Why ESG reporting often overclaims impact
The narrative trap
For the past decade, Environmental, Social, and Governance (ESG) reporting has been largely narrative. Companies have been free to publish glossy reports filled with aspirational language and unverified statistics. A corporation might claim to be circular because it runs a small pilot recycling program even if 99% of its waste still goes to landfill.
This lack of rigor has led to widespread skepticism. A 2023 study by the European Commission found that nearly 53% of green claims made by companies were vague, misleading, or unfounded. This greenwashing creates a liability risk. Regulators are increasingly cracking down on misleading environmental claims and demanding hard evidence rather than marketing copy.
Activity metrics vs outcome metrics
Defining the difference
Effective reporting requires distinguishing between activity and outcome. Activity metrics measure what the company did. Examples include statements like “We trained 50 employees on recycling” or “We installed recycling bins.” These are easy to track but tell stakeholders nothing about the actual environmental benefit.
Outcome metrics measure what the company achieved. Examples include “We recovered 5,000kg of copper via verified recycling” or “We avoided 200 tonnes of CO2e by redeploying 50 valves.”
The shift to outcomes
Investors and auditors are now prioritizing outcome metrics. They want to see the specific volume of material diverted from landfill and the calculated carbon avoidance associated with it. Organizations that continue to report only on activities will find themselves rated poorly by ESG agencies compared to peers who can demonstrate quantifiable impact.
How verified resale and recycling data improves audits
The audit trail
In an era of mandatory reporting such as the EU Corporate Sustainability Reporting Directive (CSRD), data must be audit ready. An auditor will ask for proof that the waste was actually recycled. A simple invoice from a waste hauler is often insufficient.
Transaction level data provides the necessary evidence. A digital certificate of recycling linked to a specific weight ticket and processing facility serves as irrefutable proof. Similarly, a bill of sale for a reused asset proves that the item was extended in its lifecycle rather than discarded. This level of documentation transforms ESG data from a soft estimate into a hard financial fact.
Reducing cost of capital
There is a direct financial incentive for better data. Financial institutions are increasingly linking loan terms and interest rates to ESG performance. Companies that can provide verified, granular data on their circular economy performance may qualify for green financing at lower interest rates. They must prove they are reducing risk and resource dependency. The data strategy thus becomes a capital strategy.
EPR schemes and data gaps
Understanding Extended Producer Responsibility
Extended Producer Responsibility (EPR) is a policy approach where producers are given significant responsibility for the treatment or disposal of post consumer products. This responsibility can be financial or physical. In simple terms, if a company makes a product, it is responsible for it when it becomes waste.
Countries like France and Germany have robust EPR laws for electronics and packaging. However, compliance is often hampered by data gaps. Manufacturers often lose track of their products once they are sold. They do not know if the product was exported, recycled, or dumped.
Closing the loop with marketplaces
Circular marketplaces play a critical role in closing this data gap. By facilitating the resale and tracking of assets, they provide manufacturers with visibility into the second life of their products. If a manufacturer can prove that 20% of their sold units were resold and reused, they may be able to reduce the fees they pay into national EPR schemes. This creates a direct financial incentive to support the secondary market.