There's a new sheriff in town when it comes to sustainability reporting for companies operating in the European Union. Her name is “Corporate Sustainability Reporting Directive (CSRD)' and is on a mission to improve sustainability reporting standards towards radical transparency, better comparability and informed decision-making for companies, investors and consumers. Broadly aligned with international voluntary reporting frameworks such as the Global Reporting Initiative (GRI), CSRD requires comprehensive and verified environmental, social and governance (ESG) reporting that can provide a more accurate insight into a company's sustainability risks and opportunities, while and helped companies identify how to create value in a more sustainable way for people and the planet.
The way materials and products are manufactured and processed is responsible for this 45% of global greenhouse gas (GHG) emissions and 90% loss of biodiversity. To achieve our climate goals, halt and reverse biodiversity loss and to ensure access to a decent life for all while staying within the limits of our planet, we need a fundamental transformation in how we produce, design, use and restore materials and products. This can only be achieved through the widespread adoption of circular economy solutions. Despite the strong economic case – a study by Accenture estimates that the circular economy can deliver a A $4.5 trillion opportunity – the transition from linear to circular is lagging behind. Even the most motivated companies struggle to demonstrate the value creation potential of embracing circularity and investments in circular solutions remain marginal in all sectors.
CSRD represents a game changer in the transition from a linear to a circular economy. For the first time, the most ambitious set of mandatory reporting requirements includes a dedicated standard that closely links a company's use of resources to its sustainable performance. New ones European Sustainability Reporting Standard (ESRS) E5 introduces the first mandatory reporting on resource consumption, waste generation, circular planning and processing of products and materials. By encouraging companies to assess their circularity performance throughout the value chain, CSRD has the transformative power to encourage companies to take a systemic approach to sustainability reporting and develop an understanding of the environmental and social impacts associated with a company's activities, products and services.
While this is a step in the right direction, companies still have a lot to unravel when developing the necessary knowledge and data to credibly prepare to report on the topics covered by ESRS E5. The standard covers qualitative elements such as policies, measures and resources that a company invests in as part of its circular transition. It requires companies to report on key quantitative indicators such as targets and circular performance against resource inflows; and resource drains, including waste management and the company's overall contribution to circularity through design for recovery and actual re-circulation of products and materials.
Circular Transition Indicators (CTIs) are a widely accepted framework for measuring circular performance, developed by the World Business Council for Sustainable Development (WBCSD) in collaboration with more than 50 companies and key leaders in the circular economy, such as Circle Economy, GRI. , Cradle to Cradle and the Ellen MacArthur Foundation. CTI is fully aligned with ESRS E5 requirements and can help companies take advantage of the transformational potential of the circular economy through the new CSRD requirements.
The CTI framework is simple, applicable across industries and value chains, comprehensive yet flexible, complementary to a company's existing sustainability efforts, and independent of material, sector or technology.
With CTI, companies can independently understand their circular performance, organize and build data on the materials that flow through the company, create baselines, identify risks and opportunities, develop goals and timelines for action, and monitor progress.
CTI is aligned with the new CSRD reporting standards. Developed by KPMG and supported by the WBCSD, this paper explores how companies can effectively start their journey towards reporting in line with the CSRD Resource Use and Circular Economy standards using CTI.
Without transitioning to a circular economy, we simply cannot achieve a zero-energy, nature-positive and just future. The new EU reporting requirements emphasize the importance of transparency, accountability and measurable progress in promoting responsible practices that respect our planet's limited resources. CTI can help provide a clear pathway for organizations to incorporate circular economy principles into their reporting practices, enabling them to demonstrate their commitment to sustainability.
From 2025, the new requirements will affect 50,000 companies. Now is the time to start!
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