Circularise

ESPR: four letters that are about to change how we do business in the EU (and beyond)! The EU rolled out the new Ecodesign for Sustainable Product Regulations (ESPR). It is a crucial part of the Circular Economy Action Plan and it is now in effect. 💠 What's changing? - ESPR expands beyond the Ecodesign Directive's more than 40 product groups. - New ecodesign requirements across almost all products sold in the EU. - Manufacturers now report on energy efficiency, material usage, recycling, ESG metrics, carbon footprint, and more. - Information requirements have expanded and now include a Digital Product Passport (DPP). 💠 This means a new compliance era. Chemical and material compliance cannot be a last-minute check, now it's front and centre. Before, compliance data was only needed at the last stages of the manufacturing process. But now the necessary data must be submitted during the initial stages of product design, prior to making commitments to market launch strategies.  This means that smart decision-making starts early, with CPOs and CFOs needing a new grip on compliance assets. 💠 Why should I care? - Since ESPR will directly inform all corporate sustainability reporting requirements, it will have direct and indirect impacts on the valuation of investments’ sustainability. - ESPR has global reach: the companies that are directly in scope of the regulation will need data from their global supply chains. - Non-compliance comes with real risks: fines, market exclusion, and hits to company reputation. Manufacturers should anticipate uniform enforcement due to the EU’s advancing oversight in market regulations. It is, therefore, essential to take action and be ready for these new stipulations as they become effective. Be ready and turn this ESPR challenge into your competitive advantage 🚀

5 steps to conquer the ESRS mountain 🏔️ Feeling overwhelmed by the European Sustainability Reporting Standards (ESRS)? You're not alone! But don't worry, we've got your back. Let's break it down into manageable steps: 1) Understand the requirements: dive into the standards, consult EFRAG's guidance and consider partnering with sustainability experts. 2) Establish responsibilities & conduct materiality assessment: delegate across departments, train your team, plan stakeholder engagement. 3) Develop robust data systems: audit existing systems, fill data gaps (tip: supply chain traceability tools like Circularise can be game-changers!) 4) Set & measure targets: establish time-bound goals, monitor progress, align with international standards (ISSB, GRI) targets of which overlap with ESRS. 5) Prepare reporting & verification: integrate into your annual management report, engage external assurance providers. Remember: perfect data isn't the goal in year one. It's an iterative process towards better visibility and decision-making. Ready to tackle ESRS? Find a short Q&A document on ESRS by European Commission below! If you want to learn more, check out the blog on our website or connect with our team 💪🌍

LyondellBasell and Circularise have piloted a Digital Product Passport (DPP) solution in partnership with industry players like Neste, QCP, Uponor, and Samsonite. The DPP offers insights into a product’s makeup and environmental footprint, aiding stakeholders to manage and improve lifecycle processes and support scope 3 emission reduction goals. It facilitates a shift towards data-driven sustainability and circular innovation. Each product's DPP is tethered to a distinct digital ID, ensuring continuous traceability. Updated throughout production or recycling stages, this aids in embracing circular business models, in alignment with the European Commission’s upcoming mandates for market goods information. 👁️🗨️ Ready to see the DPP in action? Discover how it functions on the LyondellBasell website: https://loom.ly/rX8nYrk

300 pages long and requires reporting of dozens of data points? 🤯 The European Sustainability Reporting Standards (ESRS) can be hard to tackle. But not to worry, it is possible. Even for a company operating in complex supply chains. Let’s break it down. ESRS has two mandatory cross-cutting standards: general requirements and general disclosures. They set uniform principles for consistent, reliable sustainability disclosures across industries. 👉 ESRS 1 (general requirements) introduces fundamental ESRS concepts: 1) Value chain scope - encompasses all company activities, resource use, and relationships. 2) Double materiality - balances financial impact with sustainability impact in reporting. 3) Stakeholder engagement - ensures inclusive consultation throughout the reporting process. 👉 ESRS 2 (general disclosures) outlines a reporting model mandating disclosures on: 1) Governance - describes the company's governing structure and sustainability oversight. 2) Strategy - reveals sustainability strategies, business model integration, and stakeholder relations. 3) Impact, risk, and opportunity management - details procedures for identifying and assessing materiality. 4) Metrics and targets - tracks and reports on sustainability objectives and performance indicators. 5) Requires certain data points for disclosure, following EFRAG's guidance, regardless of materiality assessment outcomes. These standards drive clarity and consistency in sustainability disclosures. They are vital for stakeholder trust. For an in-depth guide, explore our latest article on our website: https://loom.ly/l-N4v7k

Essentials of the CSDDD ✅ The EU's CSDDD is now active, setting the stage for sustainability in business operations. To clear the air on its operational aspects, the European Commission has laid out a robust FAQ. Key takeaways from the Commission's FAQ: 1) Scope: Includes due diligence for human rights and environmental impacts within entire business networks. 2) Prioritisation: Businesses must address severe potential impacts first, implementing "appropriate measures" proportional to risk. 3) Responsibility: The focus is firm on your own operations and those connected to your business—far-reaching yet precise. 4) Liability: Compliance matters. The CSDDD holds companies accountable primarily for negative impacts that are ignored or mishandled within their own activities. 🧭 This directive reinforces the imperative for risk assessment and action, driving responsible business conduct throughout supply chains. Take a look at the Commission's FAQ document below to learn more!

If the CSRD is like a blueprint for sustainability reporting, the ESRS is like the detailed building plans. European Sustainability Reporting Standards identify the materials, measurements, and processes needed to get the job done. Although they are interconnected, the CSRD and ESRS play separate roles. With 12 ESRS rules—two overarching and ten topic-specific based on materiality—the standards are deep and complex, especially within intricate supply chains. It takes time to understand, much less implement. This means that if your company must comply, there’s no time to waste in getting up to speed on the standards. Let’s look at each of the five major categories of ESRS standards: 🔶 ESRS 1: General Requirements - Defines the framework's essentials, highlighting the value chain, dual materiality, and stakeholder roles in reporting. 🔷 ESRS 2: General Disclosures - Requires detailed reports across governance, strategy, risk management, and performance metrics, irrespective of materiality. 🔶 E1 to E5: Environmental Standards - Mandates disclosures on climate, pollution, marine impact, biodiversity, and circular practices, shaped by materiality outcomes. 🔷 S1 to S4: Social Standards - Demands clear reporting on rights and welfare of employees, supply chain labor, impacted communities, and consumers, following materiality assessments. 🔶 G1: Governance Standard - Stipulates reporting on corporate ethics, conduct, supplier dynamics, anti-corruption, political engagement, and SME payment ethics. Jump to the comments to find the detailed steps to implement ESRS for your company in our newest article!

“When supply chains are running well, nobody cares. But when it’s broken, it becomes the biggest problem the company’s ever had” - Graeme Carter. Resilience within a supply chain is non-negotiable. It ensures swift adaptation and recovery from disruptions, regardless of their scale or origin. When your supply chain is tangled up across the globe, you’re not just opening the door to opportunity, you’re also rolling out a welcome mat for every little shock to send tremors throughout your entire operation. To explain how to improve supply chain resilience, Dr. Kjell Nordström, a Swedish economist and writer, proposes the concept of "oligons”. 📌 Oligons are strategic clusters of countries allied by common economic and ideological values rather than geography. It is a shift from global-spanning supply chains to robust, regionally focused networks. An example can be Australia sharing similar values with France and England, regardless of their geographic distances. Japan and South Korea might also be considered part of this oligon due to shared ideals and economic practices. According to Dr. Nordström, a company should identify its key oligons where it can effectively operate with shared values and goals. 🙄 Given the risks associated with global supply chains, companies can look toward strengthening regional supply chains and market strategies that focus on stable and ideologically similar regions.

🔎 CSRD vs CSDDD: Key Differences (3/3) As the EU prioritises sustainability, two directives take centre stage—each with its own focus and timeline: Reach of Regulations: CSRD: Approx. 50,000 companies, encompassing listed SMEs, with a phased approach from 2026 to 2028. CS3D: Targets around 5,500 larger companies, affecting their global suppliers as well. Timelines for Action: CSRD: Starts in 2024 for certain large entities, with reporting from 2025 and expanding coverage in 2026 and 2027. CS3D: Kicks in later, beginning 2027 for the largest firms and rolling out to others until 2029. 📍 The CSRD’s wide scope contrasts with CS3D's depth, each directive steering companies toward sustainability but on distinct paths. For a full summary and how these relate to your business, see our article: https://loom.ly/NpGbieE

🔎 CSRD vs CSDDD: Key Differences (2/3) The EU has raised the bar for corporate sustainability, challenging companies with the CSRD and CS3D—two distinct directives with a shared vision for a sustainable future. Here are more of the differences between the two regulations. 1. “Double materiality approach” Within CSRD companies must report on both financial materiality and impact materiality, which requires close collaboration between sustainability and finance departments. The CS3D primarily addresses impact materiality by requiring due diligence measures to reduce impacts on employees, communities, and the environment, hence financial departments will play a smaller role within the frame of this directive. 2. CS3D: Procurement's New Priority Unlike the CSRD's broader requirement for sustainability reporting, the CS3D specifically amplifies procurement teams' responsibilities by mandating comprehensive supplier due diligence, including collaboration with SMEs to meet compliance standards. 2. Scope: Broad vs Narrow CSRD’s "value chain" spans from product inception to disposal, while CS3D’s "chain of activities" concentrates more narrowly on direct and supplier operations. 3. Materiality: Threshold vs All-in CSRD allows firms to use a materiality threshold to determine reportable activities, adding strategic flexibility. In contrast, CS3D adopts an all-encompassing approach, requiring all potential impacts to be assessed without exception. 🌿 In essence, CSRD emphasizes transparency in sustainability's financial impacts, while CS3D focuses on thorough risk management in supply chains. 💡 For a detailed comparison and strategic insights, check our latest article: https://loom.ly/NpGbieE

⚠️ Methane is 84 times more potent than CO2 on a 20-year timescale. On a 100-year timescale, it has 28 times greater global warming potential. The IEA reports a record spike in methane emissions with the increase from 2020 to 2021 being the highest on record. The EU's new regulation, published July 2024, targets cutting methane emissions in the energy sector. The regulation aims to stop the avoidable release of methane into the atmosphere, both in the EU and in our global supply chains. Key measures include: - Better methane emission tracking and reporting in the energy sector. - Immediate emission cuts through leak detection, repair, and a ban on venting and flaring. - Import transparency to assess how exporters manage their methane emissions. For oil and gas, this translates to: - Continuous supply chain methane monitoring. - Company accountability for supply chain emissions. - Prompt identification of emission hot spots with real-time data. 🔀 A crucial component of these regulations is the implementation of traceability systems. These systems ensure that methane emissions are monitored across the entire supply chain, from initial extraction to the final point of use. This comprehensive surveillance supports targeted mitigation efforts and enhances environmental accountability.