Transforming Sustainability Policies into Business Opportunities
The European Union’s evolving environmental policies, including the draft European Sustainability Reporting Standards (ESRSs) and the Eco-Design for Sustainable Product Regulation (ESPR), serve as more than regulatory requirements. At INDEED, we see them as strategic tools that guide the transition towards a circular, sustainable economy. These policies are instrumental in our journey to reduce pollution, restore biodiversity, and achieve climate neutrality. This article is based on the information and insights gathered in 2023, and the details may change due to the dynamic nature of policy and legislative activities.
The Role of EU Policy in Circular Innovation
Our thorough analysis of EU policy roadmaps and directives reveals their significant implications for circular design and innovation. This knowledge is essential for businesses aligning with EU directives and gaining a competitive edge. Whether your business is based in the EU or elsewhere and wants to act globally, the EU Policy will have a global ripple effect.
Redefining Compliance Through Circular Design and Business Models
We embrace a philosophy that goes beyond mere compliance: We are not talking about killing two birds with one stone, we are talking about an opportunity where: How can we save ten birds in one nest.
Circular Design and Circular Business Models are more than pathways to adhere to regulations; they are meant to future-proof innovation. Practicing Eco Design not only ticks the “compliance” box (including CSRD) but also opens the door to innovative, sustainable business strategies.
European Sustainability Reporting Standards (ESRS): Drafting the Future
The draft ESRSs, as of July 2023, are reshaping the landscape of corporate sustainability reporting. These standards are currently available in working Excel documents from EFRAG. They encourage companies to integrate sustainability deeply into their business operations. We aim to infuse these standards with innovative thinking, transforming them from mere compliance tools into integral components of circular business models and circular product portfolios.
Adapting to Evolving Policy Requirements
The ESRSs are very ambitious and come with highly detailed information requirements. Below, you can see we have chosen a subset to serve as examples. However, there are over 1000 data points in the draft Excel file.
If the draft of ESRSs is implemented, businesses will be required to:
- Communicate with investors about the risks associated with continuing business-as-usual. ([draft] ESRS 2 IRO-1)
- Assess risks and opportunities within the circular economy.
Such as, opportunities by new business model: product-as-a-service, pay-per-use, sharing, leasing ([draft] ESRS 2 IRO-1 C ii)
- Disclose strategic actions across the value chain. ([draft] E5-2 17)
Such as, Refuse, Rethink, Reduce, Reuse, Repair, Refurbish, Remanufacture, and Repurpose ([draft] E5-2 20(b))
- Set and report circular economy and circular design targets. ([draft] E5-3 22)
Such as the increase of circular design and circular material use rate ([draft] E5-3 25(a), (b))
- Report on the use of renewable materials. ([draft] E5-4 25)
- Detail adherence to circular principles in products, materials, and packaging.
Circular principles in the document: durability, reusability, repairability, disassembly, remanufacturing or refurbishment, recycling, recirculation by the biological cycle, other potential optimization, and material use. ([draft] E5-3 37 (a))
Disclaimer!: These are assumptions based on the draft of ESRS and are subject to change.
These visual aids provide an in-depth understanding of the ESRS and other EU policies, clarifying their requirements and implications for businesses.
Each topic is subdivided into requirements, each of which contains specific paragraphs with detailed information.
These requirements encompass data points totaling more than 1100, which companies need to assess for mandatory reporting.
Specifically, E5 focuses on Resource Use and Circular Economy, making it the area for us to begin exploring.
Implications for Businesses
The bottom line: Businesses will need to increase R&D investment for developing new sustainable products redesigning products life cycle, and creating innovative business models.
- Focus on R&D investments for circular innovation
- Implement circular strategy into product development process
- Identify non-fiscal measures (KPIs) for value chain actors and customers
- Incentivize sustainable production and supporting consumer participation
Conclusion: Leading the Way in Sustainable Innovation
INDEED is prepared to lead the transition to circular businesses during these transformative times. By leveraging EU policies as strategic guides for circular economy innovation globally, companies can transcend compliance and spearhead sustainable business practices.
Let’s discuss how we can transform these opportunities into realities for your business.