The Corporate Sustainability Reporting Directive (CSRD) requires companies to report on sustainability themes. A key theme for industry and commerce is the circular economy and sustainable management of resources, covered under the guideline ESRS E5. This guideline requires you to demonstrate the impact of raw material usage within your supply chain on people and the environment. It also addresses the gradual phasing out of fossil-based resources and the transition to a circular economy and its implications for your business model.
The CSRD is a European directive that aims to promote transparency, standardisation, comparability and increased quality of environmental, social, and governance (ESG) information. The directive applies to large companies and listed SMEs operating in Europe. In short, it brings sustainability reporting up to the same level as financial reporting.
CSRD blog series: With the implementation of the CSRD fast approaching, TAUW takes you through the ins and outs of this directive and takes a deeper dive into different environmental topics and how they link to the CSRD.*
The ESRS E5 guideline demands transparency regarding the impact of resource extraction and processing, the company's plans and ability to adapt its business model to circular principles, and the financial opportunities and risks associated with such a transition. This is particularly relevant for companies active in key chains of the EU Action Plan for the Circular Economy, such as electronics and ICT, textiles, packaging, plastics, construction, and food.
Key reporting aspects include:
Your ESG report should support this with quantitative data on:
Several calculation models can determine the circularity of products and processes. It is crucial that your reporting provides insight into the methodology behind the data, the calculation models used, the source of data, and the justification for any estimates and assumptions.
To decide what to report on, performing a double materiality assessment is the first step. This involves examining the impact of your company on people and the environment across the entire value chain. What material flows enter your company (resource inflow) and what leaves your company as products (resource outflow) and waste? What happens to your products at the end of their life cycle? Material Flow Analysis (MFA) and Life Cycle Assessment (LCA) are recommended methods for inventorying these flows. The Material Atlas for the Circular Economy (MACE) provides insight into all incoming and outgoing material flows of your organization or project (see image).
This tool can help you understand your circular performance and monitor the progress of your circular (policy) goals.
Furthermore, you analyze the risks and opportunities that raw material usage and a transition to a circular economy pose to your business strategy. How resilient is your business model to short- or medium-term changes, and where are the opportunities? TAUW's experts can conduct this analysis with you, offering a broad perspective on circularity. A real risk is the future availability of raw materials due to geopolitical tensions, increasing global demand, or climate change. Other risks include rapid policy developments, such as the EU Ecodesign Directive, which sets requirements for design and circularity. However, the transition also offers opportunities as society gradually moves towards a circular economy and changing consumer preferences. Reuse and recycling of materials, in collaboration with supply chain partners, can provide exciting innovation opportunities.
Many products are made with carbon from fossil resources, for example, in the chemical and pharmaceutical sectors, construction, and plastics industry. Renewable sources like biomass and waste will become alternative carbon sources (also see the Delrin® case study below).
Client Case: Delrin® Prepares for Raw Material Transition
In a circular economy, materials and products retain their value for as long as possible. Combined with the move away from fossil resources this forces many companies to focus on reusable materials. Dordrecht-based Delrin®, a producer of the plastic of the same name, sought insight into alternative sources for methanol production. TAUW mapped out the options through a Life Cycle Assessment (LCA). The aim is to assist Delrin® in transitioning to a circular carbon economy, featuring CO2-neutral production and the use of renewable carbon sources. For more details on Delrin®'s raw material transition, click the button below.
After a thorough analysis, it's time to develop a strategy by determining your company's role in a circular economy. The supply chain your company operates in, as well as its position within that chain, are crucial for this exploration. What accelerators (enablers) and barriers exist within your company and its supply chain to achieve a circular economy? TAUW can assist in identifying the form of circular economy that suits your company and the accelerators and barriers influencing this development within your company and its supply chain. At this stage, the goal is to understand which path to circularity is best for your company. This could be a path focused on circular procurement, creating circular supply chains, or changing product design. Our experts can provide targeted advice on which route(s) fit your company and where to begin.
As you develop your strategy, you'll also set your Key Performance Indicators (KPIs) and goals. The CSRD expects annual reporting on circular results, requiring extensive data collection within your company and among your supply chain partners. This calls for the use of smart monitoring systems that extract this data from your existing ERP and other data systems. Proper setup and automation can save employees significant time and provide a transparent and reliable audit trail for accountants. TAUW's data professionals can assist in selecting and setting up such monitoring and reporting systems.
At TAUW, we support our clients on their journey to CSRD compliance in the following areas:
We look forward to collaborating with you and enabling you to comply with the CSRD.
Biodiversity and the Corporate Sustainability Reporting Directive (CSRD)
In the third blog, our sustainability and biodiversity experts share valuable guidelines for assessing, collecting information and reporting on biodiversity.
Understanding the ESRS : a practical guide for CSRD compliance
The European Sustainability Reporting Standards are your roadmap for sustainability reporting under the Corporate Sustainability Reporting Directive (CSRD). In this blog, we take you through these topical standards to better understand how they are structured, how to work with them, and what is expected in terms of reporting.
Visit our webpage specifically dedicated to the CSRD (Corporate Sustainability Reporting Directive) on our website. On this page, you will find background information, details about the directive, and relevant resources to help you understand and navigate the requirements of the CSRD.
Our experts are ready to assist you in your CSRD journey. Contact us today to see how TAUW can help you achieve your sustainability goals.
