ESMA announces European Common Enforcement Priorities for corporate reporting

The European Securities and Markets Authority (“ESMA”) has issued its annual European Common Enforcement Priorities Statement for corporate reporting (which can be assess here).

The European Common Enforcement Priorities set out the expectation of ESMA and National Competent Authorities (“NCAs”) regarding the specific areas of focus for the enforcement and supervision of the annual financial reports of issuers of securities admitted to trading on European regulated markets.

According to the statement, ESMA and European enforcers will focus on the following topics in 2025:

• International Financial Reporting Standards (“IFRS”) financial statements.
• Sustainability statements.
• European Single Electronic Format (“ESEF”) digital reporting.

In relation to the sustainability related statements, the enforcement will prioritise (i) materiality considerations under the European Sustainability Reporting Standards (“ESRS”), (ii) scope and structure of the sustainability statement and (iii) disclosures relating to Article 8 of the Taxonomy Regulation.

ESMA highlights that companies must consider the following in relation to their sustainability statements:

• The assessment of the materiality, covering both impact and financial materiality, is the starting point for the determination of the information to be disclosed in the sustainability report and must therefore be conducted thoroughly.
• The companies must provide a detailed disclosure on this assessment process to ensure the user of the sustainability report gains a full understanding of the sustainability report.
• Several data requirements of ESRS relate to whether and how the company engages with its stakeholders. The companies must therefore provide full transparency on how they identify and prioritize the stakeholders.
• Disclosure requirements related to the company’s policies, actions and targets are mandatory for several sustainability matters. If the companies do not have such policies, actions or targets, a statement explaining that the company has no policy, action or target in these areas must be provided, and optional with a timeframe to adopt one.
• Companies are encouraged to use the detailed structure provided in ESRS in their sustainability reporting. If an alternative presentation format for the sustainability report is used, the company must carefully consider the compliance of their approach with the relevant ESRS requirements.
• Non-financial issuers must pay attention to situations where an economic activity is eligible to multiple environmental objectives. In these situations, companies are required to conduct an assessment for each relevant objective and report on respective eligibility and alignment.

It is recommended that issuers, auditors and supervisory bodies consider the topics and detailed recommendations included in the statement when preparing, auditing, and supervising the 2024 financial reports.

Tags:  CSRDDisclosure RequirementsSustainability