What are the circular economy reporting requirements in Europe?

Context

Since the industrial revolution, the world economy has developed according to a linear model: we extract raw materials, we transform them into products, we consume these products and finally we throw them away. However, our planet only has a finite amount of resources and the capacity of natural ecosystems to absorb pollution and waste from human activities is also limited. This system has largely contributed to the fact that today, 6 of the 9 planetary limits have already been exceeded. A rather alarming situation when we know that these limits are the thresholds that humanity should not exceed in order to live sustainably in a safe ecosystem.

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Faced with this observation, the financial sector, which still invests mainly in linear activities, finds itself in a situation of profound questioning. Indeed, it is easy to understand that "business as usual" cannot continue to guide investment decisions, as opportunities for long-term economic profitability are largely compromised. In this context, ESG (Environment, Social and Governance) analysis and so-called "sustainable" finance are gradually taking their place in a financial market that is still struggling to transform itself .

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On the corporate side, growing tensions over energy prices and access to resources are contributing to a dynamic of transitioning their activities and business models towards more circularity. A reality that follows a realization: to ensure their ability to endure over time, organizations can't ignore the financial, social and environmental benefits made possible by the circular economy .

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In order to redirect capital flows towards activities that contribute to the ecological and energy transition and to encourage companies to take extra-financial issues to a new strategic level, the European Commission and its various bodies have been working for several years to develop a new regulatory and normative framework. This introduces the circular economy as one of the reporting themes that economic actors must now include in their annual extra-financial report.

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The ambitions of the report

It is in the continuity of its commitment to accompany the transition of companies towards a circular economy that Circul'R wished to take stock of the place given to this theme in the future extra-financial reporting of economic actors. This report aims at clarifying the regulatory context, highlighting the elements related to the circular economy within the 3 key European regulations of extra-financial reporting of companies and financial institutions - the Taxonomy, the Sustainable Financial Disclosure Regulation (SFDR) and the Corporate Sustainability Reporting Directive (CSRD) - as well as analyzing their consequences on the activities of organizations.

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Download the report