ESRS E5

Objective

1.

The objective of this Standard is to specify Disclosure Requirements which will enable users of the sustainability statement to understand: 

  1. how the undertaking affects resource use, including resource efficiency, avoiding the depletion of resources and the sustainable sourcing and use of renewable resources (referred to in this Standard as “resource use and circular economy”) in terms of material positive and negative actual or potential impacts ;
  2. any actions taken, and the result of such actions, to prevent or mitigate actual or potential negative impacts arising from resource use, including its measures to help decoupling its economic growth from the use of materials, and to address risks and opportunities;
  3. the plans and capacity of the undertaking to adapt its strategy and business model in line with circular economy principles including but not limited to minimising waste , maintaining the value of products, materials and other resources at their highest value and enhancing their efficient use in production and consumption;
  4. the nature, type and extent of the undertaking’s material risks and opportunities related to the undertaking’s impacts and dependencies , arising from resource use and circular economy, and how the undertaking manages them; and
  5. the financial effects on the undertaking over the short-, medium- and long-term of material risks and opportunities arising from the undertaking’s impacts and dependencies on resource use and circular economy.

2.

This Standard sets out Disclosure Requirements related to “resource use” and “circular economy” and in particular on: 

  1. resource inflows including the circularity of material resource inflows, considering renewable and non-renewable resources; and 
  2. resource outflows including information on products and materials; and 
  3. waste .

4.

This Standard builds on relevant EU legislative frameworks and policies including the EU Circular Economy Action Plan, Directive 2008/98/EC of the European Parliament and of the Council [83] (Waste Framework Directive) and the EU industrial strategy.

5.

To evaluate the transition from business as usual, meaning an economy in which finite resources are extracted to make products that are used and then thrown away (“take-make-waste”), to a circular economic system, this Standard relies on the identification of the physical flows of resources, materials and products used and generated by the undertaking through Disclosure Requirement E5-4 Resource inflows and Disclosure Requirement E5-5 Resource outflows.

Interactions with other ESRS

6.

Resource use is a major driver of other environmental impacts such as climate change, pollution , water and marine resources and biodiversity. A circular economy is a system that tends towards sustainable use of resources in extraction, processing, production, consumption and management of waste . Such system brings multiple environmental benefits, in particular, the reduction of material and energy consumption and emissions into the air (greenhouse gas emissions or other pollution), the limitation of water withdrawals and discharges and the regeneration of nature limiting the impact on biodiversity.

7.

To provide a comprehensive overview of which other environmental matters could be material to resource use and circular economy, relevant disclosure requirements are covered in other environmental ESRS as follows:

  1. ESRS E1 Climate change, which addresses, in particular, GHG emissions and energy resources (energy consumption);
  2. ESRS E2 Pollution, which addresses, in particular, emissions to water, air and soil as well as substances of concern ;
  3. ESRS E3 Water and marine resources, which addresses, in particular, water resource (water consumption) and marine resources; and 
  4. ESRS E4 Biodiversity and ecosystems, which addresses, in particular, ecosystems, species and raw materials.

8.

The undertaking’s impacts related to resource use and circular economy, in particular impacts related to waste , can affect people and communities. Material negative impacts on affected communities from resource use and circular economy attributable to the undertaking are covered in ESRS S3 Affected communities. The efficient and circular use of resources also benefits competitiveness and economic wellbeing.

9.

This Standard should be read in conjunction with ESRS 1 General requirements and ESRS 2 General disclosures.

Disclosure Requirements

ESRS 2 General disclosures

10.

The requirements of this section should be read in conjunction with and reported alongside the disclosures required by ESRS 2 chapter 4 Impact, risk and opportunity management.

Impact, risk and opportunity management

Metrics and targets

Disclosure Requirement E5-4 – Resource inflows

28.

The undertaking shall disclose information on its resource inflows related to its material impacts, risks and opportunities.

29.

The objective of this Disclosure Requirement is to enable an understanding of the resource use in the undertaking’s own operations and its upstream value chain.

30.

The disclosure required by paragraph 28 shall include a description of its resource inflows where material: products (including packaging ) and materials (specifying critical raw materials and rare earths), water and property, plant and equipment used in the undertaking’s own operations and along its upstream value chain.

31.

When an undertaking assesses that resource inflows is a material sustainability matter, it shall disclose the following information about the materials used to manufacture the undertaking’s products and services during the reporting period, in tonnes or kilogrammes:

  1. the overall total weight of products and technical and biological materials used during the reporting period; 
  2. the percentage of biological materials (and biofuels used for non-energy purposes) used to manufacture the undertaking’s products and services (including packaging ) that is sustainably sourced, with the information on the certification scheme used and on the application of the cascading principle; and
  3. the weight in both absolute value and percentage, of secondary reused or recycled components, secondary intermediary products and secondary materials used to manufacture the undertaking’s products and services (including packaging).

32.

The undertaking shall provide information on the methodologies used to calculate the data. It shall specify whether the data is sourced from direct measurement or estimations, and disclose the key assumptions used.

Disclosure Requirement E5-5 – Resource outflows

33.

The undertaking shall disclose information on its resource outflows, including waste, related to its material impacts, risks and opportunities.

34.

The objective of this Disclosure Requirement is to provide an understanding of:

  1. how the undertaking contributes to the circular economy by i) designing products and materials in line with circular economy principles and ii) increasing or maximising the extent to which products, materials and waste processing are recirculated in practice after first use; and 
  2. the undertaking’s waste reduction and waste management strategy, the extent to which the undertaking knows how its pre-consumer waste is managed in its own activities.

35.

The undertaking shall provide a description of the key products and materials that come out of the undertaking’s production process and that are designed along circular principles, including durability , reusability, repairability, disassembly, remanufacturing, refurbishment, recycling , recirculation by the biological cycle, or optimisation of the use of the product or material through other circular business models.

36.

Undertakings for which outflows are material shall disclose:

  1. The expected durability of the products placed on the market by the undertaking, in relation to the industry average for each product group;
  2. The reparability products, using an established rating system, where possible;
  3. The rates of recyclable content in products and their packaging.

37.

The undertaking shall disclose the following information on its total amount of waste from its own operations, in tonnes or kilogrammes: 

  1. the total amount of waste generated ;
  2. the total amount by weight diverted from disposal, with a breakdown between hazardous waste and non-hazardous waste and a breakdown by the following recovery operation types:
    1. preparation for reuse;
    2. recycling ; and
    3. other recovery operations. 
  3. the amount by weight directed to disposal by waste treatment type and the total amount summing all three types, with a breakdown between hazardous waste and non-hazardous waste. The waste treatment types to be disclosed are: 
    1. incineration ; 
    2. landfill; and
    3. other disposal operations; 
  4. the total amount and percentage of non-recycled waste [84].

38.

When disclosing the composition of the waste , the undertaking shall specify:

  1. the waste streams relevant to its sector or activities (e.g. tailings for the undertaking in the mining sector, electronic waste for the undertaking in the consumer electronics sector, or food waste for the undertaking in the agriculture or in the hospitality sector); and; 
  2. the materials that are present in the waste (e.g. biomass, metals, non-metallic minerals, plastics, textiles, critical raw materials and rare earths).

39.

The undertaking shall also disclose the total amount of hazardous waste and radioactive waste generated by the undertaking, where radioactive waste is defined in Article 3(7) of Council Directive 2011/70/Euratom [85].

40.

The undertaking shall provide contextual information on the methodologies used to calculate the data and in particular the criteria and assumptions used to determine and classify products designed along circular principles under paragraph 35. It shall specify whether the data is sourced from direct measurement or estimations; and disclose the key assumptions used.

Appendix A: Application Requirements

This appendix is an integral part of the ESRS E5. It supports the application of the disclosure requirements set out in this standard and has the same authority as the other parts of the standard.

ESRS 2 General disclosures

This appendix is an integral part of the ESRS E5. It supports the application of the disclosure requirements set out in this standard and has the same authority as the other parts of the standard.

Impact, risk and opportunity management

This appendix is an integral part of the ESRS E5. It supports the application of the disclosure requirements set out in this standard and has the same authority as the other parts of the standard.

Disclosure Requirement E5-2 – Actions and resources in relation to resource use and circular economy

This appendix is an integral part of the ESRS E5. It supports the application of the disclosure requirements set out in this standard and has the same authority as the other parts of the standard.

AR 13.

The actions may cover the undertaking’s own operations and/or its upstream and downstream value chain.

AR 11.

When providing information under paragraph 17 and considering that resources are shared and that circular economy strategies may require collective actions, the undertaking may specify the actions taken to engage with its upstream and downstream value chain and/or its local network on the development of collaborations or initiatives increasing the circularity of products and materials.

AR 12.

In particular, the undertaking may specify the following:

  1. how it contributes to circular economy, including for instance smart waste collection systems; 
  2. the other stakeholders involved in the collective actions : competitors, suppliers , retailers, customers, other business partners, local communities and authorities, government agencies; 
  3. a description of the organisation of the collaboration or initiative, including the specific contribution of the undertaking and the roles of the different stakeholders in the project.

Metrics and targets

This appendix is an integral part of the ESRS E5. It supports the application of the disclosure requirements set out in this standard and has the same authority as the other parts of the standard.

Disclosure Requirement E5-4 – Resource inflows

This appendix is an integral part of the ESRS E5. It supports the application of the disclosure requirements set out in this standard and has the same authority as the other parts of the standard.

AR 21.

Resource inflows may cover the following categories: IT equipment, textiles, furniture, buildings, heavy machinery, mid-weight machinery, light machinery, heavy transport, mid-weight transport, light transport and warehousing equipment. With regard to materials, resource inflow indicators include raw materials, associated process materials , and semi-manufactured goods or parts.

AR 22.

When the undertaking is subject to paragraph 31, it may also provide transparency on the materials that are sourced from by-products / waste stream (e.g., offcuts of a material that has not previously been in a product).

AR 23.

The denominator of the percentage indicator required under paragraphs 31(b) and 31(c) is the overall total weight of materials used during the reporting period.

AR 24.

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”.

AR 25.

In cases where there is an overlap between categories of reused, recycled, the undertaking shall specify how double counting was avoided and the choices that were made.

Disclosure Requirement E5-5 – Resource outflows

This appendix is an integral part of the ESRS E5. It supports the application of the disclosure requirements set out in this standard and has the same authority as the other parts of the standard.

AR 26.

Products and materials information to be provided under paragraph 35 refers to all materials and products that come out of the undertaking’s production process and that a company puts on the market (including packaging ).

AR 27.

When compiling the rate, the undertaking shall use as denominator the overall total weight of materials used during the reporting period.

AR 28.

The undertaking may disclose its engagement in product end-of-life waste management , for example through extended producer responsibility schemes or take-back schemes.

AR 29.

Type of waste is to be understood as hazardous waste or non-hazardous waste. Some specific waste, such as radioactive waste, may also be presented as a separate type.

AR 30.

When considering the waste streams relevant to its sectors or activities, the undertaking may consider the list of waste descriptions from the European Waste Catalogue.

AR 31.

Examples of other types of recovery operations under paragraph 37(b)iii may be found in Annex II of Directive 2008/98/EC (Waste Framework Directive).

AR 32.

Examples of other types of disposal operations under paragraph 37(c)iii may be found in Annex I of Directive 2008/98/EC (Waste Framework Directive).

AR 33.

When providing contextual information under paragraph 40 the undertaking may: 

  1. explain the reasons for high weights of waste directed to disposal (e.g., local regulations that prohibit landfill of specific types of waste);
  2. describe sector practices, sector standards, or external regulations that mandate a specific disposal operation; and 
  3. specify whether the data has been modelled or sourced from direct measurements, such as waste transfer notes from contracted waste collectors.

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