Circulytics - Measuring circular economy performance
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The reporting landscape is changing. From 2024, the European Commission will require businesses to adopt the European Sustainability Reporting Standards (ESRS). The circular economyA systems solution framework that tackles global challenges like climate change, biodiversity loss, waste, and pollution. It is based on three principles, driven by design: eliminate waste and pollution, circulate products and materials (at their highest value), and regenerate nature. will be a key part of the disclosure process. This will apply to large companies, and listed small and medium-sized enterprises (SMEs) in the EU, as well as companies outside the EU with substantial operations in the region.
Standardised measurement and transparent reporting at scale is essential to support the transition to a circular economy. The Ellen MacArthur Foundation’s Circulytics framework offers a company-level measuring tool to assess circularity within a business’ operations. Having developed a thought-leading framework, and demonstrated voluntary support for circular reporting standards through Circulytics, we welcome this maturation of the reporting landscape. As one of the forerunners, the Circulytics methodology has become a primary reference for EU policy development, and was used to inform the draft ESRS E5 (Resource use and circular economy).
Consequently, there are a number of overlaps between the new ESRS framework and Circulytics. In order to help companies that have used Circulytics in the past meet the new requirements, the Ellen MacArthur Foundation has mapped its metrics against the ESRS, as outlined in the tables below.
At present, more than half the data required by the ESRS E5 standard can be covered by data already gathered for a Circulytics submission. However, it is worth noting that ESRS E5 doesn’t include several important circular economy metrics relating to current performance, particularly under the sections Resource inflow and Resource outflow. Based on this mapping exercise, and our experience with Circulytics more broadly, we have highlighted some other topics that are currently absent from ESRS E5 that we would like to see included in the future as part of a comprehensive circular economy reporting framework:
Post-consumer product and material recirculation: The current draft (June 2023) does not require data on the recirculation of materials and goods after point of sale. Omitting this data fails to acknowledge one of the circular economy’s core principles: to circulate products and materials at their highest value. Within resource outflows, ESRS currently requests, among other things: 1) the expected durabilityThe ability of a product, component or material to remain functional and relevant when used as intended. of products; 2) whether they are capable of being repaired and; 3) the quantity of recycled content in them. It does not require reporting on the extent to which products and materials are recirculated in practice once they reach end-of-use (as well as related metrics).
Regeneration of nature: One of the three principles of a circular economy is ‘regenerate nature’. Although regenerative metrics were included in a previous ESRS draft (e.g., inflows from regeneratively grown sources, and company policies to regenerate the ecosystems they are part of), they have now been superseded by the term “sustainable sourcing”. Sustainably grown materials implies the preservation of ecosystems, but typically falls short of actively improving the local ecosystem health and generating net positive outcomes for nature.
The tables below map Circulytics indicators to ESRS requirements and vice versa, where companies that have completed Circulytics in the past can use this data to help them comply with ESRS requests. Circulytics indicators may be related to ESRS beyond the ‘E5 - Resource use and circular economy’ draft, therefore the drafts ‘E1 - Climate change’ and ‘E3 - Water and marine resources’ have been included in this mapping where relevant.
On the first mapping, each Circulytics indicator is displayed on the left, grouped by Circulytics theme, followed by an equivalent requirement in ESRS, with its respective paragraph in parentheses.
The second mapping is structured based on each topic covered in ESRS E5, with each of its relevant paragraphs on the left, followed by an equivalent Circulytics indicator on the right.
For each indicator, the degree of alignment is indicated. It is considered as:
‘Well aligned’ if the Circulytics data can be used in ESRS without any changes;
‘Partially aligned’ if data requests are similar, but some changes in scope are needed and;
‘Not aligned’ if the data required in Circulytics is currently not required by ESRS or vice versa
We believe that the Foundation can maximise impact and international harmonisation efforts in the circular economy reporting landscape, through further engaging with regulators to inform key standards and frameworks, and to accelerate their impact on the transition to a circular economy.
The Ellen MacArthur Foundation works to accelerate the transition to a circular economy. We develop and promote the idea of a circular economy, and work with business, academia, policymakers, and institutions to mobilise systems solutions at scale, globally.
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The work of the Ellen MacArthur Foundation is supported by our Strategic Partners and Partners.