Resource Use and Circular Economy

This text is part of the series of brief articles that HållbarTillväxt AB has created to explain, simplify and explore the various steps that are currently most relevant in the area of ​​sustainability; CSRD and ESRS. The ESRS consists of a total of 12 separate documents, 2 of which relate to general and comprehensive information (ESRS 1 and 2). The remaining 10, so-called topical standards, deal with various sustainability issues divided into environment, social responsibility and corporate governance – in English Environment, Social and Governance, abbreviated ESG. Fulfilment of the new requirements in CSRD and reporting according to ESRS is based on the involvement of all functions in a business, including the board and management. The board is ultimately responsible for sustainability reporting just as it is for financial reporting. Like the financial report, the sustainability report must now also be reviewed by an external auditor.

The fifth topical standard in environmental information in the European Sustainability Reporting Standards (ESRS), is E5 – Resource use and circular economy and is part of the EU’s broader strategy to create a sustainable and resource-efficient economy. The focus lies in detailing the company’s resource utilisation, waste management practices, and commitment to fostering a circular business model The goal of the standard is to enhance transparency in resource utilisation, leading to long-term waste reduction, optimization of reuse and recycling, and minimization of environmental impact across the entire product life cycle Companies covered by CSRD are requested, when deemed material, to report on their impact across the value chain and on their efforts and progress in the circular economy to meet the requirements of ESRS E5.The standard outlines the requirements for companies to report on their management of resource flows, resource utilisation, waste management, product life cycle practices, and circular business models within their operations and across the value chain, with external audit review mandated for compliance Preparation for reporting ESRS E5 necessitates the involvement of various skills within companies, encompassing expertise in procurement, design, logistics and production. Companies may need to develop and implement strategies that highlight the circular economy and resource efficiency across the entire value chain. This means setting targets and introducing measures that reduce resource consumption and waste generation. Companies are required to have the capability to track and report data concerning resource use and waste management, which means the establishment of robust internal systems and processes for measurement.

The value chain

The sustainability issues raised in E5 extend beyond the company’s internal operations, prompting companies to assess the impact, evaluate significant consequences and mitigate risks associated with resource use and the circular economy both upstream and downstream across the value chain. For instance, this can involve an overview of the material purchased for the company, the extraction process of raw materials, and the level of resource efficiency associated with this extraction. In accordance with this standard, companies are required to report on the portion of materials such as biological or recycled material used in their own business operations. Downstream is about having knowledge of how the company’s products and services affect the environment after they have left the company’s control. This includes analysing the life cycle of products to identify potential negative impacts, such as carbon dioxide emissions during use and final disposal, as well as opportunities for improvements that can lead to a more circular economy. Cooperation with suppliers also becomes especially important to improve sustainability in the entire value chain, which may mean that suppliers are required to meet certain environmental standards or to work with customers to promote the recycling and reuse of products. There you can also report on how the company works with innovation and design to reduce resource use and promote recycling.