27/11/2023, 12:15 The Circular Economy Transition for Asia Pacific | PwC Asia Pacific

PwC Global Today's issues Climate and sustainability Sustainability in Asia Pacific The Circula

The Circular
Economy
Transition for
Asia Pacific
Asia Pacific businesses
should prepare now for
new circular economy
reporting standards

https://www.pwc.com/gx/en/issues/esg/esg-asia-pacific/the-circular-economy-transition-for-asia-pacific.html?gclid=EAIaIQobChMI4_6anLbjggMVVM0WBR… 1/11
27/11/2023, 12:15 The Circular Economy Transition for Asia Pacific | PwC Asia Pacific

Melissa
MacEwen
Asia Pacific ESG, Circular

Economy, Director, PwC New

Zealand

Email

Europe’s Corporate Sustainability Reporting

Directive (CSRD) is coming, and it will be
mandatory for a significant number of European
and non-European companies. CSRD is the first to
include the circular economy as a reporting category,
with the aim to set new standards for how companies
report on social and environmental impacts.

As Europe’s major supplier of manufactured goods and

commodities1, Asia Pacific business leaders should
determine if they are required to report under the new
CSRD. If so, preparations for this new requirement
need to start now. Failure to take action will increase
the risk of penalties for individual companies such as
financial sanctions, exclusion from investor portfolios,
or reputation damage and could also have implications
to a territory's ability to trade with the European Union
(EU) if there is widespread non-compliance. Exact
sanctions will be implemented by each territory when
the CSRD is transposed into national law.

Here we explore which companies are impacted, what

businesses will need to do, and why the broader global
circular economy transition is increasingly critically

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important for Asia Pacific.

​CSRD - ​Which businesses

are impacted
The CSRD builds on the existing Non-Financial
Reporting Directive (NFRD), and will quadruple the
number of companies required to report on
sustainability. Under CSRD, reporting will now be
mandatory for approximately 50,000 European and
non-European companies2, versus 11,000+ under the
NFRD.

Asia Pacific businesses in the following categories will

be impacted and must comply at a legal entity and/or a
consolidated level:

Single entities listed by debt or equity on an EU-

regulated market

Large single EU-based entities that meet two of

three of the following criteria over two consecutive
financial years:

More than > 250 employees

More than > EUR€20m balance sheet total

More than > EUR€40m net turnover

Non-EU companies with an EU subsidiary or EU

branch fulfilling certain criteria, and net turnover of
more than > EUR€150m in the EU in each of the
last two consecutive financial years

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Non-EU issuers are also falling in scope for CSRD

reporting, but with a number of complex questions
outstanding for clarification.

Implementation is just
around the corner
With the European Commission adopting the CSRD in
2022, the new legislation will come into effect between
2024 and 2028 meaning that CSRD issues will need to
be reported upon, by various businesses, as follows:

2024: Entities already subject to the NFRD non-

financial reporting directive, must report on FY2024
in 2025

2025: Those not already in NFRD scope must

report on FY2025 in 2026

2028: Non-EU companies commence reporting on

FY2028 in 2029.

EU Circular Economy
Regulations

https://www.pwc.com/gx/en/issues/esg/esg-asia-pacific/the-circular-economy-transition-for-asia-pacific.html?gclid=EAIaIQobChMI4_6anLbjggMVVM0WBR… 4/11
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Source: PwC

A broad scope
The CSRD requires companies to consider
sustainability governance, strategy, impact, risk and
opportunity management, metrics and targets, the
‘double materiality’ (impacts) of their business on
people and the environment (directly and through their
supply chain), as well as how sustainability issues
affect enterprise finances. The CSRD has a wider range
of potential reporting categories than other
sustainability reporting standards, covering circular
economy, climate change, pollution, water and marine
resources, biodiversity and workforce.

Reporting on climate change and aspects of the

workforce is mandatory for all CSRD impacted
companies. For other categories, a materiality
assessment must be conducted and documented to
determine whether reporting under this category is
required. Based on PwC’s experience, businesses will
find this assessment complex and time-consuming,
potentially requiring thousands of data points. For
example, the materiality assessment process for the

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circular economy category includes evaluating a

company’s resource inflows and outflows; resource use
optimisation; circular systems; and waste
management.

If found to be material, reporting under the circular

economy category becomes mandatory.

While minimum CSRD compliance may be possible at

this early stage, it is a risky approach given reporting
requirements are likely to tighten in the longer term.
Governments and private sector businesses globally
are introducing circularity policies at pace, with a
significant ramp up in circular economy actions
observed since 2020. As momentum rapidly builds,
business leaders would be wise to plan ahead to meet
this evolving landscape and to identify and act upon
arising risks and opportunities. A number of large
multinational players are already setting the tone by
implementing circularity strategies. Companies which
have not yet developed a circularity policy would be
prudent to consider how they can remain competitive
and safeguard their reputation.

Complex changes require immediate

action

CSRD rules are complex and the extent of assessment

and reporting requirements present significant
challenges for organisations. Given the increased
scope of the CSRD, current sustainability reports are
unlikely to meet the level of granularity required,
particularly for the circular economy category. With
preparation time likely to range between 18-30 months,
it is vital that organisations prepare their data, people,
technology, policies, and processes now. Given the
increasing complexity and comprehensiveness of
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reporting requirements, it is critical for companies to

consider digital transformation of their reporting
ecosystem3 to better understand risks, impacts and
importantly identify opportunities. This is fundamental
to effective reporting and in developing a greater
understanding of how to re-imagine businesses to align
with circular economy principles.

The global circular economy

transition and what it
means for Asia Pacific
From a regulatory perspective, circularity looks
unstoppable. More than 50 national roadmaps and
strategies have been launched globally, and a further
520 circular economy-related policies (such as plastic
taxes, bans and extended producer responsibility
schemes) now exist.

The European Union currently has the most

comprehensive circular economy action plan4 in the
world, targeting the whole lifecycle of products from
design, sustainable production and consumption, to
reducing waste through circular feedback loops (reuse,
remanufacturing and refurbishing).

Circular economy regulations around the world*

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Explore the interactive map

*Note this map includes national circular economy policies, product

policies that support circular practices, extended producer responsibility

policies, waste management and recycling policies that encourage circular

practices, and fiscal policies that incentivise circular practices.

Source: circulareconomy.earth5

The circularity landscape is also shifting across Asia

Pacific. In 2021, ASEAN6 announced its own circular
economy framework, with actions including to identify
key sectors for the transition, harmonise circular
products and services, and promote financing of the
circular economy. An implementation plan for the
period 2023-2030 with a number of initiatives is now
being finalised.

On a national level, Japan, China, Vietnam and

Indonesia all have national circular economy
policies/strategies, while other countries in the region
have sector or product specific resource efficiency
circular policies, and are developing comprehensive
regulations for the circular economy. Within the private
sector, several large international brands are already
considering circularity, including through changes to
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packaging and product materials, launching ‘product

as a service’ lines and exploring new revenue streams
from by-products and waste.

As regulator and consumer pressure grows, more

investment decisions will be influenced by circularity
assessments. Businesses will look deeper into their
supply chain and preferred suppliers will be those
implementing a circular economy approach. Even Asia
Pacific-based companies currently unaffected by the
CSRD - but which supply to EU/international buyers -
will need to future-proof their business, such is the
reach of the global focus on circularity.

Are you CSRD ready?

The transition to circularity is a complex one and it is

essential the transition starts immediately to avoid
being caught off guard by regulatory and buyer
demands. A passive approach could have negative
implications for businesses and the region, while for
those who prepare now – i.e. set up and align reporting
to circular economy principles and make ongoing
business changes – are expected to reap the benefits.
The CSRD sets a new marker for corporate
sustainability standards. Preparing now will provide
Asia Pacific businesses the license to operate, grow
and remain globally competitive into the future.

As a community of solvers, PwC works with clients and

stakeholders to build trust and deliver sustained
outcomes through accelerating net zero transformation
and helping to shape the climate and policy agenda.

https://www.pwc.com/gx/en/issues/esg/esg-asia-pacific/the-circular-economy-transition-for-asia-pacific.html?gclid=EAIaIQobChMI4_6anLbjggMVVM0WBR… 9/11
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PwC’s circular business transformation model is a

framework for a step-by-step transition to the circular
economy. It builds understanding of why the circular
economy is relevant to your business while providing
an in-depth assessment of the environmental and
economic opportunities available to you. Our human-
led and tech-powered approach supports clients
through strategy, piloting and implementation. Start
transforming your business today.
https://www.pwc.com/circularbusiness

References

1 European Commission, EU trade relations with the Pacific March 2023.

Website
2
European Commission, Corporate sustainability reporting March 2023.

Website
3
PwC, A digital transformation in global reporting is needed November

2022
4 European Commission, Circular economy action plan March 2023.

Website
5 Chatham House, circulareconomy.earth March 2023. Website
6
Association of Southeast Asian Nations, ASEAN adopts framework for

Circular Economy October 2021

Get in touch

Ivy Kuo
PwC Asia Pacific Sustainability Leader, Partner, PwC China
Email

Kirsty Haymon
Managing Director, PwC Australia

Email

Jeremy Prepscius
https://www.pwc.com/gx/en/issues/esg/esg-asia-pacific/the-circular-economy-transition-for-asia-pacific.html?gclid=EAIaIQobChMI4_6anLbjggMVVM0WB… 10/11
27/11/2023, 12:15 The Circular Economy Transition for Asia Pacific | PwC Asia Pacific

Asia Pacific Sustainability, Sustainable Supply Chains, Managing Director, PwC Hong Kong

Email

Barry Murphy
ESG Leader, Global Tax and Legal Services, PwC United Kingdom
Email

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