Sustainability Reporting

ESMA coordinates national enforcers’ supervision of sustainability reporting, contributes to the EU’s process of developing European Sustainability Reporting Standards (ESRS), monitors the development of the ISSB’s IFRS Sustainability Disclosure Standards and provides feedback to the European Commission on sustainability reporting legislation.

ESMA's Mandate

ESMA’s mandate on sustainability reporting relates to companies with securities listed on a regulated market (i.e., listed issuers) and covers their disclosure under the Non-Financial Reporting Directive (NFRD) – from 2025 replaced by the Corporate Sustainability Reporting Directive (CSRD) and the accompanying European Sustainability Reporting Standards (ESRS) – as well as the disclosures required by  the Taxonomy Regulation Article 8.

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Coordinating national enforcers’ supervision of sustainability reporting

Listed issuers’ sustainability reporting is subject to supervision by national enforcers in the European Economic Area (EEA). This encompasses examining the compliance of sustainability information with the applicable reporting requirements and taking appropriate measures when infringements against these requirements are identified. 

ESMA coordinates national enforcers’ supervision through its Sustainability Reporting Working Group (SRWG) which brings together representatives from the various EEA countries, providing them with a forum to discuss and share their experiences with the application and enforcement of sustainability reporting requirements.

In the summer of 2024, ESMA published Guidelines on Enforcement of Sustainability Information. The Guidelines help enforcers carry out their supervision of listed issuers’ sustainability information under the European Sustainability Reporting Standards (ESRS) and Taxonomy Regulation Article 8 in a converged manner and ensure that this supervision closely resembles the supervision of listed issuers’ financial information.

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European Common Enforcement Priorities

In order to ensure European supervisory convergence when applying the criteria for selection and examination of sustainability information, enforcers take account of the European Common Enforcement Priorities (ECEP) which they identify together with ESMA and which ESMA publishes on an annual basis. These recommendations make sure that listed issuers subject to the Non-Financial Reporting Directive (NFRD) – from 2025, the Corporate Sustainability Reporting Directive (CSRD) – are aware of the topics which ESMA and national enforcers deem particularly important to cover in the sustainability information reported for a given year.

ESMA included the first reference to the requirements of the NFRD in its ECEP for 2017, and since then, the ECEP for each year have presented increasingly detailed recommendations in this area:

In addition to the ECEP, national enforcers may decide to set further disclosure priorities which are relevant from a national perspective.

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First application of ESRS

In 2025, undertakings previously subject to the NFRD will publish their first sustainability statements in accordance with the European Sustainability Reporting Standards (ESRS). ESMA has provided guidance to issuers in relation to this first year of application of the ESRS in two publications during 2024:

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Report on corporate reporting enforcement and regulatory activities

Each year, ESMA publishes a report on enforcement and regulatory activities related to corporate reporting, including sustainability reporting. Among other aspects, the report follows up on listed issuers’ application of the European Common Enforcement Priorities (ECEP).

For the ECEP covering year N, enforcers assess listed issuers’ application in year N+1 and the report summarising this application is published in year N+2 (for example, the report in which ESMA described listed issuers’ application of the 2022 ECEP, assessed by national enforcers during 2023, was published in 2024).

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Contributing to European standard-setting

The Corporate Sustainability Reporting Directive (CSRD) – published in the Official Journal of the European Union in December 2022 – among other measures introduces more detailed disclosure requirements and establishes mandatory European Sustainability Reporting Standards (ESRS). 

EFRAG, in its role as technical advisor to the European Commission, is responsible for developing draft versions of the ESRS. ESMA follows EFRAG’s work closely and contributes to it as an observer at both the level of the Technical Expert Group and the Board.

▸ Preliminary implementation timeline for the CSRD along with other sustainable finance disclosure legislation

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Current status of the standard-setting process

ESRS for large undertakings

In April 2022, EFRAG launched a public consultation on exposure drafts of draft European Sustainability Reporting Standards (ESRS) Set 1, directed at large undertakings. ESMA submitted a response to this consultation. EFRAG delivered the final version of ESRS Set 1 to the European Commission in November 2022.

Prior to adopting the delegated acts which establish the ESRS, the Corporate Sustainability Reporting Directive (CSRD) requires the European Commission to seek the opinion of EBA, EIOPA and ESMA. As part of this process, in January 2023 ESMA submitted an opinion to the European Commission on the draft ESRS Set 1. ESMA’s opinion was based on an assessment framework developed to ensure a robust and consistent methodology for the successive opinions ESMA will deliver on draft ESRS.

In June 2023, the European Commission published a draft version of the delegated act with ESRS Set 1 for a month of public consultation. The final delegated act was adopted by the European Commission in July 2023 and published in the Official Journal of the European Union on 22 December 2023, entering into force on the following day and applying to financial years beginning on or after 1 January 2024.

For information about the digital reporting of sustainability information under ESRS Set 1, please see here.

To support large undertakings in preparing their sustainability information in accordance with ESRS Set 1, EFRAG issues implementation guidance and publishes answers to technical questions submitted by stakeholders. ESMA provides input to this implementation support as an observer in EFRAG’s Sustainability Reporting Technical Expert Group and Board.

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ESRS for listed SMEs

EFRAG is in the process of preparing European Sustainability Reporting Standards (ESRS) for listed small and medium-sized entities (SMEs), small non-complex institutions and captive (re)insurance undertakings. An exposure draft was published for comment between January and May 2024 and ESMA submitted a response to the consultation. EFRAG is now finalising the draft ESRS for listed SMEs based on feedback to the consultation.

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ESRS for specific sectors and for third country companies

In addition to the European Sustainability Reporting Standards (ESRS) for large undertakings and ESRS for listed SMEs – both of which are sector-agnostic, EFRAG is tasked with delivering sector-specific ESRS which define the information that undertakings should disclose depending on their sector of activity. Furthermore, EFRAG is charged with developing ESRS for group level reporting by non-EU companies whose EU branches or subsidiaries are within the scope of the Corporate Sustainability Reporting Directive (CSRD).

Work on these draft standards is underway, and ESMA is providing input via its observer role in EFRAG’s Sustainability Reporting Technical Expert Group and Board.

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Providing feedback to the European Commission on sustainability reporting legislation

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Reports on greenwashing (2023-2024)

In response to a request from the European Commission, ESMA – alongside EBA and EIOPA – delivered input on greenwashing risks and the supervision of sustainable finance policies through a progress report in May 2023 and a final report in June 2024. Among other aspects, the reports contained a definition of greenwashing as well as findings and recommendations in relation to issuer disclosures due to their critical role in the sustainable investment value chain.

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Advice on disclosure under Article 8 of the Taxonomy Regulation (2021)

Article 8 of the Taxonomy Regulation obliges companies required to publish non-financial information under the Non-Financial Reporting Directive (NFRD) – from 2025, the Corporate Sustainability Reporting Directive (CSRD) – to include information on how and to what extent their activities are associated with economic activities that qualify as environmentally sustainable under the Taxonomy Regulation. For this purpose, companies are required to disclose the proportion of their turnover, capital expenditure and operating expenditure associated with economic activities that qualify as environmentally sustainable.

In March 2021, ESMA delivered advice to the European Commission regarding how to specify the content, presentation and methodology of the information to be disclosed by non-financial companies and asset management companies.

A Commission Delegated Regulation related to this advice entered into force at the end of December 2021. The Commission has published a number of FAQs with guidance related to the Commission Delegated Regulation (see heading 3 “FAQs repository”).

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Monitoring international standard-setting

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ISSB standards on general disclosure requirements and climate-related disclosures

The European Sustainability Reporting Standards (ESRS) were developed at the same time as the International Sustainability Standards Board (ISSB) prepared its two first IFRS Sustainability Disclosure Standards, relating to general requirements for disclosure of sustainability-related financial information and climate-related disclosures, respectively. Through the International Organization of Securities Commissions (IOSCO), ESMA monitored and contributed to the ISSB’s work to develop a global baseline for international sustainability reporting standards.

During the drafting process, EFRAG and the European Commission worked with the ISSB to ensure that the two sets of reporting standards are inter-operable, both to ensure helpful disclosure to investors and to limit unnecessary burden on companies, an effort which ESMA strongly supports. In May 2024, EFRAG and the IFRS Foundation published joint inter-operability guidance on the alignment between the ESRS and the IFRS Sustainability Disclosure Standards.

ESMA also contributed to IOSCO’s assessment of the ISSB’s standard-setting work which ultimately led to IOSCO’s decision to endorse the IFRS Sustainability Disclosure Standards (issued June 2023) in July 2023.

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Further work by the ISSB

ESMA continues to monitor the standard-setting activities of the International Sustainability Standards Board (ISSB) in order to support inter-operability with the European Sustainability Reporting Standards (ESRS).

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