How to approach ESRS E5 disclosures

The ESRS E5 standard defines resource inflows as "resources that enter the organisation’s infrastructure" – essentially the products and materials that a company uses within its own operations and upstream in its value chain.

Resource outflows are defined as "resources that leave the organisation’s infrastructure," – these are the products and materials – and critically, the waste – that come out of the reporting company’s production process.

While the concept seems straightforward, companies often struggle with accurate tracking and quantification of these flows, particularly when data is fragmented across suppliers, production sites, and waste management partners. Many businesses lack established measurement frameworks for materials that re-enter the circular economy versus those lost as waste, making compliance with E5 a complex exercise. Describing a company’s material inflows and outflows provides the foundation for understanding how a company utilises resources and manages waste, how it may contribute to the circular economy, and what potential inefficiencies and opportunities for value creation around resource use may exist.

You may recognise that resource use and circular economy are closely connected to other important environmental attributes (e.g., GHG emissions, pollution, water use), given that a circular economy inherently involves more sustainable production that can result in a wide a range of environmental benefits. As the reporting company describes and builds familiarity with their resource inflows and outflows, it is a good opportunity to review what related details will need to be reported in other environmental ESRS - including Climate change (ESRS E1), Pollution (E2), Water and marine resources (E3), and Biodiversity and ecosystems (E4).

What to do:

1. If resource inflows are deemed to be a material sustainability matter, identify and define all inflows (materials entering your business operations):

• First, identify all materials used in production or operations
• Then, of the total materials, identify which are technical and which are biological
• Identify critical raw materials and rare earths
• Identify biological material inflows that are sustainably sourced
• Identify secondary (recycled) or reused materials or components used in production

2. If resource outflows are deemed to be a material sustainability matter, describe your company’s outflows (materials leaving your business operations):

• Create descriptions of key products and materials intended for sale or further use
• Describe outflows which are “designed along circular principles, including durability, reusability, repairability, disassembly, remanufacturing, refurbishment, recycling, recirculation by the biological cycle, or optimisation of the use of the product or material through other circular business models”
• Disclose information about all waste streams, specifying hazardous and non-hazardous waste, as well as treatment methods (e.g., reuse, recycling, incineration, or landfill)

3. Assess data availability for both inflows and outflows, ensuring you can measure quantities accurately and categorise resources in alignment with ESRS E5 requirements

4. Consider what resource use information will be relevant for other ESRS disclosures

ESRS E5 requires, where material, a company to explain how it impacts resource use today and how it plans to adapt its business model and operations in line with circular economy principles. This step demonstrates how the resource use described in the previous step is integrated into the company’s core strategy, ensuring alignment with both the EU’s sustainability goals and the specific company’s overarching objectives.

A company’s ability to transition toward a circular economy is deeply interconnected with its value chain. Achieving circularity requires not only internal operational changes but also collaboration with suppliers, distributors, and customers to minimise resource waste and enhance material reuse. ESRS 2 underscores the importance of assessing and reporting value chain impacts, reinforcing that circular economy efforts cannot be siloed within a single entity but must be embedded across the entire supply chain.

Furthermore, businesses are often dependent on external partners to successfully implement circular models—whether through securing sustainable resource inputs, optimising production processes for resource efficiency, or ensuring proper recycling and recovery mechanisms downstream. Understanding these interdependencies helps companies identify opportunities for innovation, risk mitigation, and long-term resilience in resource management.

What to do:

1. If material to the business and available, a company can link inflows and outflows to strategic goals (e.g., incorporate metrics assessing inflows and outflows into the procurement strategy or pursue circular supply chain partnerships)

2. Consider and document the current business model (e.g. resource dependencies, inclusion of circular services such as repair or product-as-a-service, integration of circular metrics into design) and potential value levers (e.g. cost savings from reductions in operational waste, business resilience of varied sourcing, revenue streams from beneficial reuse, etc.)

3. Identify material risks and opportunities related to resource use and circular economy. These can include transition risks and physical risks impacting both the reporting company and its upstream and downstream value chain. For example:

• Transition risks may be influenced by policy and regulatory changes, technology changes, market changes, or reputational changes.
• Physical risks include acute (e.g. extreme weather events) and chronic exposures (e.g. increasing temperatures resulting in exposure to heat stress) that affect the value chain, business operations and personnel.
• Opportunities may be categorised by resource efficiency and resilience gains, expansion of markets, or new sources of financing.

4. Demonstrate how sustainability considerations are embedded in business planning to support long-term resilience.

ESRS E5 requires both qualitative and quantitative reporting to create a baseline against which future progress will be measured. This includes metrics such as:

• "The weight in both absolute value and percentage of renewable input materials" and "reused or recycled products and materials" (E5-4)
• “The expected durability of the products placed on the market by the undertaking, “the repairability of products” and “the rates of recyclable content in products and their packaging” (E5-5)
• "The total amount of waste generated" and its treatment methods (E5-5)

A baseline provides clarity on your starting point and enables measurable improvement. While ESRS E5 mandates these disclosures, it does not provide clear methodologies for setting a meaningful baseline or tracking progress over time. The standard assumes that companies have access to reliable and granular data, yet many businesses—particularly those with complex supply chains—face significant challenges in obtaining accurate resource flow information. Without clearer guidance on data collection and verification, companies may struggle with inconsistent reporting, making it difficult to compare progress across industries or even within their own operations.

What to do:

• Collect data on inflows and outflows, including volumes and types of materials used. Descriptions of material outflow products can be qualitative, rather than quantitative.
• Document current data collection practices to track progress over time.

ESRS E5 requires companies to disclose "potential financial effects of material risks and opportunities arising from resource use and circular economy-related impacts" (E5-6).

Understanding financial implications of resource use is critical for gaining stakeholder buy-in for circularity-informed business strategy and aligning sustainability with business performance.

Companies must also assess the dependencies that influence these financial risks and opportunities. Circular business models often rely on external factors such as supplier capabilities (especially in relation to scarce or critical raw materials, waste management infrastructure, regulatory incentives, and consumer demand for sustainable products). Without addressing these dependencies, businesses may face unexpected financial hurdles, such as limited access to high-quality recycled material, reduced availability of conventional materials, or higher transition costs than initially anticipated.

What to do:

• Quantify financial risks such as costs from resource scarcity, regulatory compliance, or supply chain disruptions.
• Identify financial opportunities like cost savings from efficient resource use or new revenue streams from circular products or waste to value.
• Highlight the financial impacts on cash flow, profitability, and access to capital.

ESRS E5 requires disclosure of the policies, actions, and targets a company has in order to support its approach to resource use and the circular economy:

• Policies: "The undertaking shall disclose its policies implemented to manage its material impacts, risks, and opportunities" (E5-1).
• Actions: "The undertaking shall disclose its resource use and circular economy actions and the resources allocated to their implementation" (E5-2).
• Targets: "The undertaking shall disclose the resource use and circular economy-related targets it has adopted" (E5-3).

Note that having resource use and circular economy-related policies, actions, and targets is not a requirement of CSRD in itself, but a reporting company must disclose those that it has.

This step ensures all efforts are aligned and actionable, driving progress toward circular economy goals.

What to do:

• Understand the circularity of inflows (considering primary vs. secondary, technical, biological, etc.) and outflows (based on the circular principles: durability, reusability, repairability, disassembly, remanufacturing, recycling, resource optimisation) and assess the effectiveness of current waste management strategies (e.g., assess the opportunities to reduce waste volume or increase diversion of waste from landfills)
• Create policies addressing resource optimisation, waste prevention, and circular practices. Policies should be aligned with the overall business strategy and be informed by an understanding of the baseline and the financial risks and opportunities previously identified.
• Implement actions to achieve policy objectives, including transitioning to renewable resources and enhancing product circularity.
• Set specific, measurable, achievable, relevant, and time-bound targets. If the company does not have targets, offer an explanation as to why.

1. Define inflows and outflows: Clarify material flows to align on company-specific definitions.
2. Integrate into strategy: Align resource use with the company’s business model.
3. Baseline assessment: Measure resource use to track progress and guide improvements.
4. Financial analysis: Evaluate risks and opportunities to inform decision-making.
5. Plan and act: Develop policies, implement actions, and set targets to drive circularity.

Following this five-step approach ensures that you have a comprehensive understanding of resource use at the reporting company and are prepared to comply with ESRS E5 disclosures on Resource Use and Circular Economy.

Accurate reporting not only meets regulatory standards, but also strengthens sustainability strategies in the face of transition and physical climate risks and identifies opportunities for long-term value creation. Given that current ESRS documentation is challenging to follow in parts, the framework above is intended to offer clarity; Ramboll’s recommended framework will continue to evolve as ESRS regulations do.