Report

Background: the limits of the linear model

Since the industrial revolution, the global economy has developed along a linear model: we extract raw materials, we turn them into products, we consume those products and finally we throw them away. Yet our planet holds only a finite quantity of resources, and the capacity of natural ecosystems to absorb the pollution and waste generated by human activity is equally limited. This system has contributed heavily to the fact that 6 of the 9 planetary boundaries have already been crossed. A distinctly alarming situation, given that these boundaries represent the thresholds humanity should not exceed if it is to live sustainably within a safe ecosystem.

The financial sector and the circular transition

Faced with this reality, the financial sector, which still invests mainly in linear activities, finds itself in a position of deep self-questioning. It is easy to see that "business as usual" cannot continue to guide investment decisions, as the prospects for long-term economic returns are seriously compromised. Against this backdrop, ESG (environmental, social and governance) analysis and so-called sustainable finance are gradually taking their place in a financial market that is still struggling to transform.

Companies and non-financial issues

For companies, growing pressure on energy prices and access to resources is driving a shift of their activities and business models towards greater circularity. This follows a realisation: to secure their ability to endure over time, organisations cannot forgo the financial, social and environmental benefits the circular economy makes possible.

Towards a new European framework for non-financial reporting

In order to redirect capital flows towards activities that contribute to the ecological and energy transition, and to encourage companies to raise non-financial issues to a new strategic level, the European Commission and its various bodies have spent several years developing a new regulatory and normative framework. It introduces the circular economy as one of the reporting topics that economic actors must now include in their annual non-financial report.

The report's aims

Continuing its commitment to supporting companies through their transition to a circular economy, Circul'R wanted to take stock of the place given to this topic in the forthcoming non-financial reporting of economic actors. The report therefore aims to clarify the regulatory context and highlight the circular economy provisions within the 3 flagship European regulations on non-financial reporting for companies and financial institutions, namely:

• the Taxonomy
• the Sustainable Finance Disclosure Regulation (SFDR)
• the Corporate Sustainability Reporting Directive (CSRD)

as well as to analyse their consequences for organisations' activities.