Investing sustainably in energy transition minerals
by Vicente Vicuna, Ava Scott, Njomza Miftari, Maria-Yassin Jah, Ben Lepley
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What does the new CSRD have to do with the circular economy? How does a new set of compulsory reporting requirements offer anything to redesigning your business model?
The Corporate Sustainability Reporting Directive (CSRD) [1] is a regulation introduced by the European Union to enhance corporate transparency and encourage sustainable business practices. It stipulates full sustainability reporting, including that ESG performance should be made available to stakeholders in a reliable and comparable way.
Circular economy models look at closed loop systems with products designed and materials used to be reused as much as possible, generating minimal waste and mitigating future production emissions. This perspective is important for sustainable development as circular economy initiatives help in reducing corporations’ environmental footprints. But it’s neither simple nor easy; supply chain complexity, implementation costs, and market and technological barriers need to be addressed in overhauling business models. The circular economy is a generational shift in the way our economies function.
Firstly, CSRD specifically includes the topic of the circular economy. Section ESRS E5: Resource Use and Circular Economy [2] requires companies to disclose information about impacts, risks and opportunities on that subject alongside company practices, key targets and metrics (see box below).The first and important question being; is this material? Does our participating in the circular economy have a significant impact for our company, or for the environment. For many manufacturers – and other sectors such as mineral extraction – the answer may well be ‘yes’.
Perhaps more importantly, the requirements of CSRD may prove to be a useful prompt for companies exploring circularity. Compiling the disclosures may provide an opportunity to check in on current circularity processes or to begin on a circularity journey, find areas needing improvement, and adopt strategies to boost resource efficiency. The topics contained under ESRS E5 provides a holistic view of the current state of resources and circularity within a business, highlighting either the take-make-waste structure or shining a light on sustainable practices undertaken. Gathering all this information, preparing it for publication and – importantly – Executive-level sign-off can provoke a great discussion inside your company:
We encourage companies to view CSRD reporting as an opportunity to advance circular economy initiatives. By doing so, they can contribute to a more sustainable future and achieve long-term business success. Taking a joined-up approach can deliver not just regulatory compliance but also your business’ resilience and brand reputation.
There has historically been a lack of harmonisation when it comes to circular economy and waste related disclosures for businesses [3]. The CSRD introduces a framework with essential guidelines, offering a comprehensive and consistent approach to disclosure and strategy development. This disclosure outlines various subtopics to help companies assess the impacts, risks and opportunities related to resource inflows, outflows, and waste within operations and value chains.
The European Sustainability Reporting Standard (ESRS E5) supports the CSRD by specifying the required disclosure points concerning the circular economy. These requirements cover policies (E5-1), actions (E5-2), targets (E5-3), resource inflows (E5-4) and outflows (E5-5), and financial impacts associated with material resource use, as well as risks and opportunities linked to the circular economy (E5-6).
To discuss your own reporting and initiatives, just get in touch.
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References
[1] https://www.slrconsulting.com/eur/insights/are-you-impacted-by-csrd/
[2] https://xbrl.efrag.org/e-esrs/esrs-set1-2023.html#d1e24283-3-1
[3] https://reports.circularity-gap.world/cgr-global-2024-37b5f198/CGR+Global+2024+-+Report.pdf