🌍 ESRS E5 – Resource Use and Circular Economy

The European Sustainability Reporting Standard ESRS E5 Resource Use and Circular Economy specifies how companies must disclose their impacts, risks, opportunities and financial effects related to resources and waste.

It supports the Corporate Sustainability Reporting Directive (CSRD) by shifting attention from linear consumption to circular value retention across products, materials and services.

ESRS E5 applies when resource use and circular economy topics are material in the double‑materiality assessment.

It interacts closely with ESRS E1–E4 (on climate, pollution, water and biodiversity) and with social standards where waste affects communities.

🎯 Objective and Scope of ESRS E5

ESRS E5 aims to give stakeholders a clear view of:

• Positive and negative impacts of the undertaking on resource efficiency, depletion of resources and use of renewable materials.
• How the strategy and business model are aligned with circular economy principles, such as keeping products and materials at their highest value and minimising waste.
• Actions taken to decouple economic growth from material use and to address related risks and opportunities.
• Material risks and opportunities arising from dependencies on critical resources and waste systems.
• Short‑, medium‑ and long‑term financial consequences of these risks and opportunities.

The sustainability matters covered include resource inflows (what enters the system), resource outflows (what leaves the system in products and waste) and the management of waste itself.

🧾 Governance of Resource‑Related Impacts, Risks and Opportunities

🔍 Processes to identify and assess IROs (ESRS 2 IRO‑1)

Undertakings must explain how they identify impacts, risks and opportunities (IROs) related to resource use and circular economy.

Disclosures typically cover:

• Screening of assets and activities to locate significant IROs.
• Methodologies, tools and assumptions applied (for example, life cycle thinking, scenario analysis).
• The role of stakeholder consultation, including affected communities and workers in waste management chains.
• How approaches such as LEAP are used to structure the assessment.

📜 Policies, actions and resources (ESRS E5‑1 and E5‑2)

Companies describe policies that govern resource efficiency, sustainable sourcing, circular product design and waste management.

They then link these policies to:

• Key actions already implemented and those planned.
• Expected outcomes and contributions to policy objectives and targets.
• Measures to remediate actual harm from resource‑related impacts.
• Preconditions that may limit implementation.
• Current and future financial resources dedicated to each key action or action plan.

This connects high‑level commitments with operational delivery and budgeting.

📊 Metrics and Targets for Resource Use and Circular Economy

🎯 Targets and the waste hierarchy (ESRS E5‑3)

Undertakings disclose targets that support resource and circular economy policies and address material IROs.

Required elements include:

• Performance against each target, with discussion of trends and significant changes.
• How targets are monitored, reviewed and adjusted over time.
• Whether targets are set voluntarily or mandated by legislation.
• Allocation of each target to a level of the waste hierarchy:
• Prevention of waste (highest priority)
• Preparing for re‑use
• Recycling
• Other recovery
• Disposal (lowest priority)

Targets may relate to resource inflows, outflows or waste, for example:

• Increasing circular product design and repairability.
• Raising circular material use rates.
• Reducing primary raw material consumption.
• Expanding sustainable sourcing of renewable materials.
• Improving waste treatment and closing material loops.

Companies are encouraged to explain ecological thresholds, the definition of “sustainable sourcing,” coverage of own operations versus value chain, and potential impacts on biodiversity.

📥 Resource inflows (ESRS E5‑4)

Resource inflow disclosures show what enters the organisation and its upstream chain.

Undertakings provide:

• A description of main inflows: products and packaging, critical raw materials and rare earths, water, and property, plant and equipment.
• Quantities of technical and biological materials used, in tonnes or kilograms.
• The share of sustainably sourced biological materials and bio‑based inputs, referencing certification schemes and the cascading use principle.
• The weight and proportion of secondary materials, recycled components and intermediary products.

Methodological explanations must outline calculation methods, data sources and key assumptions, including how shares of biological or secondary materials are determined relative to total material use.

📤 Resource outflows and waste (ESRS E5‑5)

Resource outflow metrics focus on what leaves the organisation as products or waste.

Key disclosures cover:

• Circular design attributes of main products and materials.
• Expected durability compared with industry norms.
• Repairability ratings, where standard systems exist.
• Recyclable content in products and in their packaging.

For waste, companies report:

• Total waste generated from own operations, by mass.
• Waste composition by stream and material type.
• Waste diverted from disposal, split into hazardous and non‑hazardous waste and further into preparation for re‑use, recycling and other recovery.
• Waste sent to disposal, broken down by hazardous/non‑hazardous waste and by route (incineration, landfill or other disposal operations).
• Amount and share of non‑recycled waste, and quantities of hazardous and radioactive waste.

Contextual information should explain methodologies, use of the European Waste Catalogue and any validation by external bodies.

💶 Anticipated Financial Effects of Resource‑Related Risks and Opportunities (ESRS E5‑6)

ESRS E5 links environmental information to financial impact.

Undertakings must disclose:

• Anticipated financial effects in monetary terms from material resource and circular‑economy risks, before mitigation actions.
• Expected financial gains from material opportunities, such as improved resource efficiency, new circular business models or value retention.

The scope covers effects on:

• Financial position, financial performance and cash flows.
• Short‑, medium‑ and long‑term time horizons.

Where precise quantification is not feasible without excessive cost or effort, qualitative explanations are required.

Companies should:

• Describe the underlying impacts and dependencies and when effects are likely to occur.
• Present the critical assumptions used in calculations, including data sources and uncertainty levels.
• Assess which products and services are most at risk and how value retention strategies are expected to capture opportunities.

🤝 How ComplyMarket Supports ESRS E5 Compliance

Implementing ESRS E5 resource use and circular economy requires consistent data across procurement, operations, product design, waste management and finance.

Many undertakings face challenges in mapping material inflows and outflows, aligning targets with the waste hierarchy and quantifying financial effects.

ComplyMarket supports organisations by:

• Interpreting ESRS E5 requirements in the context of CSRD and other ESRS standards.
• Mapping resource flows, waste streams and circularity hotspots across the value chain.
• Designing and reviewing circular economy policies, targets and metrics aligned with EU frameworks.
• Structuring methodologies, assumptions and controls so that ESRS E5 disclosures are traceable and assurance‑ready.

With robust ESRS E5 reporting, undertakings can demonstrate how they manage resource dependencies, reduce waste and capture circular economy opportunities while meeting EU sustainability reporting obligations.