Practitioner's Guide to ESRS E5 I

Michelle Horsfield

25 years: Sustainable Finance

In this video, Michelle Horsfield introduces the ESRS E5 standard on resource use and the circular economy. It discusses the concept of Earth Overshoot Day, the shift from a linear to a circular economy, and the key principles and concepts behind ESRS E5, including the 2 which are most relevant for the E5 standard: Eliminating waste and pollution and retaining materials at their highest value.

Regulation and Initiatives

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Practitioner's Guide to ESRS E5 I

7 mins 45 secs

Key learning objectives:

Understand the concept of Earth Overshoot Day and its significance
Outline the principles of a circular economy and its importance in resource management
Understand the key concepts of eliminating waste and pollution and retaining materials at their highest value

Overview:

ESRS E5 focuses on transitioning from a linear "take-make-dispose" economy to a circular economy, where resources are used more efficiently and waste is minimised. The urgency of this shift can be illustrated by Earth Overshoot Day creeping closer with every passing year. The standard emphasises on circular design thinking to ensure products are made for longevity and reuse, and it requires companies to detail their efforts in increasing circular design and retaining material quality.

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Summary

What is the Earth Overshoot Day?

It is the day that marks when humanity’s demand for ecological resources exceeds what the Earth can regenerate in a year. This date has been moving earlier, indicating unsustainable resource consumption. The need to shift from "living on ecological credit" to a sustainable model is crucial.

What is the shift from a linear to a circular economy?

The traditional linear model of "take-make-dispose" is unsustainable as evidenced by the gradual shift forward of the Earth Overshoot Day. ESRS E5 advocates for a circular economy, where resources are kept in use for as long as possible, and waste is minimised. This involves a change in mindset and business models, focusing on designing products for longevity and reuse.

The circular economy is based on three principles: eliminating waste and pollution, keeping products and materials in use at their highest value, and regenerating ecosystems. ESRS E5 primarily focuses on the first two.

How is the circular economy helping us to "eliminate waste and pollution"?

The traditional "reduce, reuse, recycle" is expanded to "Refuse, Rethink, Reduce, Reuse, Repair, Refurbish, Remanufacture, Repurpose, Recycle, and Recover." This comprehensive approach emphasises designing products with end-of-life considerations.

Design is crucial for enabling reuse and recycling. Products need to be designed so that components can be easily separated and reused. Examples like Interface's carpet tiles and Resortec's dissolvable thread illustrate how design changes can facilitate circularity.

Why should we focus on retaining materials at the highest level?

This principle focuses on maintaining the quality of materials for as long as possible. Reusing products in their original form is preferred over recycling, which often degrades material quality. Service economies, like car-sharing schemes, support this by maximising the use of a single product.

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Michelle Horsfield

Michelle Horsfield, an environmental scientist with a climate change specialisation, transitioned into the financial sector four years ago to apply her knowledge to the largest reallocation of capital in history, as the economy moves towards a lower carbon future.

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