1. Introduction
In today’s world, businesses are increasingly expected to adopt sustainable practices, particularly when it comes to how they use resources and manage waste. To ensure transparency and accountability, companies are required to set and disclose specific targets related to their resource use and circular economy efforts. This helps stakeholders understand how a company plans to minimize its environmental impact and contribute to a more sustainable future. In this article, we’ll break down what these targets should cover.
How companies can effectively disclose this information will be covered in another article.
2. Targets
Companies must set clear, measurable targets that support their resource use and circular economy policies. These targets should address the key areas where the company has significant impacts, risks, and opportunities related to resource use. For example, targets might focus on reducing the use of new, non-renewable materials, increasing the use of recycled materials, or improving product designs to make them more durable and easier to repair or recycle.
When setting these targets, companies need to consider various aspects of resource use and waste management, including:
Circular product design: Setting targets to increase the design of products that are durable, easy to dismantle, repair, and recycle.
Circular material use rate: Aiming to increase the proportion of recycled materials used in production.
Minimizing primary raw material use: Reducing reliance on new, non-renewable resources.
Sustainable sourcing: Ensuring that renewable resources are sourced and used in a way that aligns with sustainability principles.
Waste management: Setting targets related to reducing waste generation and ensuring proper treatment and disposal of waste.
Companies should also explain whether their targets are driven by legal requirements or if they are voluntarily set to exceed minimum standards. Additionally, they may consider ecological thresholds—limits that must not be exceeded to avoid damaging the environment—when setting these targets. If so, they should describe how these thresholds were determined and how the responsibility for meeting them is managed within the company.
Companies must set measurable targets to support their resource use and circular economy policies, focusing on areas like product design, material use, and waste management. They should also clarify whether these targets are legally required or voluntarily set to exceed standards.
3. Conclusion
Setting and disclosing clear targets related to resource use and the circular economy is a crucial step for companies committed to sustainability. These targets not only help reduce environmental impacts but also demonstrate a company’s commitment to responsible business practices. By understanding and following these guidelines, companies can ensure they are transparent about their efforts and contribute to a more sustainable economy.
In an upcoming article, we will explore how companies can report on these disclosures. Subscribe to stay updated.
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Relevant Standards
ESRS E5
Disclosure Requirement E5-3 – Targets related to resource use and circular economy
21. The undertaking shall disclose the resource use and circular economy-related targets it has set.
22. The objective of this Disclosure Requirement is to enable an understanding of the targets the undertaking has adopted to support its resource use and circular economy policy and to addressits material impacts, risks and opportunities.
23. The description of the targets shall contain the information requirements defined in ESRS2 MDR-T Tracking effectiveness of policies and actions through targets.
24. The disclosure required by paragraph 21 shall indicate whether and how the undertaking’s targets relate to resource inflows and resource outflows, including waste and products and materials, and, more specifically to:
(a) the increase of circular product design (including for instance design for durability, dismantling, reparability, recyclability etc);
(b) the increase of circular material use rate;
(c) the minimisation of primary raw material;
(d) sustainable sourcing and use (in line with the cascading principle) of renewable resources;
(e) the waste management, including preparation for proper treatment; and (f) other matters related to resource use or circular economy.
25. The undertaking shall specify to which layer of the waste hierarchy the target relates.
26. In addition to ESRS 2 MDR-T, the undertaking may specify whether ecological thresholds and entity-specific allocations were taken into consideration when setting targets. If so, the undertaking may specify:
(a) the ecological thresholds identified, and the methodology used to identify such thresholds;
(b) whether or not the thresholds are entity-specific and if so, how they were determined; and
(c) how responsibility for respecting identified ecological thresholds is allocated in the undertaking.
27. The undertaking shall specify as part of the contextual information, whether the targets it has set and presented are mandatory (required by legislation) or voluntary