Anders Brønd Christensen

May 26, 2024

1 in 3 Nordic companies still unsure if the Circular Taxonomy applies to them

A new Ramboll survey shows that many Nordic companies are still struggling to understand the EU’s latest circular economy regulations.

Panorama of Aerial View of Copenhagen in Summer, Denmark, Europe_AdobeStock_295079331
On 1 January this year, the European Union tightened its sustainability reporting requirements for large companies under the umbrella of its Circular Economy Taxonomy. From now on companies must report on specific metrics in a standardised way if they want to claim that they contribute to the EU’s sustainability goals as they relate to circularity and resource use.
But the new Nordic Circularity Survey 2024 from Ramboll shows a large minority of surveyed companies in Denmark, Norway, Sweden and Finland still struggle to understand how the new rules impact them.
“Awareness of the new rules is fairly high, but their understanding is low,” says Patrick Moloney, Director for Sustainability Consulting at Ramboll, prominent circularity expert, and lead author behind the study. “But an even larger problem is that many companies are still stuck thinking circularity is an issue of waste management and therefore risk missing the financial benefits that the circularity bring, and which the new rules push,” he says.
The Nordic Circularity Survey 2024 was conducted among 166 Nordic companies across Denmark, Sweden, Norway and Finland and focused on large companies that either due to their size, their revenue or number of employees are covered by the reporting requirements. The rules have three major components:
  • The EU Corporate Sustainability Reporting Directive (CSRD): The directive came into force in January 2023 and outlines which companies have to report and on what. Once fully implemented the CSRD is expected to cover 50,000 companies.
  • The 12 European Sustainability Reporting Standards (ESRS): These standards are part of the CSRD and describe how companies must report on different dimensions of sustainability to ensure comparability between companies. The first set of these standards came into force 1 January 2024, including ESRS E5 which describes how companies should report on circularity, while others focus on climate, pollution, biodiversity etc.
  • The EU Circular Economy Taxonomy: Lastly the Taxonomy describes under which circumstances companies can claim that their activities contribute to the EU’s sustainability goals. When the Taxonomy first came into force two years ago, it focused narrowly on climate, but as of January this year it has been expanded to now also cover circularity.
Learn more about the EU Circular Taxonomy and ESRS E5.
Highlights from the Nordic Circularity Survey 2024 by Ramboll:
Surveyed companies are aware of the new rules, but understanding is low: Most companies in the sample are aware they have eligible activities under the EU CE Taxonomy and that they will also need to report on the CSRD standard for resource use and circular economy (ESRS E5). But 1 in 4 (24%) companies that expect to be using ESRS E5 say they have no knowledge of it.
Graphs for the press release of the Nordic Circularity Survey
1 in 3 do not know if their activities are covered by the CE Taxonomy: Half (49%) of companies say they have activities covered by the CE Taxonomy, but 34% say they do not know. This is particularly noteworthy since the survey was designed to only include companies from sectors with a large potential to contribute to the circular transition in the EU Taxonomy. In other words, all surveyed companies are highly likely to have economic activities covered by the Taxonomy – whether they know it or not. Among companies who say they have eligible activities, knowledge of the criteria is fairly high. When asked how well they know and understand the criteria that they need to fulfil to comply with the EU Taxonomy, 11% say they have no knowledge, 30% have some knowledge and 57% have extensive knowledge.
Graphs for the press release of the Nordic Circularity Survey
Most companies do not experience financial benefits from circularity economy efforts: Only 40% of surveyed companies have managed to gain financial benefits from circularity. When asked to what extent they have gained financial benefits, half of the companies (48%) report that the financial benefits have been minor.
Graphs for the press release of the Nordic Circularity Survey
Regulatory pressure is the key driver towards circularity: Most companies (20%) cite regulatory pressure as the key factor influencing their focus on circular economy initiatives, closely followed by internal strategic priorities (19%) and customer pressure (17%).
Graphs for the press release of the Nordic Circularity Survey
Companies have made most progress on waste management: When asked within which circularity topics they have made most progress, the top answer was waste management (23%) followed by reducing greenhouse gas emissions (18%) and circular material use (15%). Although these factors are projected to remain in the top three priorities in the future, companies expect a decrease in their focus on waste management, while their efforts to reduce greenhouse gas emissions and increase the use of circular materials are expected to grow.
Graphs for the press release of the Nordic Circularity Survey
Circularity is still seen as an issue of waste management
"The survey shows that too many Nordic companies still lack knowledge of ESRS E5 and the criteria they need to fulfil to comply with it, which tells us is that there is still a huge maturity imbalance between companies on their journey towards a circular economy,” says Patrick Moloney.
He says the new rules represent “a massive leap” for many companies who have been used to thinking about sustainability as a question of CO2 emissions and waste:
“The Taxonomy has been around for two years but so far it has been focused on climate issues. With the new rules that came into force this year, we have similarly tangible requirements for circularity.”
"For those of us who work with the circular economy, the challenge has been that if you ask ten people what it is, you get ten different answers. In the survey we see that many companies still view circularity as a question of waste management. For example, only 9% of surveyed companies say they have made progress on designing out waste, but we know roughly 90% of waste comes from how we design in the first place. So those companies that focus on waste management have not yet fundamentally understood what the circular economy is,” he adds.
Patrick Moloney believes ESRS E5 and the CSRD will make the annual reports published by the EU’s biggest companies more transparent:
“For the first time, companies will be forced to disclose their financial risks, opportunities and dependencies based on the materials they use, and that is going to be an eye opener for many,” he says.
"The ESRS E5 forces companies to now really think both holistically and strategically to resource use and circular economy, forcing you to go to your board and say ‘wow we really have underestimated what circular economy really means to our business and indeed our stakeholders.’”
Is circularity a money maker?
While a minority of surveyed companies see the financial upside, Patrick Moloney believes the new rules will significantly impact revenue opportunities:
“Companies often overlook the potential revenue opportunities because they do not fully grasp the requirements involved. However, inability to look at sustainability and circularity through the prism of financials comes with a risk. The transition to a circular economy ultimately needs to be ‘monetisable’. This can be illustrated through the prism of risk (e.g. regulation, supply chain), operations (e.g. resource efficiency, innovation) or through the prism of growth (e.g. competition, customers). Those that can understand the different components of value that the circular transition can create will be the ones to reap the financial benefits.”
About the 2024 Nordic Circularity Survey from Ramboll
The Nordic Circularity Survey takes the pulse on the region’s biggest companies and their readiness for the transition to a circular economy.
The survey was conducted among 166 Nordic companies across Denmark (34), Sweden (49), Norway (63) and Finland (20) who are subject to the new EU Corporate Sustainability Reporting Directive (CSRD), either due to being listed, having annual revenue above €40 million or having more than 500 employees.

Want to know more?

  • Patrick Moloney

    Director, Strategic Sustainability Consulting

    +45 51 61 66 46

    Patrick Moloney