CSRD's circular economy: Reshaping corporate resources

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January 4, 2024 - The EU Corporate Sustainability Reporting Directive (CSRD) is set to become the most extensive regulatory disclosure requirement, driving rapid adoption and heightened scrutiny of corporate sustainability practices and reporting.

In BSI’s ongoing five-part online seminar and subsequent blog series surrounding this new directive, our sustainability experts delve into what this means for organizations everywhere, not just those that are based within the EU.

Part one, Navigating the CSRD: Applying the double materiality principles, addresses reporting in accordance with the European Sustainability Reporting Standards (ESRS) while navigating the double materiality principle; part two delves into the fundamentals of the ESRS E1 standard surrounding climate change; and part three, Own workers and upstream workers, addresses the entire workforce value chain. Now, in part four, we discuss the EU Sustainability Reporting Standard (ESRS 5) on resource use and circularity.

ESRS 5: Resource use and circularity

At its core, ESRS 5 underlines the significance of rethinking how resources are utilized and managed within corporate operations and supply chains. It focuses on fostering a circular economy—an economic model designed to regenerate resources, minimize waste, and maximize the longevity of materials within the production cycle. The fundamental elements of the ESRS 5 revolve around:

  • Resource consumption reporting: Organizations are required to disclose comprehensive data on resource consumption, including materials, water, energy, and other vital resources. This transparency offers insights into the environmental footprint of businesses.
  • Circularity strategies: The directive prompts businesses to outline strategies for embracing circularity. This includes efforts to reduce waste generation, promote recycling and reuse, and design products with a lifecycle approach in mind. (Also read Leveraging LCAs.)
  • Material efficiency and innovation: ESRS 5 encourages innovation aimed at enhancing material efficiency. This involves exploring alternative materials, optimizing manufacturing processes, and designing products for durability and recyclability.

Circular economy: Benefits and requirements

Transitioning towards a circular economy model is not just a regulatory obligation; it's an opportunity for organizations to drive significant positive change. This can be achieved via:

  • Resource conservation: By optimizing resource use and reducing waste, firms can contribute to the conservation of finite resources, ensuring their availability for future generations.
  • Cost savings and efficiency: Adopting circular practices often leads to cost savings through reduced resource consumption and waste-management expenses. It also encourages innovation, advancing efficiency in operations.
  • Environmental impact reduction: A circular economy approach minimizes the environmental impact of overall operations, decreasing greenhouse gas emissions and mitigating pollution.
  • Market competitiveness: Those embracing circularity gain a competitive edge by meeting the expectations of environmentally conscious consumers and investors, positioning the organization as a forward-thinking and responsible entity.

Challenges and collaborations

Transitioning toward a circular economy isn't without its hurdles. Challenges in redesigning products, securing reliable recycled materials, and implementing circular strategies in challenging regulatory environments and across complex infrastructure and supply chains can be difficult to overcome. However, these issues present opportunities for innovation:

  • Collective partnerships: Engaging with regulators, suppliers, industry peers, and stakeholders fosters collaborative solutions. Sharing knowledge, technologies, and best practices accelerates progress towards circularity.
  • Innovation and research: Investing in sustainable materials development and innovative circular technologies is pivotal as it not only aids in overcoming current obstacles but also opens doors to new market opportunities.
  • Education and awareness: Building awareness and educating stakeholders about the benefits of a circular economy advocates for a commitment toward sustainable practices.

The ESRS 5 urges businesses to rethink resource consumption patterns and embrace circularity as a fundamental approach. The benefits are far-reaching, encompassing environmental preservation, cost savings, enhanced competitiveness, and a more sustainable future.

Look for the fifth and final installment of our series, CSRD Reporting Requirements on Water Impacts, as BSI experts continue to explore the nuances of CSRD and unpack the EU Sustainability Reporting Standard (ESRS 3) on water and marine resources.

Read more from other BSI sustainability experts in ESG compliance: Navigating sustainability-related regulations, California’s latest climate disclosure bills (SB 253 and SB261), TCFD: Beyond regulatory compliance, and LCA and its role in sustainability. Follow along with more sustainability-focused content and other digital trust, EHS, and supply chain topics that should be at the top of your list at BSI’s Experts Corner.

Ramin Ghamkhar

Ramin Ghamkhar

Ramin Ghamkhar, PhD is a Sustainability Consultant at BSI America Professional Services Inc. he has a strong track record of experience in life cycle assessment (LCA), multi-criteria decision analysis (MCDA), and integrated environmental and economic assessment, evidenced by 11 peer-reviewed and well received publications and presentations. As the LCA service lead in BSI’s Sustainability Practice, he works with clients across multiple sectors and industries to implement LCA into their sustainability efforts and elevate their systems environmental performance.

David Meyer

David Meyer

Dave Meyer - Principal Consultant, BSI, specializes in EHS and sustainability, focusing on product circularity, corporate governance, and supply chain responsibility. With a successful track record in leading organizations across diverse industries, he excels in leveraging regulatory compliance and ESG initiatives for risk management. His expertise spans ISO certifications and teaching supply chain management and life cycle analysis at California institutions.

Ethan Redden

Ethan Redden

Ethan Redden - Consulting Specialist, BSI, is a data-driven sustainability expert with five years of experience. His expertise includes life cycle analyses, change management, LEED certifications, and sustainable organizational design. Ethan's commitment to sustainability extends to his role as Co-Team Lead for the Guyanese Ministry, where he delivered impactful solutions for indigenous populations, showcasing his ability to merge environmental expertise with practical solutions.

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