5.1.5EU Taxonomy Disclosure

In accordance with European Regulation 2020/852 of June 18, 2020, SBM Offshore is subject to the obligation to disclose the part of its 2021 revenue, its capital expenditures, and operating expenses eligible under the EU Taxonomy on sustainable activities. In the future eligibility to the EU Taxonomy will need to be complemented with disclosure on the alignment with the EU Taxonomy. Taxonomy-eligible economic activity means an economic activity that is described in the delegated acts supplementing the Taxonomy Regulation irrespective of whether that economic activity meets any or all of the technical screening criteria required for alignment.

The EU Taxonomy is geared towards six environmental objectives that sustainable activities should pursue as indicated in the European Regulation, which are as follows:

1. Climate change mitigation.
2. Climate change adaptation.
3. Sustainable use and protection of water and marine resources.
4. Transition to a circular economy, waste prevention and recycling.
5. Pollution prevention and control.
6. Protection and restoration of biodiversity & ecosystems.

At this point the EU regulation is effective for objectives i and ii with further delegated acts to be published at a later stage. SBM Offshore is strongly committed to facilitating the Energy Transition. As such SBM Offshore has put Environmental objectives in place that help mitigate and adapt to the impacts of climate change. SBM Offshore’s Value Platforms are geared towards environmental objectives i. and ii. This is evidenced by the Material Topics of Energy Transition, Emissions and Innovation. Objectives set for these topics are explained in section 2.1.7 , 2.1.9 And 2.1.10.

In order to identify its business activities covered by the nomenclature of the European Taxonomy, the Group relied on the Delegated Act on Climate supplementing Regulation (EU) 2020/852 of the European Parliament , and Annex 1 & 2 to this Delegated Act. Eligible activity classification was done through codes of the Nomenclature statistique des Activités économiques dans la Communauté Européenne (NACE).

The evaluation of the eligibility of SBM Offshore’s business activities has been conducted on the basis of the Taxonomy and Delegated Regulation (Annex I – KPIs of non-financial undertakings) and its definition of the denominator and nominator of the 3 KPIs which are Turnover, CAPEX and OPEX. It was performed through a methodological approach consisting of:

1. extracting total denominator for the 3 KPIs from the financial reporting and consolidation system used to prepare 2021 IFRS consolidated financial statements,
2. identifying those activities that might fall within the list of economic activities covered in ‘Delegated Acts’,
3. documenting and assessing for each of those economic activities their ’eligibility’ to the first two environmental objectives: ’Climate Change Mitigation’and ’Climate Change Adaptation’ included in the EU taxonomy in order to determine the nominator of each of the 3 KPIs.

• Turnover considered for this analysis covers all business activities of SBM Offshore Group as at December 31, 2021 and the denominator can be reconciled with the 2021 IFRS Total revenue recognized pursuant to IAS1 and disclosed in note 4.3.2 of the consolidated financial statements. It consists of the Revenues from Turnkey and Lease and Operate activities. A considerable part of this business relates to services to the industry of oil & gas extraction. Even if this part of SBM Offshore’s business is addressing the net-zero path – e.g. through decarbonization and digitalization – it cannot be considered eligible for the EU Taxonomy as it is today. The only eligible part of the Turnover therefore relates to SBM Offshore’s renewable energy products & services (EU Taxonomy activity: Manufacture of renewable energy technologies).
• CAPEX consists of additions to tangible and intangible assets during the financial year 2021 considered before depreciation, amortization and any re-measurements recognized by SBM Offshore pursuant to IAS16, IFRS16 and IAS38. The denominator can be reconciled with the sum of the lines ’Additions’ disclosed in notes 4.3.13 and 4.3.14 of the consolidated financial statements. The majority of CAPEX is associated with services to the industry of oil & gas extraction and is therefore non-eligible for the EU Taxonomy – even if part of the CAPEX improves the energy efficiency and emissions profiles of these activities. The eligible part of CAPEX comes mainly from capitalized cost of the Wave Energy Converter, explained in section 2.1.9 (EU Taxonomy activity: Manufacture of renewable energy technologies).
• OPEX according to the EU Taxonomy is determined by the direct non-capitalized costs of research and development, building renovation measures, short-term leases, maintenance and repair and any other direct expenditures relating to the day-to-day servicing of assets of property, plant and equipment by the undertaking or third-party outsources that are necessary to ensure the continued and effective functioning of such assets (EU Taxonomy activity: Close to market research, development and innovation).

It is worth mentioning that the Delegated act for disclosures supplementing Article 8 requires companies to ’disclose the KPIs for each environmental objective and the total KPIs for all environmental objectives at the level of the undertaking or group across all environmental objectives while avoiding double counting’.

Maintenance and repair costs covering operating leased FPSOs is a service provided by SBM Offshore to its lessee. These expenses are direct ’cost of sales’ (reported as such in the Consolidated Income Statement under IFRS) related to services already included in Turnover KPI as revenue from contracts with customers. To avoid double counting, these ’cost of sales’ are therefore not included in the OPEX KPI.

The eligible part of OPEX relates mainly to R&D activities into non-carbon solutions as explained in section 2.1.9. Other items are non-capitalized investments into increased energy efficiency of office buildings.

Table 1 provides the basis for the numerator and denominator of EU Taxonomy eligibility for respectively Turnover, CAPEX and OPEX, whereas Table 2 shows the actual KPI related to the EU Taxonomy.

Table 1

Table 2

From fiscal year 2022 onwards, eligibility assessment will be complemented by alignment assessment as per the EU Taxonomy regulation.