[Draft] ESRS E5 Resource use and circular economy
[Draft] ESRS E5 Resource use and circular economy
Working paper, February 2022
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[Draft] European Sustainability Reporting Standard E5
Resource Use and Circular Economy
[DISCLAIMER]
This document is a technical working paper intended solely for the internal use of PTF-
ESRS members, supporting debates in Plenary meetings. It is not open to public
consultation but serves as work-in progress document leading to the exposure drafts to be
submitted to a future public consultation. Significant changes to this working paper may
arise from the subsequent steps of the due process (for more information on subsequent
steps of the due process, see here).
This working paper should therefore not be interpreted in any way whatsoever as
representing the views of the PTF-ESRS as a whole at this stage, nor the position of
relevant co-construction partners. Also, the content of this working paper is the sole
responsibility of the PTF-ESRS and can under no circumstances be regarded as reflecting
the position of the European Union or European Commission DG Financial Stability,
Financial Services and Capital Markets Union (DG FISMA).
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Table of content
Contents
OBJECTIVE.......................................................................................................................................... 3
INTERACTIONS WITH OTHER ESRS ....................................................................................................... 3
DISCLOSURE REQUIREMENTS .............................................................................................................. 5
STRATEGY AND BUSINESS MODEL, GOVERNANCE AND ORGANISATION, IMPACTS, RISKS AND OPPORTUNITIES ..................... 5
SPECIFIC CIRCULAR ECONOMY-RELATED DISCLOSURES FOR THE IMPLEMENTATION OF ESRS 2 STRATEGY AND BUSINESS MODEL 5
[Disclosure Requirement 1] Resource use and circular economy integration in the business model5
SPECIFIC RESOURCE USE AND CIRCULAR ECONOMY-RELATED DISCLOSURES FOR THE IMPLEMENTATION OF ESRS 4 IMPACTS, RISKS
AND OPPORTUNITIES ........................................................................................................................................ 5
[Disclosure Requirement 2] Processes to identify resource use and circular economy-related impacts,
risks and opportunities 6
[Disclosure Requirement 3] Resource use and circular economy-related impacts, risks and opportunities
6
POLICIES, TARGETS, ACTION PLANS AND RESOURCES ............................................................................................. 6
[Disclosure Requirement 4] – Policies implemented to manage resource use and circular economy 6
[Disclosure Requirement 5] – Measurable targets for resource use and circular economy 7
[Disclosure Requirement 6] – Resource use and circular economy action plans 7
PERFORMANCE MEASUREMENT .......................................................................................................................... 8
[Disclosure Requirement 7] – Resources inflows 8
[Disclosure Requirement 8] – Resources outflows 8
[Disclosure Requirement 9] – Waste and emissions 8
[Disclosure Requirement 10] – Resource value strategy 9
[Disclosure Requirement 11] – Circular enablers 9
[Disclosure Requirement 12] – Taxonomy Regulation for the transition to a circular economy including
enabling activities 9
[Optional Disclosure Requirement 13] – Financial opportunities related to resource use and circular
economy other than the Taxonomy Regulation 10
APPLICATION PROVISIONS ...............................................................................................................................10
APPENDIX A: DEFINED TERMS ........................................................................................................... 11
APPENDIX B: APPLICATION GUIDANCE .............................................................................................. 13
SPECIFIC RESOURCE USE AND CIRCULAR ECONOMY-RELATED DISCLOSURES FOR THE IMPLEMENTATION OF ESRS 2 STRATEGY AND
BUSINESS MODEL ...........................................................................................................................................13
[Disclosure Requirement 1] Resource use and circular economy integration in the business model13
[Disclosure Requirement 2] Processes to identify resource use and circular economy-related impacts,
risks and opportunities 14
[Disclosure Requirement 6] – Resource use and circular economy action plans 14
[Disclosure Requirement 7] - Resource Inflows 15
[Disclosure Requirement 8] - Resource outflows 16
[Disclosure Requirement 9] - Waste and emissions 16
[Disclosure Requirement 10] Resource value strategy 17
APPENDIX C: DIGITISATION GUIDANCE .............................................................................................. 18
BASIS FOR CONCLUSIONS ................................................................................................................. 19
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Objective
1 The objective of this [draft] standard is to specify Disclosure Requirements which will enable users
of the sustainability reporting to understand:
(a) the impact of the undertaking on resource use considering the depletion of non-renewable
resources and the regeneration of renewable resources and its past, current and future
measures to decouple its growth from extraction of natural resources;
(b) the plans and capacity of the undertaking to adapt its business model and operations in line
with circular economy principles including the elimination of waste, the circulation of
products and materials at their highest value, and the nature’s regeneration;
(c) the type and extent of risks and opportunities arising from the resources use and the
transition to a circular economy including potential negative externalities;
(d) the effects of circular economy-related risks and opportunities on the undertaking’s
development, performance and position over the short-, medium- and long-term and
therefore on its ability to create enterprise value in.
2 This standard derives from the (draft) CSRD stating that the sustainability reporting standards
shall specify information to disclose about ‘resource use and circular economy’.
3 This standard also builds on existing EU legislative frameworks and policies which are referred to
in this standard: the EU Green Deal, the EU Sustainable Finance Disclosure Regulation (SFDR),
the EU Taxonomy regulation, EU Circular Economy Action Plan
1
and the EU industrial strategy.
4 This standard covers Disclosure Requirements developed primarily from the perspective and for
the reporting purpose of non-financial undertakings
2
. However financial undertakings shall apply
this standard in relation to their own operations and value chain, it being understood that they are
in addition subject to specific regulatory and other sector-specific Disclosure Requirements.
5 This standard sets out Disclosure Requirements related to ‘resource use’ and ‘circular economy’.
6 ‘Resource use’ covers Disclosure Requirements related to the undertaking’s resource inflows,
resource outflows and waste and emissions.
7 ‘Circular economy’ covers Disclosure Requirements related to the undertaking’s circular enablers
and resource value strategy
Interactions with other ESRS
8 Specific aspects related to Pollution are addressed in ESRS E2, climate change mitigation and
adaptation matters are addressed in ESRS E1, Biodiversity and ecosystems matters are
addressed in ESRS E4 and Water and marine resources matters are addressed in ESRS E3.
Circular economy is a system that tends to a sustainable production and consumption. In doing
so, the system brings multiple environmental benefits, in particular, the reduction of energy
consumption and emissions into the air (carbon emission or other pollution), the limitation of water
withdrawals and discharges and the regeneration of the nature limiting the impact on biodiversity.
9 The contents of this standard on Strategy and business model, Governance and organisation and
Impacts, risks and opportunities, as well as Policies, targets, action plans and resources shall be
read in conjunction respectively with cross-cutting standards ESRS 2, ESRS 3, ESRS 4 and cross-
cutting reference standard ESRS 5.
1
https://ec.europa.eu/environment/strategy/circular-economy-action-plan_en
2
A non-financial undertaking means an undertaking that is subject to the disclosure obligations laid down in Articles 19a and 29a
of Directive 2013/34/EU and is not a financial undertaking, i.e. an asset manager, a credit institution as defined in Article 4(1), point
(1), of Regulation (EU) No 575/2013 of the European Parliament and of the Council22, an investment firm as defined in Article
4(1), point (2), of Regulation (EU) No 575/2013, an insurance undertaking as defined in Article 13, point (1), of Directive
2009/138/EC of the European Parliament and of the Council23, or a reinsurance undertaking as defined in Article 13, point (4) of
Directive 2009/138/EC [Disclosures Delegated Act of the (EU) 2020/852 Regulation, commonly referred to as the EU Taxonomy
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10 This standard covers sector-agnostic Disclosure Requirements. Sector-specific Disclosure
Requirements are developed separately and in accordance with the classification following ESRS
SEC 1.
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Disclosure Requirements
Strategy and business model, governance and organisation, Impacts, risks and
opportunities
11 The Disclosure Requirements related to Resource Use and Circular Economy and to (i) Strategy
and business model, (ii) Governance and organisation, and (iii) Impacts, risks and opportunities
are defined below.
12 The specific circular economy-related Disclosure Requirements hereafter (Disclosure
Requirements 1 to 3) shall be read as complementary to the relevant cross-cutting standards
(ESRS 2, ESRS 3 and ESRS 4) and they are to be reported upon by the undertaking under the
related cross-cutting standards. The information to be covered by Disclosure Requirements 1 to 3
are those that due to their importance to the undertaking are prioritised and monitored directly by
the undertaking’s highest governing bodies.
13 With regards to the circular economy-related Disclosure Requirements in ESRS 2 Strategy and
business model, this topical standard includes one specific Disclosure Requirement. Disclosure
Requirement 1 covers the integration of resource use and circular economy key levers in the
business model.
14 With regards to the circular economy-related Disclosure Requirements in ESRS 4 on Impacts,
risks and opportunities, this topical standard includes two specific Disclosure Requirements.
Disclosure Requirement 2 covers Processes to identify resource use and circular economy-related
impacts, risks and opportunities and Disclosure Requirement 3 covers Resource use and circular
economy-related impacts, risks and opportunities.
Specific circular economy-related disclosures for the implementation of ESRS 2
Strategy and business model
[Disclosure Requirement 1] Resource use and circular economy integration in the
business model
15 The undertaking shall disclose a description of the alignment of the strategy and business
model with circular economy principles and how the undertaking is decoupling the
economic activity from extraction of natural resources.
16 The principle to be followed under this Disclosure Requirement is to provide an understanding of
the plan of the undertaking to move from a linear to a circular economy in accordance with the
Disclosure Requirements 7 and 8 under ESRS 2.
17 The disclosure required by paragraph 15 shall include:
(a) by reference to the resource use and circular economy targets, an explanation of the levers
identified and key actions planned to move from a linear to circular business model;
(b) an explanation of how the plan is embedded in and aligned with the overall business
strategy;
(c) an explanation of the progress made in retaining the resource, the product and material at
their highest value.
Specific resource use and circular economy-related disclosures for the implementation
of ESRS 4 Impacts, Risks and Opportunities
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[Disclosure Requirement 2] Processes to identify resource use and circular economy-
related impacts, risks and opportunities
18 The undertaking shall disclose its processes to identify and assess its:
(a) resource use and circular economy-related impacts;
(b) resource use and circular economy-related risks; and
(c) resource use and circular economy-related opportunities.
19 The disclosure required by paragraph [18] shall include a description of the processes to identify
those impacts, risks and opportunities that due to their importance for the undertaking are
prioritised and monitored directly by the undertaking’s highest governing bodies. It shall be
disclosed in accordance with ESRS 4, Disclosure Requirement 1.
[Disclosure Requirement 3] Resource use and circular economy-related impacts, risks
and opportunities
20 The undertaking shall disclose a description of its:
(a) resource use and circular economy-related impacts;
(b) resource use and circular economy-related risks; and
(c) resource use and circular economy-related opportunities.
21 The principle to be followed under this Disclosure Requirement is to provide an understanding of
the resource use and circular economy-related impacts, risks and opportunities that due to their
importance to the undertaking are prioritised and monitored directly by the undertaking’s highest
governing bodies. It shall be disclosed in accordance with ESRS 4, Disclosure Requirement 2.
22 The disclosure required by paragraph [20] shall cover a description of:
(a) the principal risks of staying in a linear economy;
(b) the principal opportunities related to a circular economy;
(c) the principal risks of a transition to a circular economy.
Policies, targets, action plans and resources
23 The Disclosure Requirements developed hereafter refer to ESRS 5 Definitions for policies,
targets, action plans and resources.
[Disclosure Requirement 4] – Policies implemented to manage resource use and
circular economy
24 The undertaking shall disclose separately its policies (i) to decouple economic activity
from extraction of non-renewable resources and (ii) for regeneration of renewable
resources and ecosystems.
25. The principle to be followed under this Disclosure Requirement is to provide an understanding of
the undertaking’s ability to transition away from extraction of virgin non-renewable resources and
to implement practices that secure and contribute to the regeneration of the stock of renewable
resources and the ecosystems they are part of.
26. The disclosure required by paragraph [24] shall include a description of how the policy
commitments related to resource use and circular economy are implemented within the
undertaking's own operations and the value chain.
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[Disclosure Requirement 5] – Measurable targets for resource use and circular
economy
27 The undertaking shall describe (i) the measurable outcome-oriented target set to meet the
resource use and circular economy-related policy’s objectives related to the management
of its material impacts, risks and opportunities and (ii) the overall progress against the
defined target.
28 The principle to be followed under this Disclosure Requirement is to provide an understanding of
the capacity of the undertaking to meet the policy’s objectives of resource use and circular
economy.
29 The resource use and circular economy targets above-mentioned shall include the following
categories of targets:
(a) targets to eliminate waste (including in use phase);
(b) targets for circular material use rate;
(c) targets to eliminate the use of virgin raw material;
(d) targets for reduction/reversal in the depletion of the stock of renewable resources.
30 The disclosure required under paragraph 27 shall include:
(a) a description of how targets are tightly connected with material impacts disclosed in the
section ‘risks and opportunities’ and if they are not, a comprehensive justification as to
why a material impact is not covered by a target;
(b) a description of how the targets contribute to the objectives of the EU Circular Economy
Action Plan
3
;
(c) whether targets are absolute or intensity-based and in which unit they are measured;
(d) as applicable, the geographical scope of the target: a description of the geographies
covered by the target and how these geographies were selected and, if applicable, an
explanation of why the relevant geographies identified were not included.
31 The undertaking shall disclose which actions are taken to achieve the changes in strategy that
are supporting the achievement of the targets.
[Disclosure Requirement 6] – Resource use and circular economy action plans
32 An undertaking shall describe its action plans and allocation of resources to meet its
policy objectives and targets.
33 The principle to be followed under this Disclosure Requirement is to provide an understanding of
the measures taken to reduce the pressure on resources and to retain and optimise the value of
the resources, including to get prepared for the transition to more circular economy related to its
policies set in Disclosure Requirement 4.
34 The disclosure required by paragraph [32] shall include for each action plan a description of:
(a) the geographical scope of the actions, including explanation of any limitations as to
geographical boundaries or activities;
(b) a list of the stakeholders involved in the action plan and how they are involved, or/and a
list of stakeholders impacted negatively or positively by the action plan and how they are
impacted;
35 The action plan shall also include:
3
https://ec.europa.eu/environment/strategy/circular-economy-action-plan_en
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(a) an explanation whether the action is intended to be a one-time initiative or a systematic
practice;
(b) a brief assessment whether key actions may induce significant adverse sustainability
impacts;
(c) further explanations deemed useful to understand key actions and the expected outcomes
in relation to the contribution to the achievement of the underlying policy objectives and
targets;
(d) if the action is individual or collective, and for a collective action, the undertaking shall
explain its role;
(e) whether the success of the action depends on the undertaking of similar or on supporting
actions by other undertakings, and to what degree.
Performance measurement
[Disclosure Requirement 7] – Resources inflows
36 The undertaking shall provide information on its resources’ inflows.
37 The principle to be followed under this Disclosure Requirement is to provide an understanding of
the resources use in the course of the undertaking’s operations.
38 The disclosure required by paragraph [36] should include:
(a) the amount in both absolute and percentage terms, of reused, recycled and renewable
input materials used to manufacture the undertaking’s primary products and services;
(b) the amount in both absolute and percentage terms of reused, recycled and renewable
input materials used to package the undertaking’s primary products.
[Disclosure Requirement 8] – Resources outflows
39 The undertaking shall provide information on its resources’ outflows.
40 The principle to be followed under this Disclosure Requirement is to provide an understanding of
how the undertaking is contributing to circular economy by increasing the durability, reparability,
upgradability, reusability or recyclability of the products and materials.
41 The disclosure required by paragraph [39] shall include:
(a) the amount in both absolute and percentage terms of reused content derived from
products or services outflow;
(b) the amount in both absolute and percentage terms of recycled content derived from
products or services outflow;
(c) the amount in both absolute and percentage terms of renewable content of products or
services outflow.
[Disclosure Requirement 9] – Waste and emissions
42 The undertaking shall provide information on its wastes and emissions.
43 The principle to be followed under this Disclosure Requirement is to provide an understanding of
the undertaking waste management strategy and of the extent to which the undertaking knows
how its waste is managed.
44 This Disclosure Requirement supports the information needs of financial market participants
subject to the Sustainable Finance Disclosure Regulation (EU) 2019/2088 (SFDR).
45 The disclosure required by paragraph [42] should include:
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(a) For each of hazardous and non-hazardous solid waste, the amount by weight diverted
from disposal by recovery operation type and the total amount summing all three types.
The recovery operation types to be reported are:
(i) preparation for reuse;
(ii) recycling;
(iii) other recovery operations;
(b) For each of hazardous and non-hazardous solid waste, the amount by weight directed to
disposal by recovery operation type and the total amount summing all three types. The
recovery operation types to be reported are:
(i) incineration with energy recovery;
(ii) incineration without energy recovery;
(iii) landfilling;
(iv) other disposal operations.
[Disclosure Requirement 10] – Resource value strategy
46 The undertaking shall provide information on its strategy to retain the value of the
resources.
47 The principle to be followed under this Disclosure Requirement is to provide an understanding of
the intensity of materials and products use by the undertaking and its capability to retain the
value of the resource used at its highest stage.
48 The disclosure required by paragraph [46] shall include the share of net revenue from products
and services that leverage the transition to a circular economy through circular business models
such as pay-per-use, sharing or repairing services.
[Disclosure Requirement 11] – Circular enablers
49 The undertaking shall provide information on its circular enablers.
50 The principle to be followed under this Disclosure Requirement is to provide an understanding of
the services and products that contribute to create circular systems initiatives outside its own
activities in the value chain.
51 The disclosure required by paragraph [49] shall include a description of:
(a) actions, including circularity measures, taken to prevent waste generation in the
undertaking’s own activities and upstream and downstream in its value chain, and to
manage significant impacts from waste generated.
(b) the extent to which processes are set up to support circular business models, products or
services;
(c) the extent to which the undertaking engages with customers on advancing circular
economy topics;
(d) the extent to which the undertaking engages with suppliers on advancing circular
economy topics.
[Disclosure Requirement 12] – Taxonomy Regulation for the transition to a circular
economy including enabling activities
52 The undertaking shall disclose information required by Article 8 of the Regulation (EU) 2020/852
(Taxonomy Regulation) in conjunction with the Commission Delegated Regulation (EU)
2021/2178 of 6 July 2021 and in conjunction with upcoming technical screening criteria for
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determining the conditions under which an economic activity qualifies as contributing
substantially to transitioning to circular economy.
53 The Taxonomy Regulation in its Article 8(2) requires undertakings to disclose information on the
proportion of the turnover, capital expenditure (‘CapEx’) and operating expenditure (‘OpEx’)
associated with economic activities that qualify as environmentally sustainable.
The information to be disclosed under the upcoming circular economy-related provisions of the
Taxonomy regulation shall be complementary to the information disclosed under the provisions
of this standard as it provides an understanding of the undertaking’s own substantial contribution
in favour of the transition to a circular economy.
[Optional Disclosure Requirement 13] – Financial opportunities related to resource use
and circular economy other than the Taxonomy Regulation
54 The undertaking may disclose its financial opportunities that relate to resource use and
circular economy and that complement the Taxonomy Regulation related ones.
55 The principle to be followed under this Disclosure Requirement is to provide information allowing
for an overall understanding of the financial opportunities related to resource use and circular
economy, complementing the information requested under the Taxonomy Regulation.
56 If the undertaking discloses the information according to paragraph 54, it shall include an
assessment of the market size of related products and services over the short-, medium-, and
long-term, explaining how these are defined, how financial amounts are estimated and which
critical assumptions are made.
Application provisions
57 Nil.
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Appendix A: Defined terms
This appendix is integral part of the [draft] ESRS E5.
Circular economy
Economic system that uses a systemic approach to maintain a circular
flow of resources, by regenerating, retaining or adding to their value,
while contributing to sustainable development
Circularity
A state of a specified system, organisation, product or process where
resource flows and values are maintained whilst benefiting sustainable
development
Resource
Asset from which a product is sourced, produced, supplied or utilised.
By-product
An inevitable result of certain types of material processing and
agriculture. In a circular economy all by-products can be feedstock for
another production process
Circularity enabler
The services, products or Business models that allow to creating circular
systems including cross value chain initiatives.
Hazardous solid
waste
Waste that possesses any of the characteristics contained in Annex III
of the Basel Convention, or that is considered to be hazardous by
national legislation
Non-hazardous
solid waste
Waste that does not possesses any of the characteristics contained in
Annex III of the Basel Convention, or that is not considered to be
hazardous by national legislation
Incineration
Controlled burning of waste at high temperature
Incineration with
energy recovery
Incineration with energy recovery refers to incineration processes where
the energy created in the combustion process is harnessed for re-use,
for example for power generation
Incineration
without energy
recovery
Incineration without energy recovery means the heat generated by
combustion is dissipated in the environment.
Landfilling
Final depositing of solid waste at, below, or above ground level at
engineered disposal sites
Natural Resource
Natural assets (raw materials) occurring in nature that can be used for
economic production or consumption.
Non-renewable
material
Resource that does not renew in short time periods
Primary products
Grown, harvested or extracted raw materials
Recovery
operation
Any operation wherein products, components of products, or materials
that have become waste are prepared to fulfill a purpose in place of new
products, components, or materials that would otherwise have been
used for that purpose
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Recyclable
materials
Materials which may be collected, separated or processed and returned
to the economic mainstream in the form of secondary raw materials or
products
Recycling
Reduce a product all the way back to its basic materials, reprocessing
and using them to make new products, components or materials.
Regeneration
Approach to managing agroecosystems that provides food and material
in ways that create positive outcomes for nature
Renewable
materials
Material that is derived from plentiful resources that are quickly
replenished by ecological cycles or agricultural processes, so that the
services provided by these and other linked resources are not
endangered and remain available for the next generation
Resource
depletion
Consumption of a resource faster than it can be replenished
Resources
Inflows
Resource that enters the organisation's infrastructure.
Resources
Outflows
Resource that leaves the organisation's infrastructure.
Reusable
materials
Materials that are able of being reused after minimal processing
Reuse
The repeated use of a product or component for its original intended
purpose without significant modification, but potentially involving
cleaning or small adjustments so it is ready for the next use.
Resource value
strategy
To design, produce and distribute materials and products with the
objective to keep them in use at their highest value. Eco-design and
design for longevity, repair, reuse, repurposing, disassembly,
remanufacturing are examples of tools to prevent from a quick and
limited use of materials and products. Innovative business models could
also contribute to better use existing products and materials (sharing,
pay-per-use, …). Regenerative production methods could also be
applied.
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Appendix B: Application Guidance
This appendix is an integral part of the proposed [draft] ESRS E5 Resource use and circular economy.
It describes the application of the requirements set for in paragraphs [11–58] and has the same
authority as the other parts of the [draft] ESRS Standard.
Specific resource use and circular economy-related disclosures for the implementation
of ESRS 2 Strategy and business model
[Disclosure Requirement 1] Resource use and circular economy integration in the
business model
AG1. When disclosing information under paragraph [15], the undertaking shall consider the principles
of circular economy:
(a) the elimination of wastes in the value chain;
(b) the circularity of products and materials keeping them at their highest value;
(c) the regeneration of nature.
AG2. When disclosing information under paragraph [15], the undertaking shall consider the five key
subtopics of resource use and circular economy:
(a) resources inflows, which represents the circularity of material resources inflows with a
split between renewable and non-renewable resources including transparency on virgin
versus non virgin materials and on sustainable or regenerative sources;
(b) resources outflows, which represents the circularity of material intended outflows
including being recirculated in practice. Outflows in this category are intentional to
provide an economic or other benefit;
(c) waste and emissions, which represents the circularity of extraneous resources outflows
taking into account the waste hierarchy: prevention, re-use, recycling;
(d) resource value strategy, which represents the intensity of materials and products’ use;
creating innovative business models or applying regenerative production methods;
(e) circular enablers, which represents the services and products that allow to creating
circular systems including cross value chain initiatives.
AG3. With regards to impacts, the undertaking shall disclose how the current and future business
model and strategy cause and drive pressure on resources that reduce stocks and flows of
resources - and their benefits to society.
AG4. The disclosure required by paragraphs AG28 and AG29 of ESRS 2 shall include a description
of:
(a) the implementation of a strategy to retain the value of the resources and to shift from
linear to circular business practices, within own operations and across value chain;
(b) the potential risks of negative externalities;
(c) how the undertaking will implement the requirements of the EU circular economy action
plan.
AG5. With regards to Risks and opportunities, the disclosure required by paragraphs AG33 and
AG34 of ESRS 2 shall cover:
(a) a list and prioritisation of the natural resources used by the undertaking based on the
evaluation of the remaining resources and the negative externalities resulting from the
use of resources;
(b) a description of:
(i) the capability of the undertaking to safeguard future stocks and flows of resources
and the related benefits to society;
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(ii) the way activities are decoupled from extraction and natural resources by
implementing a value strategy of the resources use and intensifying circular
material use; and
(iii) the resulting short-, medium- and long-term strategic implications for its business
model and strategy;
(c) a description in the operations and along the value chain of the undertaking of:
(i) the extraction and use of non-renewable resources;
(ii) the depletion of stock and use of renewable resources; and
(iii) the stages of the value chain where resource use, risks and negative impacts are
concentrated;
(d) a description of how the risks and opportunities both related to the transition to a circular
economy and to the risks of staying in a linear economy serve as an input to the
management’s strategy and decision making.
[Disclosure Requirement 2] Processes to identify resource use and circular economy-
related impacts, risks and opportunities
AG6. The disclosure required by paragraph [18] shall include:
(a) a description of the due diligence processes used to identifying and assessing the
adverse and positive impacts associated with the linear or circular nature of the activities
along the value chain, i.e. on the undertaking operations, supply chain and products;
(b) a description of how processes for identifying, assessing and managing impacts, risks
and opportunities related to the transition to a circular economy are integrated into the
overall risk management, management system and strategy definition.
AG7. When disclosing information, the undertaking shall consider:
(a) how business models could increase the resource value (e.g. product-as-a-service, pay-
per-use, sharing, leasing);
(b) the conception of the products and materials (eco-design for longevity, repair, reuse…),
including raw material inputs (for example recycling, by-products, virgin raw materials,
renewable resources), use and end of use of products and materials.
AG8. When describing the identification process on its operations, the undertaking shall cover the
raw material consumption, potential substitution of natural resources by recycling materials,
the waste management (hazardous and non-hazardous wastes) while considering the potential
adverse or beneficial other environmental impacts (climate change, water, pollution,
biodiversity).
AG9. When describing the identification process on its supply chain, the undertaking shall cover raw
material inputs, practices to secure renewable resources regeneration, waste management
and other potential impacts downstream on the operations.
[Disclosure Requirement 6] – Resource use and circular economy action plans
AG10. When disclosing information under paragraph [32], the undertaking shall disclose action plans:
(a) based on the circular economy principles: elimination of waste, product and materials
circulation at their highest value, and nature regeneration;
(b) subdivided into sub-topics identifying the key stage of the actions among the five stages
presented earlier: resources inflows, resources outflows, waste and emissions, resource
value strategy and circular enablers.
AG11. The actions taken shall cover operations, products, services and materials and supply chain.
AG12. When describing action plans on operations, the undertaking shall consider:
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(a) the manufacturing and distribution adaptation,
(b) the development of skills and training to improve internal competencies on resource use
and circular economy; and
(c) innovation and R&D on manufacturing processes and product development allowing the
conception of products and materials integrating eco-design principles, circularity and
resources value along the value chain.
AG13. When describing action plans on its value chain, the undertaking shall consider developing
collaborations with its local eco-system and suppliers or more generally stakeholders to
increase the circularity of products and materials.
[Disclosure Requirement 7] - Resource Inflows
AG14. The resource inflows indicators are inspired by GRI 301: Materials. Specifically, disclosure 301-
1 and disclosure 301-2 are referenced.
AG15. The disclosure required under paragraph 38 (a) related to the tonnage and percentage of
reused, recycled and renewable input materials used to manufacture the organisation primary
products and services should include:
(a) the total weight of materials that are used to manufacture the undertaking’s primary
products and services during the reporting period, by:
(i) reused;
(ii) recycled;
(iii) renewable.
(b) the percentage of materials used to manufacture the undertaking’s primary products
and services, that are:
(i) reused;
(ii) recycled;
(iii) renewable.
AG16. When compiling the percentage indicator, the undertaking shall use as denominator the
overall total weight of materials used during the reporting period.
AG17. The materials used should include:
(a) raw materials;
(b) associated process material;
(c) semi-manufactured goods or parts.
AG18. The reported usage data are to reflect the material in its original state, and not to be
presented with further data manipulation, such as reporting it as ‘dry weight’ (see Guidance
for Disclosure 301-1 in GRI-301 Materials).
AG19. In cases where reused, recycled, renewable categories overlap, the undertaking shall explain
how double counting was avoided and choices that were made.
AG20. The disclosure required under paragraph 38 (b) related to tonnage and percentage of reused,
recycled and renewable input material used to package the undertaking’s primary products
and services should include the following information:
(a) the total weight of materials that are used to package the undertaking’s primary
products and services during the reporting period, by
(i) reused;
(ii) recycled;
(iii) renewable;
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(b) the percentage of materials used to package the undertaking’s primary products and
services that are:
(i) reused;
(ii) recycled;
(iii) renewable.
AG21. When compiling the percentage indicator, the undertaking shall use as denominator the
overall total weight of materials used for packaging during the reporting period.
AG22. As additional information the undertaking shall report whether these data are sourced from
direct measurement or estimated; if estimation is required, the methods used shall be
reported.
[Disclosure Requirement 8] - Resource outflows
AG23. The resource outflows indicators are inspired by GRI 301: Materials. Specifically, disclosure
301-1 and disclosure 301-2 are referenced.
AG24. The disclosure required under paragraph 39 related to the tonnage and percentage of
reusable, recyclable and renewable material derived from products or services outflow shall
include:
(a) the total weight of materials that come out of the undertaking’s products and services
production process, including packaging, during the reporting period, by:
(i) reusable;
(ii) recyclable;
(iii) renewable;
(b) the percentage of materials that come out of the undertaking’s products and services
production process, including packaging, during the reporting period:
(i) reusable ;
(ii) recyclable ;
(iii) renewable.
AG25. Solid waste production coming out of the undertaking’s products and services production
process, even if diverted from disposal, have to be disclosed under Disclosure Requirement
8, ‘Waste and emissions’.
AG26. Sector-specific guidelines in terms of quality of resource outflow, such as thresholds for
potential concentration of contaminants, may divert some undertaking’s materials derived
from products and services outflow in ‘Waste and emissions’ subtopic.
AG27. When compiling the percentage indicator, the undertaking shall use as denominator the
overall total weight of materials used during the reporting period.
AG28. The reported usage data are to reflect the material in its original state, and not to be
presented with further data manipulation, such as reporting it as ‘dry weight’ (see Guidance
for Disclosure 301-1 in GRI-301 Materials).
AG29. The reusable, recyclable, renewable categories might overlap.
AG30. As additional information the undertaking shall report whether these data are sourced from
direct measurement or estimated; if estimation is required, the methods used shall be
reported.
[Disclosure Requirement 9] - Waste and emissions
AG31. The weight of hazardous and non-hazardous waste generated shall be expressed in tonnes.
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AG32. The application guidance for Waste and Emissions indicators is the one of GRI 306 – Waste
2020 GRI standards.
AG33. The undertaking shall disclose the metrics as defined by GRI 306 Waste disclosure 306-5,
When reporting composition of the waste, the organization can describe:
(a) the type of waste, such as hazardous waste or non-hazardous waste;
(b) the waste streams, relevant to its sector or activities (e.g., tailings for an undertaking in
the mining sector, electronic waste for an undertaking in the consumer electronics
sector, or food waste for an undertaking in the agriculture or in the hospitality sector);
(c) the materials that are present in the waste (e.g., biomass, metals, non-metallic
minerals, plastics, textiles).
AG34. Besides incineration and landfilling, the undertaking may specify the other types of disposal
operations it uses under Disclosures 306-5-b-iv and 306-5-c-iv, such as dumping, open
burning, or deep well injection.
AG35. Where relevant, the undertaking shall:
(a) explain the reasons for the difference between the weights of waste directed to
disposal on, own operations and in the value chain (e.g., local regulations that prohibit
landfilling of specific types of waste);
(b) describe sector practices, sector standards, or external regulations that mandate a
specific disposal operation;
(c) specify whether the data has been modeled or sourced from direct measurements,
such as waste transfer notes from contracted waste collectors, external assurance, or
audits of waste-related data.
[Disclosure Requirement 10] Resource value strategy
AG36. The undertaking shall illustrate and describe the business model to strengthen value
retention, while considering the sector-specific standards and how circular economy is
addressed in those standards.
AG37. Net revenue shall be consistent with financial statements.
AG38. The share of revenue leveraging the transition to a circular economy shall refer to product life
cycle management.
AG39. The examples given are non-comprehensive. Any enumeration would remain incomplete at
the current stage of circularity. Thus, the undertaking shall provide illustrations in order to
make the link between (i) products and services net turnover and (ii) value retention
transparent.
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Appendix C: Digitisation guidance
This appendix is an integral part of ESRS E5 Resource Use and Circular Economy. It describes the instructions
for the digital tagging.
To be further developed
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Basis for conclusions
This Basis for Conclusions accompanies but is not part of ESRS1 Resource Use and Circular Economy.
This draft accompanies the working paper. It gathers the considerations relating to the disclosure
proposals summarised in the working paper and elaborates on them. At the final version it summarises
the considerations of the EFRAG Sustainability Board in developing the proposed contents of the
Standard. Individual Board members gave greater weight to some factors than to others.
Objective
BC1. Based on the relevant provisions from the Corporate Sustainability Reporting Directive (CSRD)
proposal, existing and upcoming EU Taxonomy
4
, the new EU Circular Economy Action Plan
5
,
and approach of the EFRAG PTF-ESRS, the objective of the environmental standard on
Resource Use and Circular Economy should be to ensure that stakeholders of the undertaking
obtain the necessary information that enables them to understand:
(a) the positive and negative impacts of the undertaking on resource use taking into account
the depletion of non-renewable resources and the regeneration of renewable resources
and its past, current and future measures to decouple its growth from extraction of
natural resources;
(b) the nature, type and extent of risks and opportunities arising from the resources use and
the transition to a circular economy including potential negative externalities;
(c) the effects of circular-economy-related risks and opportunities on the entity’s
development, position and performance and on the ability to create enterprise value over
the short-, medium- and long-term; and
(d) the plans and capacity of the undertaking to adapt its business model and operations in
line with the transition to a circular economy and the efficient use of natural resources
including its regeneration.
BC2. The ESRS seeks an appropriate compatibility with other international initiatives, including:
(a) the Global Reporting Initiative (GRI);
(b) the Value Reporting Foundation (based on the standards of the Sustainability
Accounting Standards Board [SASB]);
(c) ISO TC323 /WG3 ongoing standards.
Scope: (subject to alignment with ESRS 1)
BC3. The “Resource Use and Circular Economy standard prototype” working paper and this
document cover disclosure proposals related to these issues defined in EU existing legislation
and policies. ESRS Resource Use and Circular Economy shall be used for the reporting entities
as stated in the following sections.
Financial consolidation considerations
BC4. The ESRS1 reporting entities boundaries should extend at minimum to the financial
consolidation reporting principles of that entity.
•
4
The denomination « Resource Use and Circular Economy » is taken from the draft CSRD; EU
Taxonomy calls the objective « Transition to a Circular Economy »
5
https://ec.europa.eu/environment/strategy/circular-economy-action-plan_fr
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Value chain considerations
BC5. Based on the ESRG1 Guidelines on Double Materiality, Materiality of a sustainability topic
should be assessed over the whole value chain and over all time horizons. This may thus
extend the required disclosures beyond the scope of the company’s consolidated financial
reporting.
BC6. When carrying out circularity measurement and assessment of systems that can be complex it
is necessary to generate, search and manage appropriate data and apply those data across
the entire life cycle(s) of the product(s) raw material acquisition, production, distribution, use
and end-of-life treatment.
BC7. In performing circularity measurements and assessments a systemic approach and a life cycle
perspective should thus be applied.
Context
EU legislation and policy alignment
BC8. To ensure consistency with the political targets of the European Union, and to fit to other
frameworks, this standard has been very closely aligned with:
(a) the new EU Circular Economy Action Plan: as a key deliverable of the EU Green
Deal, published on 11/03/2020;
(b) the proposal made by the Technical Working Group of the Platform on Sustainable
Finance (PSF) published on August 3, 2021;
(c) the Sustainable Finance Disclosure Regulation (SFDR) draft Regulatory Technical
Standards (RTS), published on 22/10/ 2021.
BC9. As stated in the Commission’s 2020 new Circular Economy Action Plan, the EU needs to
accelerate the transition towards a regenerative growth model, advance towards keeping its
resource consumption within planetary boundaries, and therefore strive to reduce its
consumption footprint and double its circular material use rate in the coming decade. The action
plan also highlights how scaling up the circular economy will make a decisive contribution to
achieving climate neutrality by 2050 and decoupling economic growth from resource use, while
ensuring the long-term competitiveness of the EU and leaving no one behind. More broadly,
transitioning to a circular economy not only addresses the negative impacts of the linear
economy, but more importantly it represents a systemic shift that builds long-term resilience,
generates business and economic opportunities, and provides environmental and societal
benefits.
BC10. As today there is no quantitative overarching EU ambition level for the circular economy, the
ambition builds on a range of published strategies and targets. For example, the Commission
committed to develop indicators on resource use, including consumption and material
footprints. In February 2020, the EU Parliament called for binding targets for 2030 to
significantly reduce the EU material and consumption footprints and bring them within planetary
boundaries by 2050. Finally, the Council encouraged the Commission to explore how these
indicators could set a benchmark for an indicative EU circular economy goal.
6
Thus, this
standard includes cross-references in particular to the:
(a) EU Taxonomy headline ambition for the transition to a circular economy;
(b) EU Sustainable Finance Disclosure Regulation (SFDR);
(c) EU Green Deal– “Goal on mobilizing industry for a clean and circular economy”;
(d) EU new Industrial Strategy;
(e) EU new Circular Economy Action Plan.
6
(Source: Platform on Sustainable Finance: Technical Working Group – Taxonomy pack for feedback,
August 2021, p26-27).
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BC11. This standard strives to provide transparency on a undertaking’s contribution to international
goals especially the UN’s SDG Goal 12 Responsible Consumption and Production: Ensure
sustainable consumption and production encompasses the following targets:
(a) Target 12.2 By 2030, achieve the sustainable management and efficient use of natural
resources;
(b) Target 12.5 By 2030, substantially reduce waste generation through prevention,
reduction, recycling and reuse.
BC12. This standard builds on and specifies the cross-cutting standards:
(a) ESRS Business Strategy;
(b) ESRS Risks, Opportunities and Impacts;
(c) ESRS Sustainability Governance and Organisation.
BC13. Global use of resources (renewable and non-renewable) continues to grow and is expected to
double in the next forty years. The resulting negative externalities (such as climate change,
biodiversity loss, and waste and pollution) and the pressure on resources is no longer bearable
(sustainable).
BC14. To safeguard future stocks and flows of resources - and their benefits to society - and to
address the (risks of) negative externalities, we need to secure both:
(a) reduce the extraction of non-renewable resources with the priority based on the existing
residual stock, and decouple economic activity from extractive practices (e.g. through
circular business models increasing asset utilisation or lifespan);
(b) implement practices that secure the regeneration of renewable resources (e.g. soil
regeneration rather than depletion) and keep resources in the economy at their highest
value (e.g. cascading food to feed to material feedstock).
BC15. Decoupling economic activity from extraction of natural resources can take place through the
implementation of a value strategy to prevent the natural resources extraction and the
intensification of circular material use.
BC16. A resource value strategy means to design, produce and distribute materials and products with
the objective to keep them in use at their highest value. Ecodesign and design for longevity,
repair, reuse, repurposing, disassembly, remanufacturing are examples of tools to prevent from
a quick and limited use of materials and products. Innovative business models could also
contribute to better use existing products and materials (sharing, pay-per-use, …).
Regenerative production methods could also be applied.
BC17. The intensification of circular material use is also a way to decouple natural resources use and
economic activity. Beyond the existence of circular streams, they have to be organised from
the collection of used products and materials to ensure the reuse, repair, remanufacturing and
recycling. In addition, the production processes could be to be designed to reduce waste and
increase the use of recycled materials (closed loop recycling, by-product use…). Depending
on the sector of the undertaking, cascading food and upcycling ingredients could be
opportunities to retain the value of the resource.
Subtopics
BC18. The ESRS Resource Use and Circular Economy working paper covers disclosure proposals
for performance measures related to subtopics:
(a) resource inflows;
(b) resource outflows;
(c) waste and emissions;
(d) resource value strategy;
(e) circular enablers.
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BC19. The structure based on subtopics was chosen to facilitate the illustration of the strategy and
the action plan developed by the undertaking to intensify circular material use and implement
a value strategy to avoid natural resource extraction described in BC15, BC16 and BC17. The
structure will also facilitate the comparability of the disclosures for the users.
BC20. Resource inflows, Resource outflows, Waste and emission subtopics are commonly used by
most active circularity indicator systems, such as GRI or Circulytics framework from Ellen Mc
Arthur Foundation. They also have been inspired from ISO TC323/WG3 draft standard
“Circular Economy — Measuring and assessing circularity. The flows measurements will be
divided in renewable and non-renewable resources in line with the Objectives highlighted in
BC 1.
BC21. Resource inflows subtopic represents the circularity of material resources inflows with a split
between renewable and non-renewable resources including transparency on virgin versus non
virgin materials and on sustainable or regenerative sources.
BC22. Resource outflows subtopic represents the circularity of material intended outflows including
being recirculated in practices. Outflows in this category are intentional to provide an economic
or other benefit.
BC23. Waste and emissions subtopic represents the circularity of extraneous resources outflows
taking into account the waste hierarchy: prevention, re-use, recycling.
BC24. Value Strategy and Circular enablers subtopics aim to describe the action of the entity for
keeping materials and products in use at their highest value, creating innovative business
models contributing to better design and utilisation of existing products and materials, or
applying regenerative production methods. They also stress the issue that circular economy
performance results from the mobilization of an ecosystem centred around the undertaking.
BC25. Value strategy subtopic represents the intensity of materials and products’ use; creating
innovative business models or applying regenerative production methods.
BC26. Circular enablers subtopic represents the services and products that allow to creating circular
systems including cross value chain initiatives.
BC27. The definition of these subtopics was challenged and updated following discussion with PSF
members or external experts, such as Ellen Mc Arthur Foundation or ISO TC323/WG3 Chair.
Interaction of the environmental objectives
BC28. As for the technical steering criteria of the EU Taxonomy “The headline ambition levels reflect
these positions, (…) the circular economy ambition level focused on a system change to enable
the achievement of other objectives (including climate).(EU Tax pack, p21)
(EU Tax pack, p22)
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Choice of specific Disclosure Requirements
BC29. Draft standard prototype aims to meet the requirements of a sector agnostic approach.
However, as the existing frameworks on Circular Economy are more often sector specific
than sector agnostic, sector specific frameworks have also been analysed. Exchanges with
PSF representatives have allowed to align the draft standard with PSF views. In addition,
informal dialogue with external organisations (GRI, ISO, …) are still ongoing in order to
continue to merge the approaches on a common basis.
Circularity
Indicator
Category
/ Potential
Subtopics
Description
Potential
overlaps with
other topics /
subtopics
EU Taxonomy alignment
Types of substantial
contribution
Resource
inflows
Indicators that
represent the
circularity of
material resource
inflows (excluding
resources that
are covered in
other categories
i.e energy and
water)
Water
(a) uses natural
resources including
sustainably sourced bio-
based and other raw
materials in production
more efficiently : reducing
the use of primary raw
materials or increasing
the use of by-products
and secondary raw
materials
resource and[energy]
efficiency
(d) reduce the content of
hazardous substances
and substitutes of very
high concern in material
and products throughout
the life cycle in line with
the EU objectives
including replacing such
substances with safer
alternatives and ensuring
traceability
(f) increase the use of
secondary raw materials
and the quality including
high-quality recycling of
waste
1. Circular design and
production
3. Circular value
recovery
Resource
outflows
Indicators that
represent the
circularity of
material intended
outflows
(excluding
resources that
are covered in
other categories
i.e energy and
water).
Note: outflows in
this category are
intentional to
provide an
economic or
other benefit.
Water
(b)increases the
durability, reparability,
upgradability or
reusability of products in
particular designing and
manufacturing activities
(c)increases the
recyclability of products
including the recyclability
of individual materials
contained in those
products inter allia by
substitution or reduced
use of products or
materials that are not
recyclable
1.Circular Design
2. Circular use
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Waste and
emissions
Indicators that
represent the
circularity of
extraneous
resource outflows
(such as solid
waste and
emissions)
(excluding
resources that
are covered by
other categories
i.e water)
Pollution
(g) prevents or reduces
waste generation
including the generation
of waste from extraction
of minerals and waste
from construction and
demolition.[sector
specific]
(h)increases preparing for
re-use and recycling
waste (i) increases the
development of the waste
management
infrastructure needed for
prevention, for preparing
for re-use and for
recycling while ensuring
that the recovered
materials are recycled as
high quality secondary
raw material input in
production thereby
avoiding downcycling
(k) avoids and reduce
litters
1. Circular design and
production
2. Circular use
3. Circular value
recovery
Value strategy
and circular
enablers
Indicators that
consider the
economy value
and other
benefits in
comparison to
net resource
requirements
(e) prolonge the use of
products including
through reuse, design for
longevity, repurposing,
disassembly,
remanufacturing,
upgrades and repair,
sharing products
1. Circular design and
production
2. Circular use
3. Circular value
recovery
4. Circular support
Additional disclosure on Resource Use and Circular Economy: Business Strategy
BC30. Cross-Cutting Standards on the reporting area “Strategy” are being developed separately. The
draft proposals in this document are limited to additional Resource Use and Circular Economy
disclosures.
Why disclosing on Business strategy and Resource Use and Circular Economy
EU legislation and recommendations
BC31. As stated in Article 19a of the proposed Corporate Sustainability Reporting Directive (CSRD),
reporting entities shall report on the following elements: “The information […] shall contain in
particular:
(a) a brief description of the undertaking's business model and strategy, including:
i. the resilience of the undertaking's business model and strategy to risks related to
sustainability matters;
ii. the opportunities for the undertaking related to sustainability matters;
iii. the plans of the undertaking to ensure that its business model and strategy are
compatible with the transition to a sustainable economy and with the limiting of
global warming to 1.5 °C in line with the Paris Agreement;
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iv. how the undertaking’s business model and strategy take account of the interests
of the undertaking’s stakeholders and of the impacts of the undertaking on
sustainability matters;
v. how the undertaking’s strategy has been implemented with regard to sustainability
matters;”
BC32. The ESRS should support the new Circular Economy Action Plan through requiring reporting
entities to consider how to adapt their business strategy to align with this goal and mandating
disclosure on how this is being achieved.
Global reporting frameworks
BC33. The Global Reporting Initiative (GRI)
BC34. The Value Reporting Foundation (based on the standards of the Sustainability Accounting
Standards Board [SASB])
BC35. Ellen McArthur Foundation Circular Economy Reporting Framework (Circulytics)
BC36. ISO TC323 /WG3 ongoing standards.
Users’ needs
BC37. The EU new Industrial strategy states that consumers should receive trustworthy and relevant
information to choose reusable, durable and repairable products. The Commission will propose
ways to improve consumer rights and protection, including by working towards a ‘right to repair’
for consumers.
BC38. “The new Circular economy action plan presents a set of interrelated initiatives to establish a
strong and coherent product policy framework that will make sustainable products, services
and business models the norm and transform consumption patterns so that no waste is
produced in the first place. Empowering consumers and providing them with cost-saving
opportunities is a key building block of the sustainable product policy framework.
BC39. To enhance the participation of consumers in the circular economy, the Commission will
propose a revision of EU consumer law to ensure that consumers receive trustworthy and
relevant information on products at the point of sale, including on their lifespan and on the
availability of repair services, spare parts and repair manuals. The Commission will also
consider further strengthening consumer protection against green washing and premature
obsolescence, setting minimum requirements for sustainability labels/logos and for information
tools”.
Additional disclosure on Resource Use and Circular Economy impacts, risks and
opportunities
Why disclosing on impacts, risks and opportunities and Resource Use and Circular Economy
EU legislation and recommendations
BC40. As stated in Article 19a of the proposed Corporate Sustainability Reporting Directive (CSRD),
reporting entities shall report on the following elements:
“The information […] shall contain in particular:
(a) a brief description of the undertaking's business model and strategy, including:
i. the resilience of the undertaking's business model and strategy to risks related to
sustainability matters;
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ii. the opportunities for the undertaking related to sustainability matters;
iii. the plans of the undertaking to ensure that its business model and strategy are
compatible with the transition to a sustainable economy and with the limiting of
global warming to 1.5 °C in line with the Paris Agreement;
iv. how the undertaking’s business model and strategy take account of the interests
of the undertaking’s stakeholders and of the impacts of the undertaking on
sustainability matters;
v. how the undertaking’s strategy has been implemented with regard to sustainability
matters;”
BC41. The EU new Industrial strategy states that a more circular approach will ensure a cleaner and
more competitive industry by reducing environmental impacts, alleviating competition for
scarce resources and reducing production costs. Applying circular economy principles in all
sectors and industries has potential to create 700,000 new jobs across the EU by 2030, many
of which in SMEs.
BC42. The new EU Circular Economy action plan assesses that Circularity is an essential part of a
wider transformation of industry towards climate-neutrality and long-term competitiveness. It
can deliver substantial material savings throughout value chains and production processes,
generate extra value and unlock economic opportunities.
What to disclose
BC43. Every undertaking should disclose on the impacts, risks and opportunities covering own
operations and the whole value chain related to the transition to a circular economy:
(a) identification and assessment processes for the impacts related to the transition to a
circular economy;
(b) description on impacts related to the transition to a circular economy.
Additional disclosure on Resource Use and Circular Economy: Governance
BC44. Cross-Cutting Standards on the reporting area “Strategy” are being developed separately. The
draft proposals in this document are limited to additional Resource Use and Circular Economy
disclosures.
Why disclosing on Governance and Resource Use and Circular Economy
EU legislation and recommendations
BC45. As stated in Article 19a of the proposed Corporate Sustainability Reporting Directive (CSRD),
reporting entities shall report on the following elements:
“The information […] shall contain in particular:
[…]
(c) a description of the role of the administrative, management and supervisory bodies with
regard to sustainability matters;
[…]
(d) a description of:
(i) the due diligence process implemented with regard to sustainability matters;
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(ii) the principal actual or potential adverse impacts connected with the undertaking’s
value chain, including its own operations, its products and services, its business
relationships and its supply chain;
(iii) any actions taken, and the result of such actions, to prevent, mitigate or remediate
actual or potential adverse impacts;”
BC46. The new EU Circular Economy Action plan aims to identify knowledge and governance gaps
in advancing a global circular economy and take forward partnership initiatives, including with
major economies
Resource Use and Circular Economy: Policies and targets
BC47. Cross-Cutting Reference Standards on the reporting area “Implementation” are being
developed separately. The draft proposals in this document are limited to additional Resource
Use and Circular Economy specificities.
Why disclosing on Policy and Targets and Resource Use and Circular Economy
EU legislation and recommendations
BC48. As stated in Article 19a of the proposed Corporate Sustainability Reporting Directive (CSRD),
reporting entities shall report on the following elements:
7
“The information […] shall contain in particular:
[…]
(b) a description of the targets related to sustainability matters set by the undertaking and
of the progress the undertaking has made towards achieving those targets;
(c) a description of the role of the administrative, management and supervisory bodies with
regard to sustainability matters;
(d) a description of the undertaking’s policies in relation to sustainability matters;
(e) a description of:
(i) the due diligence process implemented with regard to sustainability matters;
(ii) the principal actual or potential adverse impacts connected with the undertaking’s
value chain, including its own operations, its products and services, its business
relationships and its supply chain;
(iii) any actions taken, and the result of such actions, to prevent, mitigate or remediate
actual or potential adverse impacts;”
BC49. The European Green Deal targets to improve the well-being and health of citizens and future
generations by providing longer lasting products that can be repaired, recycled and re-used.
BC50. The Taxonomy proposal published on August 3, 2021, elaborates:
(a) Objective 4 – The transition to a circular economy: “By 2030 economic growth is
decoupled from extraction of non-renewable resources and depletion of the stock
of renewable resources is reversed, and by 2050 economic activity is largely
decoupled from resource extraction, through environmental design for a circular
economy to eliminate waste and pollution, keep materials and products in use at their
highest value, and to regenerate ecosystems.
(b) This ambition builds on a reduction of the EU27 material footprint (RME) by 50% by
2030 and by 75% by 2050 (compared to a 2015 baseline of 14t/capita) and raising
the circular material use rate of all materials to increase the average to at least
7
Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending
Directive 2013/34/EU, Directive 2004/109/EC, Directive 2006/43/EC and Regulation (EU) No 537/2014,
as regards corporate sustainability reporting, p. 42-43
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25% by 2030, by increasing the durability, repairability, upgradability, reusability or
recyclability of products, and by remanufacturing, preparing for reuse and recycling
of used materials and products; and on cultivating 25% of total agricultural land and
production forestry by 2030, and 100% by 2050, using regenerative production
methods, such as agroecology and silvopasture.” (EU Tax pack p25)
BC51. As today there is no quantitative overarching EU ambition level for the circular economy, the
ambition builds on a range of published strategies and targets. (EU Tax pack p27)
BC52. The EU Industrial Strategy, complemented by the European Commission’s new Action Plan on
the Circular Economy (CEAP), states that circularity is an essential part of a wider
transformation of industry towards climate-neutrality and long-term competitiveness. It can
deliver substantial material savings throughout value chains and production processes,
generate extra value and unlock economic opportunities.
BC53. Moving past the current linear model, a circular economy aims to redefine growth, focusing on
positive society-wide benefits and gradually decoupling economic activity from the extraction
of natural resources. The transition to renewable energy sources is an essential requirement
for the circular economy, which is based on three principles, driven by environmental design16:
eliminate waste and pollution; keep products and materials in use at their highest value; and
regenerate ecosystems. (EU Tax pack, p26)
BC54. Undertakings should disclose which actions the undertaking takes to achieve the targets (see
section on actions and resources) and how the business model and strategy support the
achievement of the targets (see section on business model and strategy).
Additional disclosure on Resource Use and Circular Economy: Actions and resources
BC55. Cross-Cutting Reference Standards on the reporting area “Implementation” are being
developed separately. The draft proposals in this document are limited to additional Resource
Use and Circular Economy disclosures. Three issues have been identified in the draft standard
as part of these additional disclosures: eliminating of waste, circulating products and materials
at their highest value, Regenerating nature.
Why disclosing on Actions and Resources and Resource Use and Circular Economy
EU legislation and recommendations
As stated in Article 19a of the proposed Corporate Sustainability Reporting Directive (CSRD),
reporting entities shall report on the following elements:
8
“The information […] shall contain in particular:
(a) a brief description of the undertaking's business model and strategy, including:
(i) the resilience of the undertaking's business model and strategy to risks related to
sustainability matters;
(ii) the opportunities for the undertaking related to sustainability matters;
(iii) the plans of the undertaking to ensure that its business model and strategy are
compatible with the transition to a sustainable economy and with the limiting of
global warming to 1.5 °C in line with the Paris Agreement;
(iv) how the undertaking’s business model and strategy take account of the interests
of the undertaking’s stakeholders and of the impacts of the undertaking on
sustainability matters;
8
Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending
Directive 2013/34/EU, Directive 2004/109/EC, Directive 2006/43/EC and Regulation (EU) No 537/2014,
as regards corporate sustainability reporting, p. 42-43
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(v) how the undertaking’s strategy has been implemented with regard to sustainability
matters;
[…]
(e) a description of:
i. the due diligence process implemented with regard to sustainability matters;
ii. the principal actual or potential adverse impacts connected with the undertaking’s
value chain, including its own operations, its products and services, its business
relationships and its supply chain;
iii. any actions taken, and the result of such actions, to prevent, mitigate or remediate
actual or potential adverse impacts;”
BC56. “Circular Economy can be seen as a response that helps to achieve the desired state of an
objective, or to reduce the pressure on an objective” (EU Tax pack p21).
What to disclose
BC57. Every undertaking should disclose on their actions and resources aiming to eliminate waste,
circulate products at their highest value and regenerate nature, in line with the 5 subtopics
highlighted in the working paper in the disclosure proposals for performance mesure. For
example, conception and ecodesign, innovation and R&D, skills development and training,
manufacturing and distribution adaptation, local collaborations, initiatives across value chain.
Resource Use and Circular Economy performance measures: (retrospective and
forward looking)
Why disclosing on Resource Use and Circular Economy performance measures?
EU legislation and recommendations
BC58. As stated in Article 19a of the proposed Corporate Sustainability Reporting Directive (CSRD),
reporting entities shall report on the following elements:
“The information […] shall contain in particular:
[…]
(b) a description of the targets related to sustainability matters set by the undertaking and
of the progress the undertaking has made towards achieving those targets;
[…]
(g) indicators relevant to the disclosures referred to in points (a) to (f).
[…]
BC59. Undertakings shall report the process carried out to identify the information that they have
included in the management report […] and in this process they shall take account of short,
medium and long-term horizons.
BC60. The information […] shall contain forward-looking and retrospective information, and qualitative
and quantitative information.
BC61. Where appropriate, the information […] shall contain information about the undertaking’s value
chain, including the undertaking’s own operations, products and services, its business
relationships and its supply chain.”
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BC62. The Taxonomy Regulation highlights the importance of increasing durability, repairability,
upgradability, reusability and recyclability, in particular in designing and manufacturing
activities, of prolonging the use of products, including through reuse and remanufacturing, and
of recycling (Regulation (EU) 2020/852 (Taxonomy) on the establishment of a framework to
facilitate sustainable investment) (from EU Tax pack, p.27)
BC63. The Taxonomy Regulation establishes 6 environmental objectives; Transition to a circular
economy is the 4th.
Global reporting frameworks (see comparison table below)
BC64. GRI 301 – Materials: Resource conservation aspects are described by GRI 301 which
addresses the topic of materials and describes the following resource conservation aspects:
“The type and amount of materials the organization uses can indicate its dependence on
natural resources, and the impacts it has on their availability. The organization’s contribution
to resource conservation can be indicated by its approach to recycling, reusing and reclaiming
materials, products, and packaging (GRI 301, p4)
BC65. The Value Reporting Foundation (based on the standards of the Sustainability Accounting
Standards Board [SASB])
BC66. Ellen McArthur Foundation Circular Economy Reporting Framework (Circulytics).
BC67. ISO TC323/WG3 draft standard.
BC68. Relevant SASB frameworks were also reviewed and their sector agnostic parts were
incorporated as part of the required metrics.
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GRI SFRD Circulytics
Resource inflows Water
a. Percentage of reclaimed products and their packaging
materials for each product category.
b. How the data for this disclosure have been collected.
.Total weight or volume of materials that are used to
produce and package the organization’s primary products
and services during the reporting period, by:
i. non-renewable materials used;
ii. renewable materials used.
.PERCENTAGE OF MATERIALS USED THAT ARE RECYCLED
INPUT MATERIALS
.Percentage of recycled input materials used to
manufacture the organization’s primary products and
services.
Raw materials consumption for
new construction and major
renovations - Share of raw
building materials (excluding
recovered, recycled and
biosourced) compared to the
total weight of building materials
used in new construction and
major renovations
. Mass of inflow products and materials
suitable for the technical /biological
cycle
. For technical cycle : % of non-virgin, %
of virgin but renewable and
regeneratively sourced
. For biological cycle : % of sourced, %
virgin but renewable and regeneratively
sourced
Resource outflows (intended) Water
. Mass of outflow products and materials
suitable for the technical /biological
cycle
. % of physical products designed along
circular economy principles (during use/
during end of functional life)
. % of products and materials suitable for
the technical cycle that are recirculated
in reuse/redistribution, refurbishment,
recycling, nutrient recirculation
Waste and emissions Pollution
a. Actions, including circularity measures, taken to
prevent waste generation in the organization’s own
activities and upstream and downstream in its value
chain, and to manage significant impacts from waste
generated.
b. If the waste generated by the organization in its own
activities is managed by a third party, a description of the
processes used to determine whether the third party
manages the waste in line with contractual or legislative
obligations.
c. The processes used to collect and monitor waste-
related data
a. Total weight of waste directed to disposal in metric
tons, and a breakdown of this total by composition of the
waste.
b. Total weight of hazardous waste directed to disposal in
metric tons, and a breakdown of this total by the
following disposal operations:
i. Incineration (with energy recovery);
ii. Incineration (without energy recovery);
iii. Landfilling;
iv. Other disposal operations.
c. Total weight of non-hazardous waste directed to
disposal in metric tons, and a breakdown of this total by
the following disposal operations:
i. Incineration (with energy recovery);
ii. Incineration (without energy recovery);
iii. Landfilling;
Hazardous waste ratio - tonnes of
hazardous waste generated by
investee companies per million
EUR invested, expressed as a
weighted average
Non-recycled waste ratio - tonnes
of non-recycled waste generated
by investee companies per
million EUR invested, expressed
as a weighted average
Waste production in operations -
share of real estate assets not
equipped with facilities for waste
sorting and not covered by a
waste recovery or recycling
contractWaste production in
operations - share of real estate
assets not equipped with
facilities for waste sorting and not
covered by a waste recovery or
recycling contract
. % total outflow of products and
materials suitable for the technical /
biological cycle being waste or by-
products that go to landfill or
incineration and are therefore not
recirculated (to be questioned …)
. Material outflows (products, by-
products, waste and materials used in
processes) contain any substances from
the Cradle to Cradle Certified Products
Program in quantities above the
maximum allowable concentration
Energy Climate
a. Total fuel consumption within the organization from
non-renewable sources, in joules or multiples, and
including fuel types used.
b. Total fuel consumption within the organization from
renewable sources, in joules or multiples, and including
fuel types used.
c. In joules, watt-hours or multiples, the total:
i. electricity consumption
ii. heating consumption
iii. cooling consumption
iv. steam consumption
.Total annual energy use
. % of energy use from renewable
sources
. Total energy production
. % of energy production from renewable
sources
Water Water
. Total annual water inflow volume
. Total annual water outflow volume
. Annual water demand by sources
. % of annual water with SMART
reduction targets
Economic and other
indicators
. % of physical products designed to
enable customers to improve their
product’s circular economy performance
. % of plant, property, and equipment
(PPE) assets procured with circular
procurement approaches
. % of plant, property, and equipment
(PPE) assets having policies or
agreements in place to enable
recirculation
. % of the following categories screened
positively for EU taxonomy circular
economy alignment : lending/fixed
income/private equity /listed equity (i.e
eligibility ?)
. % of the following categories going
toward financing the circular economy :
lending/fixed income/private equity
/listed equity (i.e alignment ?)
Circularity Indicator Category
/ Potential Subtopics
Potential
overlaps
