ESMA publishes 2025 Report on EU corporate reporting enforcement and regulatory activities

ESMA has analysed enforcements for sustainability reporting in the EEA

The ESMA enforcement report considers activities related to supervision and enforcement of corporate reporting between 1 January 2105 and 31 December 2025 in the EEA area. It is intended to provide key messages to improve future financial and sustainability reporting by assessing how issuers have complied with the existing reporting frameworks.

In this briefing, we will focus on the third chapter of the report setting on the enforcement of sustainability reporting in the EU. Primarily this refers to information drawn up under the ESRS and Article 8 of the Taxonomy Regulation and pursuant to the Transparency Directive. ESMA also looked at compliance with the priorities set out in the 2024 European common enforcement priorities (“ECEP”).

At the end of 2025, approximately 2,000 issuers’ sustainability statements were in scope of enforcement. In 2025, the Corporate Sustainability Reporting Directive (“CSRD”) applied to some issuers, whilst in some Member States the CSRD had not been transposed, meaning that the Non-Financial Reporting Directive (“NFRD”) still applied, though some chose to voluntarily prepare reporting according to the ESRS.

ESMA reports that of the examinations carried out on sustainability statements prepared under the ESRS, 25% related to voluntarily prepared sustainability statements who were not yet subject to the ESRS because their Member States had not transposed the CSRD, showing that issuers were beginning to report under ESRS even if not legally obliged to do so.

The 2025 examinations led to enforcement actions towards 109 issuers (including voluntary and mandatory reporting under both NFRD and CSRD), although the report explains that each action could have multiple areas of non-compliance.

Most enforcement actions taken on statements were related to climate change reporting under ESRS E1 (40%) and on general disclosures required by ESRS E2 (36%). The topic with the next most enforcements was ESRS S1 on own workforce (8%).

Enforcers almost exclusively required issuers to correct infringements in future sustainability statements, recognizing that the issuers are on a learning curve whilst reporting under the ESRS and that the regulatory environment was in upheaval with the omnibus simplification process ongoing during this period.

Looking at the European common enforcement priorities (“ECEP”) – key takeaways for sustainability report issuers were identified

In October 2024, ESMA published the ECEP. In order to analyze how these were taken into account by issuers, enforcers examined a sample (not random but selected to represent risk across the EU).

Overall the enforcers took actions against 15 issuers in the sample, requiring them to correct the relevant matter in future sustainability statements. In addition, 19 ECEP examinations of 2024 are still ongoing and may result in potential additional enforcement action.

The report sets out key finding and recommendations derived from the ECEP assessment set out under each of three priorities, as follows:

• Materiality considerations. “In the first year of application of the ESRS, disclosures on the materiality assessment process and description of the material impacts, risks and opportunities [(“IROs”)] were found satisfactory for a majority of issuers, but enforcers also identified several areas for improvement.”
  • Although the majority of issuers disclosed satisfactory information on the double materiality assessment, enforcers found the process disclosures generic with little information about how the issuers had adapted the required or suggested steps to their own considerations and topical information was missing in many cases.
  • Enforcers found that different terminology was used in the description of IROs so it was difficult to map the disclosed IROs to ESRS sustainability matters and to identify the related topical disclosures.
  • A vast majority of issuers disclosed the list of ESRS disclosure requirements they had complied with and the list of datapoints from other EU legislation, but for the latter part of the information was sometimes missing.
• Scope and structure of the sustainability statement. “The scope and structure of the sustainability statement, as prescribed by the ESRS, were generally complied with. Issuers relied on the flexibility to make use of incorporation by reference but did not always respect the mandatory conditions. Direct connections with financial disclosures were often missing.”
  • Enforcers noted some cases of misalignment between the consolidated sustainability statement and the financial statements even though issuers had confirmed that they were aligned.
  • Issuers generally followed the structure of the sustainability statement in four parts, as prescribed by the ESRS, although enforcers identified some deviations where custom structures were implemented and/or some information was positioned outside the designated section.
  • Although a large majority of issuers made use of incorporation by reference, some did not comply with the ESRS requirements. Enforcers found that, in a limited number of cases, the use of incorporation by reference impaired the overall cohesiveness and readability of the sustainability statement.
  • A low number of issuers provided full information enabling an understanding of the connections between the sustainability statement and other parts of the corporate reports. Part of the sample made no connection at all, either because financial information was entirely missing from their sustainability disclosures, or because it was not reconciled with the financial statement.
• Disclosures relating to Article 8 of the Taxonomy Regulation. “Consistency between the Taxonomy objectives and the ESRS transition plan disclosures was only relevant for a minority of the sample and was not always achieved in those cases. When reporting their KPIs, most issuers referenced their financial statement and notes, but enforcers also noted cases of partial connection.”
  • Consistency between the transition plan and Taxonomy disclosures could only be assessed when the issuer had disclosed both a transition plan and Taxonomy objectives, which was not the case for most of the sample. Where both had been reported, inconsistencies were noted in some cases.
  • A majority of issuers made reference to their financial statement and notes when disclosing their turnover and CapEx KPIs, although some disclosures were partial.
  • Close to half of the non-financial issuers of the sample reported activities eligible for multiple environmental objectives. Most of the limited number of financial issuers in the sample which are parent of a financial conglomerate disclosed a consolidated group level KPI. A few of the financial issuers made voluntary disclosures of estimates of the Taxonomy alignment of their exposures.

Additional details on considerations and reporting are included in the Annexes to the ESMA enforcement report.

The ESMA enforcement report also contained a snapshot of the activities and output of the Sustainability Reporting Working Group (“SRWG”). It notes that the SRWG discusses the application and enforcement of the sustainability information framework in regular meetings. In the report the following examples were highlighted as representative examples:

Under ESRS

• Portraying remediation of negative impacts as positive impacts: An issuer presented the possible remediation of negative impacts coming from its own business as positive impacts, using EFRAG’s guidance as a reference point. The case presented enforcers with the opportunity to discuss the clarification of this matter by including clarificatory wording as follows in the draft revised ESRS: “The results of prevention, mitigation or remediation actions to address negative impacts the undertaking is connected to, or compliance with law and regulation, are not positive impacts.
• Treatment of franchises: Enforcers discussed whether to cover franchise workers under S1 (Own workforce – as non-employees) or S2 (Workers in the value chain). As the reporting obligations under S1 are more substantial, the enforcers found this question important. Enforcers considered that classification may depend on the nature of the franchise contract, notably whether the issuer controls the work performed by the franchise workers which, enforcers agreed, was usually not the case.
• Remuneration disclosure when CEO is not the highest paid individual: There was some variance in how the ratio between the remuneration of an issuer’s highest paid individual and the median remuneration for all employees excluding the highest paid individual was reported. Enforcers observed diversity in application whereby some issuers calculate the ratio based on the remuneration of the CEO even when they are not the highest paid individual while other issuers use the remuneration of the highest paid individual even when they are not the CEO. The divergence likely comes from the word “CEO” in the footnote reference to an SFDR PAI indicator whereas S1-16 itself consistently refers to “highest paid individual” which enforcers therefore agreed was the reference point.

Article 8 of the Taxonomy Regulation

• Disclosure on how alignment was assessed: Disclosures of how issuers assessed the Taxonomy alignment of their activities was often lacking analysis regarding how it assessed its alignment with technical screening criteria and do no significant harm. Enforcers agreed that explanation was needed on the way in which issuers had assessed their alignment, notably for some activities where alignment is less obvious.
• Statement that financial undertakings have no Taxonomy-aligned economic activities: Enforcers discussed how to apply the new provision in the Amending Delegated Act, published by the Commission in July 2025, according to which financial undertakings do not have to report under the Taxonomy provided that they include a statement in the management report that they do not have Taxonomy-aligned economic activities. Notably, enforcers discussed that, if this statement is to be covered by the assurance engagement, it has to sit within the part of the management report dedicated to sustainability reporting.

The report gives some insight into how enforcers are reviewing sustainability statements and the general mistakes that issuers are making. ESMA has also highlighted areas where clarity needs to come from the enforcers.

EFRAG analysis on the first set of CSRD-aligned reports

On 23 July 2025, EFRAG published its analysis on the first set of CSRD-aligned sustainability statements. In total, EFRAG examined 656 CSRD reports. Alongside this, EFRAG new “2025 State of Play” portal has been launched to present all EFRAG’s analysis reports of each CSRD-aligned statement.

Key finding from EFRAG include:

• Materiality Coverage: Only 10% of companies identified all 10 topical ESRS standards as material. Climate Change (E1), Own Workforce (S1), and Business Conduct (G1) were the most commonly disclosed.
• Stakeholder Engagement Gaps: 97% involved internal stakeholders in materiality assessments, but engagement with broader societal stakeholders remains rare.
• Transition Plans: 55% of companies disclosed a climate transition plan, though approaches and formats vary.
• Reporting Depth and Length: Sustainability statements vary widely in length with financial institutions producing longer reports on average.
• Underreported Topics: Biodiversity and internal carbon pricing remain limited in disclosures. Human rights incidents are rarely reported, despite other social data being present.

EFRAG stated that it used this report to inform its work on the ESRS simplification in the context of the omnibus simplification package.

Preparing sustainability statements in 2026

This type of feedback from the regulators and standard-setters is genuinely useful for those preparing sustainability statements either for the first time or building on previous experience. EU regulators acknowledge that there is an adjustment period for companies complying with CSRD especially given uncertainty due to the omnibus simplification package, but they will nonetheless expect companies to take into account feedback they have made public.