ESRS E5 and the Circular Economy: A Business Perspective on Turning Data into Strategy

Companies that embrace E5 early will not only meet compliance requirements but also secure investor trust and unlock opportunities in a resource-constrained future, says Yashy Raghoo-Luchmun.

What is ESRS E5?

ESRS E5 (Resource Use and Circular Economy) is a mandatory disclosure standard under the European Union's Corporate Sustainability Reporting Directive (CSRD) that requires companies to report on how they manage resources throughout product lifecycles—from raw material sourcing and product design to end-of-life management and waste reduction. In summary, E5 transforms circular economy practices from voluntary initiatives into quantifiable, auditable business data that directly impacts procurement strategy, supply chain decisions, and investor confidence.

What Makes ESRS E5 Different from Other CSRD Requirements?

When evaluating a business and looking at the growing stack of mandatory sustainability regulations, the Corporate Sustainability Reporting Directive (CSRD) can feel overwhelming. Among its detailed guidelines and hefty nine disclosure requirements, the European Sustainability Reporting System (ESRS) E5: Resource Use and Circular Economy presents a difficult dichotomy: it is challenging to understand and report on, yet it may also be the most powerful and valuable to companies.

Why? Beyond adding another line in an ESG report, E5 focuses on how businesses fundamentally manage resources — what is bought, how products are designed, how they are sold, and what happens when they leave a customer’s hands. This is where compliance meets strategy.

Why Should Businesses Prioritize ESRS E5 Reporting?

The key difference is that ESRS E5 makes these environmental risks financially visible through structured disclosure, connecting sustainability metrics directly to balance sheet exposure.

Global data underscores the business case:

• Material extraction accounts for 90% of biodiversity loss and 50% of greenhouse gas emissions (UNEP, 2019). This means our supply chains, not just factories, carry most of the environmental weight.
   
• Municipal waste could reach 3.8 billion tonnes by 2050 (UNEP, 2024). Disposal costs will rise, regulations will tighten, and landfills will become an economic liability.
   
• E-waste hit 62 million tonnes in 2022 (UNITAR, 2024). For electronics companies, this is both a reputational risk and a lost revenue stream from unrecovered materials.

These statistics are not abstract. They point to risks in procurement costs, regulatory exposure, investor scrutiny, and customer expectations. ESRS E5 makes these risks visible through structured disclosure.

Which Companies Must Comply with ESRS E5?

Not every company is immediately subject to ESRS E5. Under CSRD, reporting is required for:

• Large EU companies that meet two of the following three criteria:
   
  • €50 million net turnover or more
     
  • €25 million or more in assets
     
  • 250+ employees
     
• Listed SMEs (with lighter requirements and longer phase-in periods).
   
• Non-EU companies generate more than €150 million turnover in the EU, with at least one subsidiary or branch in the region.
   

Medium-to-large manufacturers, retailers, technological firms, and resource-intensive companies will increasingly be drawn into reporting. Smaller suppliers face indirect pressure, as larger customers demand circularity data and resource transparency.

Which Sectors are Most Impacted by ESRS E5

While ESRS E5 applies broadly, certain sectors are particularly affected:

• Manufacturing and electronics: Material intensity, e-waste, complex supply chains.
   
• Construction and real estate: High raw material use (cement, steel, timber) and demolition waste.
   
• Retail and consumer goods: Packaging waste, product design, take-back schemes.
   
• Automotive and transport: Metals, plastics, and batteries present both risks and circular innovation opportunities.
   
• Food and beverage: Packaging, waste streams, and resource efficiency.
   

For these industries, ESRS E5 is not just compliance — it can be a competitive differentiator. Even service sectors are expected to consider resource use across operations and supply chains.

How Does Life Cycle Assessment Support ESRS E5 Compliance?

The practical starting point for ESRS E5 reporting is a Life Cycle Assessment (LCA). LCAs form the backbone of disclosure because they show where the largest impacts occur. They serve three business functions:

1. Baseline and hotspots: Revealing whether impacts lie in raw material sourcing, production, logistics, use, or end-of-life.
    
2. Scenario planning: Testing if recycled aluminium, modular parts, or design shifts reduce impacts.
    
3. Reporting confidence: Generating ISO 14040/44-aligned numbers regulators, auditors, and investors trust.

According to UNEP’s Global Waste Management Outlook 2024, 38% of global municipal solid waste is improperly disposed — dumped, burned, or left unmanaged. Understanding material flows is essential for credible reporting and circular product design. Without LCAs, companies risk fragmented data. With LCAs, ESRS E5 becomes structured, credible, and actionable.

What Are the Core ESRS E5 Disclosure Requirements?

The disclosure requirements of ESRS E5 can be summarised as:

• Policies: What is the position on resource efficiency and circularity? Position statements on the circular economy and resource efficiency.
   
• Actions and Resources: Which projects and partnerships are being implemented? Funded initiatives such as product redesign, repair programmes, or supplier engagement.
   
• Targets: What measurable goals are in place? Concrete, time-bound objectives — for example, reducing virgin material use by 20% or achieving 50% recycled packaging by 2030.
   
• Metrics: What data shows progress? Tonnes of virgin vs recycled inputs, design for reuse, waste avoided — quantitative indicators that demonstrate circularity data and operational results.
   

This makes clear that ESRS E5 is not just an environmental tick-box. It touches procurement, supply chain, design, and financial strategy, directly linking compliance to business decisions.

How Can ESRS E5 Create Business Value Beyond Compliance?

While ESRS E5 is a regulatory requirement, it also offers clear business advantages:

• Cost reduction: Lower material use and reduced waste treatment expenses.
   
• Innovation: Circular products and services, such as leasing, resale, or refurbishment.
   
• Risk management: Reduced exposure to volatile commodity prices and regulatory fines.
   
• Investor trust: Demonstrating alignment with EU circular economy policy and broader ESG report requirements.

Approaching ESRS E5 strategically allows companies to transform compliance into competitive advantage while driving sustainability and resource efficiency.

What Are the First Steps to Implement ESRS E5 Reporting?

For companies preparing ESRS E5 reporting for the first time, follow these practical steps:

Step 1: Run an LCA on a flagship product or business unit. Start with available data. It provides a credible baseline.

Step 2: Map your resource flows. Understand what comes in (virgin vs recycled materials), where it is used, and its end-of-life destination.

Step 3: Set one tangible target. For example, "Increase recycled content in packaging to 60% by 2028." Ambition grows after the first step.

Step 4: Engage suppliers early. Suppliers hold critical upstream data. Early collaboration avoids last-minute compliance scrambles.

Step 5: Build a reporting workflow. Treat E5 data like financial data—version control, audit trails, and consistent methodology across business units.

In summary, these five steps ensure that ESRS E5 data becomes actionable, auditable, and aligned with strategic business goals.

How Can External Expertise like Tunley Environmental Accelerate ESRS E5 Implementation?

Many companies view ESRS E5 as uncharted territory. Challenges often include data gaps, complex supplier networks, and uncertainty over methodologies. External expertise bridges the gap, turning compliance into strategic advantage. Tunley Environmental provides clarity and support by:

• Conducting Life Cycle Assessments (LCAs): Delivering ISO-aligned, defensible data to identify environmental hotspots and quantify impacts.
   
• Building custom ESRS E5 reporting frameworks: Aligning with CSRD requirements while integrating seamlessly into existing business processes.
   
• Creating supplier engagement strategies: Securing upstream data critical for circularity and compliance.
   
• Translating technical findings into business insights: Connecting circular economy reporting to cost savings, risk reduction, and innovation.
   
• Providing audit-ready documentation and assurance: Reducing compliance risk and enhancing investor confidence.
   

By partnering with Tunley, businesses can transform ESRS E5 from a regulatory obligation into a clear business strategy.

Conclusion: Compliance as Strategy

ESRS E5 is more than a regulatory requirement — it is a mirror reflecting how resource-dependent businesses truly are. Approached with the right tools — particularly LCAs, supplier collaboration, and structured reporting — companies can:

• Meet disclosure requirements.
   
• Unlock operational efficiency gains.
   
• Reduce risks from material scarcity and regulatory exposure.
   
• Discover new revenue opportunities through circular product design.

Companies that embrace ESRS E5 early not only meet compliance requirements but also secure investor trust and capitalize on the opportunities presented by a resource-constrained future.

Quick References:

• UNEP (2019). Global Resources Outlook 2019: Natural Resources for the Future We Want.
• UNEP (2024). Global Waste Management Outlook 2024.
• OECD (2019). Global Material Resources Outlook to 2060.
• UNITAR (2024). Global E-Waste Monitor 2024.

Article courtesy: Tunley Environmental (https://www.tunley-environmental.com/sustainability-reporting-compliance)

Yashy Raghoo-Luchmun is Sustainability Scientist at Tunley Environmental.

Yashy holds a BEng in Chemical Engineering (minor: Environmental Engineering) and she is currently a PhD candidate in the field of Materials Engineering. Her doctoral research is entitled, ‘Investigating the Effects of Plant Fibres on the Thermal and Mechanical Characteristics of Concrete Blocks’ which forms a research synergy between the interdisciplinary spheres of concrete technology, chemistry, chemical, environmental and mechanical engineering. The research focus is geared towards decreasing the burden on non-exhaustive mineral resources stemming from the construction sector by using agricultural waste-derived plant fibres and to engender thermal comfort by integrating plant fibres, that are intrinsically thermal insulators, in a concrete matrix to reduce the overall operative temperature of a concrete envelope. This is much applicable to fluctuating hot weather patterns in Small Islands Developing States (SIDS). Yashy has always had the strong determination to showcase how academic studies translates into the real world and she had the opportunity to prove it through the transition from lab scale works to commercial basis by the large-scale production of banana fibre-reinforced concrete blocks with the partnership of Gamma Materials, Mauritius. She is much dedicated to environmental stewardship and has worked closely with SMEs valorising women entrepreneurs for the mentoring and training in plant fibre extraction and eventually development of local crafts as a source of living.

On an informal note, Yashy enjoys family time and loves to find herself surrounded by nature; be it the sun, sand and sea or green scenic views. She is a Zumba enthusiast and loves instrumental music.