Reporting according to the EU Taxonomy

The EU Taxonomy Regulation (EU) 2020/852 entered into force in July 2020 and this is Peab’s first taxonomy report. The EU Taxonomy is a classification system that is meant to help investors and other stakeholders assess how sustainable a business is and thus steer capital flows to environmentally better alternatives. The basis is the range of economic activities listed in the Taxonomy. For an economic activity to be classified as environmentally sustainable it must substantially contribute to one or more of the established environmental objectives, do no significant harm to any of the other objectives as well as meet certain minimum social safeguards. There are two environmental objectives defined for 2021: Climate change mitigation and climate change adaptation.

The Regulation requires a large number of European companies to report on how much of their business is eligible according to the Taxonomy. As of 2022 reporting will be complemented with to what extent that business meets the criteria for being defined as sustainable according to the Taxonomy.

As a community builder Peab has broad and diversified operations. We are active in four Nordic countries with an extensive geographic presence as well as customers in both the private and public sectors. Our four business areas Construction, Civil Engineering, Industry and Project Development are independent but ensure through collaboration that we utilize local resources as far as possible in the form of our own personnel and input goods. In other words, Peab’s business comprises different kinds of activities that come under the Taxonomy.

Operations considered eligible according to the Taxonomy

A team of representatives for all four business areas and the Group functions finance and treasury, the environment, sustainability and investor relations was created at Peab and during the year the team has evaluated activities included in the Taxonomy. As a result of the analysis we consider the following activities relevant and material for Peab:

Manufacturing

• 3.6 Manufacture of other low carbon technologies

Includes net sales, operating expenses and capital expenditures in Peab’s own developed ECO-​products in business area In­dus­try such as ECO-​Asfalt which is manufactured with biofuel in as­phalt plants, ECO-​Betong (ECO-Concrete) which is manufactured with al­ter­na­ti­ve binder that partially replaces ce­ment and ECO-​Prefab where climate-improved concrete is used and the reinforcement consists of recycled steel.

Transport

• 6.14 Infrastructure for rail transport
• 6.16 Infrastructure enabling low carbon water transport

Includes net sales and operating expenses from engineering contracts to ex­ter­nal customers for rail transports and port and water transports in business area Civil Engineering.

Construction and real estate

• 7.1 Construction of new buildings
• 7.2 Renovation of existing buildings
• 7.7 Acquisition and ownership of buildings

Includes net sales in new construction, ren­ovation, rebuilding and extensions for ex­ter­nal customers in business area Construction as well as sales of our own developed, newly built buildings in business area Pro­jec­t Development. Further, it includ­es rental income from owned buildings and net sales from the divestiture of project and development property recognized as inventories in business area Pro­jec­t Development. It also includ­es operating expenses in the form of R&D regarding new construction.

All the operations in business area Construction and Pro­jec­t Development are completely tax­onomy-eligible. Operations we consider tax­onomy-non-eligible are in business area Civil Engineering’s mainly contracts in road and land projects, in­fra­struc­ture ­pro­jects and operation and maintenance work. Operations in business area In­dus­try not classified in the Tax­onomy are mineral aggregates operations, paving contracts where ECO-​Asfalt is not used, rental operations and product sales.

Double counting has been avoided since only ex­ternal sales have been included in summation of the relevant activities. The use of our own ECO-​products in construction and civil engineering contracts has been exc­lud­ed in ac­tivity 3.6 and is included in the reporting in contracts for ex­ter­nal customers in ac­tivity 7.1.

As is the entire industry, we are at the start of a challenging transition that will require changing the way we work and additional monitoring. An example of this is that several cer­ti­fication sys­tems have already begun adapting to the Taxonomy, which sets a new standard for the industry. Our work will continue in 2022 by measuring to what extent the taxonomy-eligible operations also meet the sustainability criteria.

Applied accounting principles

Net sales: Net sales includ­e ex­ternal net sales according to IFRS 15 Revenue from contracts with customers and IFRS 16 Leasin­g (rental income) in tax­onomy-eligible activities. For business areas Construction and Civil Engineering this means the income from contracts with ex­ter­nal customers. For business area In­dus­try net sales refer to external revenue from paving contracts with ECO-​Asfalt and sales of ECO-​Betong (ECO-Concrete), ECO-​Prefab and ECO-​Stommar (ECO-Frames). In business area Pro­jec­t Development this includes ex­ter­nal revenue from divestitures of various kinds of homes and com­mer­cial property as well as rental income from buildings.

Operating expenses: Operating expenses includ­e operational costs re­lat­ed to tangible assets in tax­onomy-eligible activities, primarily in business area In­dus­try. For the most part these consist of repa­ra­tions and maintenance of factories, machines and equipment for ECO-​products. Operating expenses also includ­e R&D expenses related to business areas In­dus­try and Construction.

Capital expenditures: Capital expenditures refer to acquisitions of buildings and land clas­si­fi­ed as tangible assets as well as machines and equipment. Capital expenditures are related to business area In­dus­try and manufacturing ECO-​products along with leas­ed assets regarding buildings.

Acquisitions regarding project and development property in business area Pro­jec­t Development have not been includ­ed in tax­onomy-re­lat­ed capital expenditures since they are re­cognized as current assets in the Group.