Within the apparel, footwear, and textile industries, all brands have the potential to decarbonize their footprint with supply chain interventions — for instance, improving production methods to minimize waste, redesigning goods to incorporate recycled materials, and investing in energy-efficient machinery within factories. But brands can also decarbonize by embracing circular models (such as resale, product recovery, and resource recycling). 

In fact, meaningfully transitioning your business to a sustainable model will likely require both supply chain interventions and embracing a circular philosophy. At Worldly, we see these as two sides of the same coin: with supply chain impact reduction concentrating on short and medium-term improvements, while a circular philosophy centers around innovative design, production, and consumer-use models. (If you want to dive deeper, check out the whitepaper we co-authored with Trove on the role of supply chain interventions and circularity in apparel brand decarbonization.) 

The significance of circular business models becomes increasingly apparent under the Corporate Sustainability Reporting Directive (CSRD), which is set to impact businesses in the European Union. Under section ESRS E5 in CSRD, brands are obligated to disclose strategies, opportunities, risks, and impact targets associated with the circular economy. 

As part of our commitment to supporting businesses in navigating compliance, this article addresses reporting requirements related to circular business models (and if you are new to CSRD, we recommend starting here). 

Within CSRD, what does circularity entail?

Under CSRD ESRS E5, brands are required to disclose strategies, opportunities, risks, and impact targets related to the circular economy.

For example, brands are encouraged to consider circular economy-related actions such as:

• value retention actions (maintenance, repair, refurbishing, remanufacturing, component harvesting, upgrading and reverse logistics, closed loop systems, second-hand retailing);
• value maximization actions (product-service systems, collaborative and sharing economy business models); 
• end-of-life actions (recycling, upcycling, extended producer responsibility); 
• and systems efficiency actions (industrial symbiosis).

For any activities that brands are engaged in, they will be expected to disclose policies, resources allocated, and any targets they have set. 

How can Worldly help?

The Higg Index tools, hosted on Worldly, help you gather data that is essential for calculating and disclosing circularity targets under CSRD.

For instance, the Higg Brand and Retail Module (BRM) contains a section on waste that has significant thematic overlap to ESRS E5 and also includes questions related to material choices, product-design initiatives, circular business model initiatives, and value chain engagement initiatives. By completing Higg BRM in advance of CSRD reporting, a company will understand the types of circular economy related policies, actions, and targets it should be setting to keep pace with industry peers on sustainability matters. 

Additionally, the Higg Product Tools help companies understand the baseline impacts of their materials and products over their full lifecycles. With industry-leading Life Cycle Assessment (LCA) data, these tools can be used to inform product design and end-of-life impacts as part of circular product strategies. 

Lastly, the Higg Facility Environmental Module (FEM) includes a waste section that can be used to track resource use and efficiency over time within a brand’s supply chain. Questions in Higg FEM’s Level 1–2 Waste section may be used to evaluate the success of waste reduction initiatives in the value chain — reporting on such actions is a requirement under ESRS E5, which mandates disclosure of “actions taken to prevent waste generation in the (business’s) upstream and downstream value chain.”

Start preparing for CSRD. 

For a more in-depth exploration of the technical aspects involved in circular reporting, we’ve developed a full technical paper that provides comprehensive guidance for CSRD. 

Please get in touch with your customer success manager to learn more and to ensure your business is well-prepared for the evolving landscape of sustainability reporting.