Circular Economy KPIs: What to Measure and How to Report Under ESRS E5

At a Glance

• ESRS E5 requires disclosure of resource inflows, resource outflows, and waste where circular economy is material to your business
• 2026 is the first year circularity KPIs appear alongside emissions data in mainstream corporate reports
• The Global Circularity Protocol (GCP) is an emerging framework intended to help standardize circularity measurement and value-chain accounting for physical material flows.
• Most companies use an estimation methodology to fill early data gaps before moving to primary material data
• You do not need to report every possible metric: materiality determines scope

Introduction

Most sustainability teams have spent the past two years building their emissions inventory. Scope 1, Scope 2, and Scope 3 have an established methodology, existing databases, and a reasonably well-understood audit trail. The circular economy hasn’t had the same runway. When your double materiality assessment flags resource use as material, you’re working without a legacy framework to lean on. There’s no material database to fall back on and no established internal process for collecting the data yet. That is the situation many European mid-market companies face in 2026. ESRS E5 requires companies to disclose material information on resource use and circular economy, including quantitative disclosures for resource inflows and resource outflows where relevant, and sustainability teams are often being asked to produce numbers they have never had to track before.

To turn those high-level DMA findings into a structured data strategy, the World Business Council for Sustainable Development (WBCSD) and the UNEP-hosted One Planet Networklaunched the Global Circularity Protocol for Business (GCP). The GCP provides a framework for measuring physical material flows, built to support structured circularity accounting.

You do not need perfect primary data on day one. ESRS E5 permits practical estimation approaches where needed, but companies should document the methodology, assumptions, and boundaries used. Start where your DMA points, estimate your baselines, and build toward better primary data over time.

What ESRS E5 Requires You to Measure

The ESRS E5 standard organises its disclosures around resource inflows and resource outflows, including products, materials, and waste.

E5-4: Resource Inflows

E5-4 covers the materials that enter your operations. The required disclosures are:

• Key Material Descriptions: A concise qualitative description of the primary materials used, with mandatory identification of any critical raw materials or strategic raw materials contained within them, where relevant.
• Total Material Weight: The absolute weight of all key materials used during the reporting period, measured in tonnes or kilograms.
• Material Breakdown: A granular breakdown of each key material, expressed as either an absolute weight or a percentage of total material input.
• Secondary Resource Proportion: The precise weight or percentage of secondary inputs used, specifically tracking non-virgin, reused, or recycled content.

The underlying principle is transparency on the split between virgin and non-virgin materials and between renewable and non-renewable sources. Where relevant, companies should present both absolute figures and percentages so the reporting is decision-useful and comparable.

E5-5: Resource Outflows

E5-5 covers resource outflows and explains how the undertaking contributes to circular economy principles through products, services, and waste management. It covers both product-related disclosures and waste-related disclosures:

Products & Materials (Circular Design):

• Expected Durability: Qualitative or quantitative data regarding the baseline lifespan and longevity of key products placed on the market.
• Repairability: Documentation detailing the extent to which products are designed to be easily repaired, maintained, or disassembled.
• Recyclability Rates: The designed recyclability rate of key products and their packaging, calculated on a physical-weight basis.

Operational Waste Data: For waste generated within your own operations, the standard requires several distinct waste disclosures:

• Waste streams: A qualitative description of your company’s distinct waste streams.
• Total waste generated: The absolute total weight of waste generated.
• Waste diverted from disposal: The weight or percentage of waste diverted from disposal, split between hazardous and non-hazardous waste and by recovery operation type.
• Waste directed to disposal: The weight or percentage of waste directed to disposal, split between hazardous and non-hazardous waste and by disposal operation type.
• Unknown final destination: The proportion of waste for which the final destination is unknown.

Radioactive waste: The total amount of radioactive waste generated by the undertaking.

Implementing the Global Circularity Protocol (GCP)

To turn high-level ESRS E5 disclosures into structured data, the GCP organizes your transition into a systematic 5-stage journey:

1. Frame: Setting your organization’s specific circularity goals.
2. Prepare: Defining value chain boundaries, identifying material hotspots, and setting operational system limits.
3. Measure: Quantifying material mass and calculating performance indicators.
4. Manage: Embedding these physical insights into procurement, R&D, and corporate strategy.
5. Communicate: Structuring verifiable data disclosures for external auditors and compliance reporting.

Navigating the 4 Accounting Scopes

The protocol structures physical material flow analysis into four operational scopes, to clarify system boundaries. For executives tracking compliance, it is important to understand how these scopes relate to ESRS E5, even though ESRS E5 itself does not use this same four-scope terminology.

• Scope A (Flows to/from the environmental system): Tracks direct flows between the economy and the natural environment, such as raw material extraction or regenerative inputs.
• Scope B (Flows entering and exiting the company): Measures the physical mass of materials entering and leaving the company’s own operational boundary. This is the scope most closely aligned with ESRS E5 reporting.
• Scope C (Flows across the end-to-end value chain): Covers material flows across the upstream supply chain and downstream lifecycle stages.
• Scope D (Flows within other parts of the economic system): Captures broader system-level effects, such as avoided resource use and other indirect circularity impacts outside the direct value chain.

GCP to ESRS E5: Mapping Table

The GCP scopes are useful for organising circularity data, but ESRS E5 still determines what must be disclosed. In practice, Scope B is the main source of E5-4 and E5-5 data, Scope C helps explain value-chain assumptions, and Scope D is mainly strategic context rather than a reporting requirement.

In short: ESRS E5 sets the reporting requirements, while the GCP scopes help you organise the underlying material flow data.

Which Metrics to Prioritise

Not all circularity metrics carry the same weight. Prioritisation comes down to two practical questions.

Question 1: Which material flows are the largest by weight or value? Measurement effort should follow material significance. A company spending 60% of its procurement budget on a single raw material category should measure that category first. The effort of collecting data on a minor packaging component is rarely justified in year one.

Question 2: Which metrics are most likely to be requested externally? Customers, investors, and banks increasingly ask about circularity as part of their own due diligence. EcoVadis includes circular economy criteria in its scorecards. CDP supply chain questionnaires ask about waste and material efficiency. Bank ESG due diligence frameworks, particularly under Dutch sustainable finance guidelines, are beginning to include circular economy indicators. Reporting on metrics that appear in these external frameworks gives your disclosure double utility.

Recommended Starter Set for Year One

The following seven metrics represent what many Dutch mid-market companies can realistically collect in year one, using either proxy-based, spend-based, or weight-based approaches:

For companies without circular business lines or dedicated circular products, qualitative metrics can be answered with a direct explanation of baseline status or omission justifications, provided the reasoning is documented.

How to Collect the Data in Practice

There are three approaches to collecting circular economy data, each with a different level of accuracy and a different level of effort. The right starting point depends on what data your organisation already has access to.

Approach 1: Estimated proxies (Year One Default)

Use existing business records, such as procurement spend, physical unit counts, or sample operational metrics, as a proxy for material flows. By applying material intensity factors or industry-average weights to your purchasing volumes and logs, you can estimate overall weights and material types across the business.

What you need: Procurement records (spend or unit volumes), plus material intensity conversion factors and industry averages (available from databases such as Ecoinvent or sector-specific industry data).

Accuracy: Low to moderate. Proxy-based estimates introduce uncertainty, particularly due to market price volatility or broad database averages. But they are achievable in year one without a full operational data collection programme.

Best for: Getting a first-pass circularity baseline and understanding which material categories are the largest by volume or value.

Approach 2: Weight-Based (Recommended for Year Two Onwards)

Collect actual quantities of materials purchased and waste generated. This means working with procurement to pull purchase order data in units rather than spend, and working with operations or facilities management to pull waste contractor data in tonnes.

What you need: Purchase order data with unit quantities, waste contractor reports, and internal production records where relevant.

Accuracy: Moderate to good. Weight-based data is more reliable than spend-based and is the standard expected by auditors and assurance providers.

Best for: Companies with centralised procurement systems and existing waste management contracts that already produce tonnage reports.

Approach 3: Supplier-Specific (Target State)

Collect material composition and recyclability data directly from suppliers. This allows you to classify each input material as virgin or recycled, renewable or non-renewable, and to understand the circular design characteristics of components you purchase.

What you need: A supplier engagement programme, data request templates, and a system for collecting and validating supplier responses.

Accuracy: High. Supplier-specific data is the most granular and defensible approach, and it is what regulators and auditors will increasingly expect as reporting matures.

Best for: Year three and beyond, or for high-value material categories where precision matters most.

Practical recommendation: Start with proxy-based or weight-based data for your first ESRS E5 disclosure. Document your methodology clearly (see the common mistakes section below), and build a roadmap toward supplier-specific data for your most significant material flows.

Common Mistakes to Avoid

Four mistakes come up consistently in first-year circularity reporting. Each one is avoidable with the right setup.

1. Measuring recycling rates only and calling it a circularity KPI. Recycling is one element of circular economy performance, not a proxy for the whole. A company that recycles 80% of its waste but uses 100% virgin, non-renewable input materials is not performing well on circularity. ESRS E5 requires disclosure across inflows, outflows, and waste precisely because the full picture matters. Report all three categories, not just the one where your numbers look best.

2. Using percentage metrics without absolute baselines. A percentage improvement means nothing without the starting point. If your recycled input share increases from 12% to 18%, that is useful context. But if total material consumption doubled in the same period, the absolute picture is very different. Where relevant, report absolute figures alongside percentages so the disclosure is decision-useful and comparable.

3. Not documenting your methodology. Year-on-year comparability is the foundation of credible sustainability reporting. If you use proxy-based estimates in year one and switch to weight-based data in year two without documenting the change, your numbers will not be comparable, and your auditor will flag it. Document which databases you used, what boundaries you applied, which assumptions you made, and where data gaps exist. The Ellen MacArthur Foundation’s circularity indicators guidance provides a useful reference for methodology documentation.

4. Conflating waste reduction with circularity. Reducing waste is good, but a circular economy also requires designing products for reuse and recovery, sourcing recycled and renewable materials, and building business models that keep resources in use. A company that minimises waste through process efficiency but does nothing on product design or input sourcing is not yet circular. ESRS E5 captures this distinction through its separate disclosure requirements: make sure your reporting reflects all three dimensions.

How The Overview Effect Can Help

Building a circularity data collection process takes time, internal coordination, and a clear understanding of what regulators and auditors will actually scrutinise. The Overview Effect works with sustainability teams at mid-market companies to design practical ESRS E5 reporting programmes: from scoping your material flows and selecting the right data collection approach to structuring your disclosure and preparing for assurance.

We map out your baseline, apply the right estimation methodology to bridge early data gaps, and align your metrics with the Global Circularity Protocol. Done well, ESRS E5 compliance becomes the starting point for a real circular strategy, not just a reporting exercise.

If you are at the start of this process or working through your first circular economy disclosure, book a free consultation to talk through where you are and what a realistic path forward looks like.

Frequently Asked Questions