commission published guidance in the form of Frequently Asked Questions (FAQs) on specific interpretation issues related to the Disclosures Delegated Act.¹ EU Commission: Draft Commission Notice on the interpretation and implementation of certain legal provisions of the Disclosures Delegated Act under Article 8 of the EU Taxonomy Regulation on the reporting of taxonomy-eligible and taxonomy-aligned economic activities and assets (second Commission Notice) (December 19, 2022) There was insufficient time to implement the guidance related to two specific accounting issues, and therefore OMV deviates in its accounting policies from this guidance as described below. The impact on the KPIs is immaterial.

The guidance provided clarifies that revenue from non-current assets or disposal groups classified as held for sale (IFRS 5) should be reported as part of the turnover KPI. The same applies to the calculation of the CAPEX KPI to the extent that additions to fixed assets related to disposal groups fulfill the definition of CAPEX for the calculation of the CAPEX KPI. OMV had already decided in the prior year to exclude amounts related to IFRS 5 disposal groups from its KPIs. Total sales revenues related to IFRS 5 disposal groups amounted to EUR 3,838.1 mn in 2022 and were mainly associated with the nitrogen division at Borealis and the retail business in Slovenia. Total CAPEX related to IFRS 5 disposal groups amounted to EUR 5.9 mn.

In addition, the guidance clarifies that CAPEX should be reported excluding government grants (i.e., gross presen­tation approach). OMV follows the IFRS net presentation option, which means that government grants have been deducted from additions to intangible and tangible assets, and the CAPEX KPI has been prepared based on the IFRS data. In 2022, total government grants related to assets and deducted from CAPEX amounted to EUR 5.4 mn. OMV plans to change the accounting policies for the EU taxonomy reporting during 2023 in order to be fully aligned with this additional guidance in the 2023 EU taxonomy reporting.

Overview of EU Taxonomy KPIs for 2021 and 2022

Environmental goal climate change mitigation

Taxonomy-Eligible and Taxonomy-Aligned Turnover

In 2022, 17.9% of OMV’s total turnover could be classified as taxonomy-eligible. 0.1% of OMV’s total turnover could be classified as taxonomy-aligned.

The eligible turnover stemmed from activities 3.17 Manufacture of plastics in primary form, which reflects the activities of our C&M segment (e.g., production of polyolefins), and 3.14 Manufacture of organic basic chemicals, also stemming from the C&M segment (e.g., production of ethylene and propylene), as well as activity 4.29 Electricity generation from fossil gaseous fuels, stemming mainly from power sales from the Brazi gas-fired power plant in Romania.

Taxonomy-Aligned Turnover 2022

in mn EUR

Nearly all aligned turnover in 2022 stemmed from activity 4.25 Production of heat/cool using waste heat, which reflects the waste heat supplies from the Schwechat refinery. Minor additional contributions to aligned turnover stem from activity 4.13 Manufacture of biogas and biofuels for transport, which reflects the sales of sustainable aviation fuels, and from activity 6.15 Infrastructure enabling low-carbon road transport, which reflects hydrogen sales for mobility purposes.

According to the Complementary Delegated Act, eligible turnover in 2022 included turnover from the sale of power and heat produced from natural gas (4.29 Electricity generation from fossil gaseous fuels and 4.30 High-efficiency co-generation of heat/cool and power from fossil gaseous fuels). The power was mainly produced at the Brazi gas-fired power plant in Romania. Turnover associated with other gas-related activities, including the production of natural gas and gas supply, marketing, trading, and logistics, is reported as non-eligible turnover. The eligible turnover for the prior year’s KPI does not include any gas-related activities.

The split of aligned and eligible turnover between revenue from contracts with customers and revenue within the scope of IFRS 9 is included in the following table. Eligible revenue from transactions within the scope of IFRS 9 includes power sales from the gas-fired power plant in Romania.

Electricity produced from renewables, such as the generation of electricity using solar photovoltaic technology and wind power, is used for internal consumption only.

Taxonomy-Aligned Turnover 2022

in mn EUR

Taxonomy-Eligible and Taxonomy-Aligned CAPEX

In 2022, 43.7% of OMV’s total CAPEX could be classified as taxonomy-eligible. 9.5% of OMV’s total CAPEX could be classified as taxonomy-aligned.

The largest contributors to eligible CAPEX were the activities 3.14 Manufacture of organic basic chemicals and 3.17 Manufacture of plastics in primary form, both of which reflect the activities of our C&M segment. Other contributors were activity 9.1 Close to market research, development, and innovation (e.g., R&D into chemical recycling, e-fuels, geothermal), various activities in Section 6 Transport (e.g., railway transportation and infrastructure, hydrogen filling stations), various activities in Section 4 Energy (e.g., generation of electricity using solar photo­voltaic technology and wind power), and activity 7.2 Renovation of existing buildings (mainly buildings of filling stations).

Taxonomy-Aligned CAPEX 2022

in mn EUR

The largest contributors to aligned CAPEX were from activity 3.14 Manufacture of organic basic chemicals, which reflects our investment in Borealis’ propane dehydrogenation unit 2 (PDH₂) in Kallo, and activity 9.1 Close to market research, development, and innovation, which stems from the investment in the ReOil®^® 2000 chemical recycling demonstration plant at the Schwechat refinery. Other contributors to taxonomy-aligned CAPEX were activity 2.5 Manufacture of hydrogen (e.g., UpHy project), activity 4.1 Electricity generation from photovoltaic technology (e.g., PV plant in Schönkirchen, PV plant in Lobau), activity 4.3 Electricity generation from wind power (e.g., Gullfaks Hywind Tampen project), activity 4.9 Transmission and distribution of electricity (e.g., renewable electricity transmission line to Edvard Grieg field), activity 4.13 Manufacture of biogas and biofuels for transport (e.g., production facilities for sustainable aviation fuels at the Schwechat refinery), activity 4.25 Production of heat/cool using waste heat (e.g., Fernwärme hub at the Schwechat refinery), activity 6.15 Infrastructure enabling low-carbon road transport (e.g., hydrogen filling stations, electric charging points), and activity 7.6 Installation, maintenance, and repair of renewable energy technologies (e.g., installation of PV panels and heat pumps).

In 2022, eligible CAPEX included CAPEX for gas-fired power plants and gas-powered generators used for OMV’s own consumption (4.29 Electricity generation from fossil gaseous fuels and 4.30 High-efficiency co-generation of heat/cool and power from fossil gaseous fuels). CAPEX associated with other gas-related activities, including mainly CAPEX for gas assets in the E&P business, was reported as non-eligible CAPEX. The eligible CAPEX for the 2021 KPI did not include any gas-related activities.

The rise in total eligible CAPEX in 2022 in comparison to 2021 is mainly due to increased investments related to the PDH₂ project in Kallo and refinery turnarounds (activity 3.14 Manufacture of organic basic chemicals) as well as the ReOil 2000 project (activity 9.1 Close to market research, development and innovation).

Aligned and eligible CAPEX can be disaggregated into additions to the different asset classes in the table below. Additions to right-of-use assets are included in additions to property, plant, and equipment.

Taxonomy-Aligned CAPEX 2022

in mn EUR

CAPEX Plan

The CAPEX plan includes the list of economic activities for which taxonomy-aligned investments in 2022 have already been made and provides information on the planned CAPEX to overall expand these activities. The CAPEX plan intended to expand taxonomy-aligned activities is based on the latest Supervisory Board-approved business plan, whereas the time horizon reflects the maximum five-year period for a CAPEX plan mentioned in annexes 1–5 to the Commission Delegated Regulation (EU) 2020/852. The planned CAPEX is subject to reviews and changes. The CAPEX plan does not include planned CAPEX for taxonomy-eligible activities which have not yet been claimed taxonomy-aligned in 2022 but will be likely taxonomy-aligned in the future such as geothermal activities, recycling activities, and CCS activities for which in total around EUR 3.2 bn CAPEX are planned for the period 2023–2027.

Taxonomy-Eligible and Taxonomy-Aligned OPEX

In 2022, 41.2% of OMV’s total OPEX could be classified as taxonomy-eligible. 0.1% of OMV’s total OPEX could be classified as taxonomy-aligned.

The largest contributors to eligible OPEX were the activities 3.17 Manufacture of plastics in primary form and 3.14 Manufacture of organic basic chemicals, both of which reflect the activities of our C&M segment, as well as activity 4.29 Electricity generation from fossil gaseous fuels. Other contributors were activity 9.1 Close to market research, development, and innovation (e.g., R&D into ReOil®^®), and various activities in Section 6 Transport (e.g., infrastructure for rail transportation).

Taxonomy-Aligned OPEX 2022

in mn EUR

Aligned OPEX stemmed mainly from activity 4.1 Electricity generation from photovoltaic technology (e.g., PV plant in Schön­kirchen, PV plant in Lobau) and activity 4.25 Production of heat/cool using waste heat (Fernwärme hub at the Schwechat refinery).

In 2022, eligible OPEX included OPEX for activities related to the production of power and heat from natural gas (4.29 Electricity generation from fossil gaseous fuels and 4.30 High-efficiency co-generation of heat/cool and power from fossil gaseous fuels), which predominantly include maintenance expenses for the gas-fired power plant in Romania and for gas-powered generators used for OMV’s own power consumption. OPEX associated with other gas-related activities, which is mainly related to the production of natural gas in the E&P business, is reported as non-eligible OPEX. The OPEX KPI for 2021 did not include any gas-related activities.

Taxonomy-Aligned OPEX 2022

in mn EUR

Outlook

OMV has a clear commitment to becoming net zero by 2050 and has set ambitious GHG reduction targets for 2030 and 2040 across all GHG scopes. In order to achieve those targets, a significant amount of CAPEX will be allocated to low-carbon business projects and activities between now and 2030. Organic CAPEX growth will be driven by investments in sustainable and low-carbon projects in all three business segments of OMV. For the period 2022–2030, around 40% of the average annual organic CAPEX of around EUR 3.5 bn will be low-carbon CAPEX. In total, OMV will invest EUR 13 bn in low-carbon business solutions between 2022 and 2030.

In 2023, we expect the publication of the remaining four environmental objectives of the EU taxonomy. This means that in the coming year, we will assess our eligible and aligned activities with reference to the additional four environmental objectives and also report on those activities.