Corporate Sustainability Reporting (CSR) includes the obligation to declare incoming and outgoing flows, as well as food loss and waste, as well as the fate of the various co-products.
The questionnaire developed by Wiise benefits in the Wasteless research project, in Horizon Europe, offers companies in the sector a basic model for reporting circular economy performances and thus fulfilling the new obligations.
1) CSRD, Corporate Sustainability Reporting Directive. Premise
Corporate Sustainability Reporting Directive (EU) No 2022/2464, in reform of the Accounting Directive 2013/34/EU, introduced the obligation to report on the social and environmental responsibilities of companies. Progressively, from large groups to SMEs (Small and Medium Enterprises), excluding only micro-enterprises. (1)
Budget reports must therefore be integrated with the information necessary to understand the impact of the company on issues related to sustainability, as well as the impact of these aspects on the performance of the company and its economic results.
The European Commission – following specific consultations with the European Financial Reporting Advisory Group (EFRAG) – then introduced the first European Sustainability Reporting Standards (ESRS), through Reg. (EU) No 2023/2772, so that reporting can follow homogeneous criteria. (2)
2) European Sustainability Reporting Standards (ESRS), updates
Reg. (EU) No 2023/2772 had set the update of the European Sustainability Reporting Standards (ESRS) for 30 June 2024, in order to add:
– complementary information relating to sustainability in the specific sector in which the company operates
– sustainability reporting principles for third countries (to be adopted with a separate delegated act).
The adoption of the aforementioned criteria of sustainability reporting was however extended by two years, via Directive (EU) No 2024/1306. (3)
3) Circular economy, ESRS 5
ESRS 5 introduces for the first time the definition of ‘the circular economy’, understood as:
‘an economic system in which the value of products, materials and other resources in the economy is maintained for as long as possible, improving their efficient use in production and consumption, thus decreasing the environmental impact of their use, reducing minimizing waste and the release of dangerous substances at all stages of their life cycle, including through the application of waste hierarchy.
The objective is to maximize and maintain the value of technical and biological resources, products and materials by creating a system that allows for durability, optimal use or reuse, reprocessing, remanufacturing, recycling and nutrient cycling .’
3.1) Purpose and scope of application
Information obligations relate to the use of resources from a circular economy perspective, with regard to:
– resource inflows, including the circularity of relevant resource inflows, taking into account renewable and non-renewable resources;
– outgoing resource flows, including information on products and materials; And
– waste.
The information on these flows must allow users of the sustainability declaration to understand:
– how the business impacts the use of resources, including resource efficiency, prevention of resource depletion, sustainable sourcing and use of renewable resources (according to the ‘use of resources and circular economy’) in terms of significant positive and negative impacts, actual or potential;
– any actions taken to prevent or mitigate negative impacts (actual or potential) arising from the use of resources, including measures to help decouple economic growth from the use of materials, and to address risks and opportunities, as well as results achieved;
– the company’s plans and ability to adapt its strategy and business model to align with the principles of the circular economy, including, but not limited to, waste minimization, maintaining the maximum value of products, materials and other resources and promoting their efficient use in production and consumption;
– the nature, type and extent of the risks and opportunities for the business associated with impacts and dependencies, which arise from the use of resources and the circular economy, and the way in which the business manages them; And
– the financial effects on the company in the short, medium and long term associated with the risks and opportunities deriving from the impacts and dependencies in terms of use of resources and circular economy.
3.2) Incoming resource flows
Businesses must illustrate the use of resources in their own operations – and those of the company upstream in the value chain – which include the products (including packaging) and materials used (including water), spaces, systems and machinery used in each phase.
If incoming flows relevant for sustainability, the following additional information must then be provided, expressed in kg or t:
– total weight of technical and biological products and materials used in the reference period;
– percentage of organic materials (and biofuels used for non-energy purposes) for the manufacture of products and provision of services (including packaging) coming from a sustainable supply chain, including information on the certification system and the application of the principle of use cascading; and
– weight (absolute value or percentage) of reused or recycled secondary components, products and secondary intermediate materials used by the company for products and services (including packaging).
The company must also provide the methods used to calculate the data, specifying whether the data come from direct measurements or estimates (specifying the reference hypotheses).
3.3) Outgoing resource flows
Flow measurement of outgoing resources serves to show the company’s contribution to the principles of circular economy, increasing or maximizing the reintegration of products, materials and treated waste already used, together with the strategies and waste reduction adopted by the company and the awareness of implementation.
Outgoing flows of products and materials must be described according to applied circularity principles including – where relevant, also for food products – durability, reusability, repairability, disassembly, remanufacturing, reconditioning, recycling (indicating the rate of recyclable content in products and packaging).
3.4) Waste
Waste data are part of the information on outgoing flows, for which the total quantity (kg ot) must be specified, the quantity by weight not intended for disposal and addressed to reuse, recycling and other recovery operations.
Waste to be disposed of must also be quantified by weight and distinguished by type of treatment, including incineration, landfill disposal and other disposal operations, and type (i.e. hazardous and non-hazardous waste) with the overall sum of these types of treatment and the quantity (total and percentage) of non-recycled waste.
The composition of the waste must specify the sector to which it belongs (eg food waste for the food chain) and the materials present in the waste (eg biomass, plastic, metals), specifying any hazardous waste (including radioactive waste) and the methods used for measuring or estimating such values, similarly for incoming flows.
3.5) Financial effects
The financial effects to be reported refer to the risks and opportunities connected to the application of the circular economy, in relation to the financial situation, the economic result and the financial flows of the company.
This measures the influence of the circular economy on these factors, as well as any financial effects expected before and after the concrete implementation of new measures aimed at increasing sustainability.
4) European Commission, FAQ
The European Commission has published the drafts of Frequently Asked Questions (FAQs), which collect the requests received from companies, to offer details on areas and periods of application, exemptions, conditions for referring to estimates rather than the accurate collection of data offered by suppliers, as well as those own. (4)
The document includes clarifications on the implementation of the CSRD in compliance with the Accouting Directive and the application of the ESRS. Also taking into account Audit Directive 2006/43/EC, Audit Regulation (EU) No 537/2014, Transparency Directive 2004/109/EC, Sustainable Finance Disclosure Regulation (EU) No 2019/2088. (5)
Fig. 2 – Periods of application of sustainability reporting (source: European Commission)
6) Wasteless, tools and methods
The application of the principles underlying the circular economy are based on several European regulatory policies, including the new Circular Economy Action Plan, the EU Industrial Strategy and Directive 2008/98/EC (Waste Framework Directive, WFD ), whose review is in the process of definitive approval by the European Council.
The project #Wasteless , in Horizon Europe, is developing a series of innovative tools and methods to help operators in the ‘from farm to fork’ agri-food supply chain to prevent, measure and reduce food loss and waste (FLW).
WIISE benefits, in this project, is developing a data collection system that uses blockchain technology and is based on the main EU standards and regulatory references, including:
– FLW Standard
– Delegated Decision (EU) 2019/1597
– Joint Research Center (JRC), ‘Building a balancing system for food waste accounting at national level’ report
– also with a view to fulfilling the reporting obligations established in ESRS 5. (6)
7) Provisional conclusions
The implementation of the CRSD and the application of the first group of sustainability reporting principles offer an incentive to operators in the food supply chain to start measuring material flows and circular economy performances.
The tools and methods being developed in the Wasteless research project, in the form of ‘open innovation’, can offer useful and free support to companies that intend to start this process easily such reporting obligations.
Businesses based in the EU interested in trying this tool, completely free of charge and with the support of our technical staff, can write to surveywasteless@gmail.com.
Dario Dongo and Andrea Adelmo Della Penna
Footnotes
(1) Dario Dongo, Alessandra Mei. CSR, European Sustainability Reporting Standard. The new obligations for businesses . GIFT (Great Italian Food Trade).
(2) Dario Dongo, Alessandra Mei. European Sustainability Reporting Standards, EU criteria defined . GIFT (Great Italian Food Trade).
(3) Directive (EU) 2024/1306, amending Directive 2013/34/EU as regards the deadlines for the adoption of sustainability reporting principles for certain sectors and for certain third-country companies. EUR-Lex OJ L 2024/1306 http://data.europa.eu/eli/dec/2024/1306/oj
(4) Draft Commission notice on the interpretation of certain legal provisions in Directive 2013/34/EU (Accounting Directive), Directive 2006/43/EC (Audit Directive), Regulation (EU) No 537/2014 (Audit Regulation), Directive 2004/109/EC (Transparency Directive), Commission Delegated Regulation (EU) 2023/2772 (first set of European Sustainability Reporting Standards “first ESRS delegated act”), and Regulation (EU) 2019/2088 (Sustainable FinanceDisclosures Regulation “SFDR” ) as regards sustainability reporting https://tinyurl.com/y2rsydjr
(5) Dario Dongo, Elena Bosani. Sustainability reports and responsible investments, ESG and CSR due diligence. EU Reg. 2022/1288 . GIFT (Great Italian Food Trade).
(6) The aforementioned JRC report applies the principle of mass balance of incoming and outgoing flows, including by-products and food waste, through the Material Flow Analysis (MFA) method
(7) Dario Dongo, Andrea Adelmo Della Penna. Wasteless, reduce and enhance food waste in blockchain . GIFT (Great Italian Food Trade). 12.7.24/XNUMX/XNUMX
Dario Dongo, lawyer and journalist, PhD in international food law, founder of WIISE (FARE - GIFT - Food Times) and Égalité.
Graduated in Food Technologies and Biotechnologies, qualified food technologist, he follows the research and development area. With particular regard to European research projects (in Horizon 2020, PRIMA) where the FARE division of WIISE Srl, a benefit company, participates.
