On 14 October 2025 the European Securities and Markets Authority (ESMA) issued its annual Public Statement setting out the European common enforcement priorities (ECEP) for the 2025 annual financial reports (which includes sustainability statements and ESEF requirements) of issuers admitted to trading on European Economic Area (EEA) regulated markets.
ESMA, together with national enforcers in the EEA (enforcers), will pay particular attention to these areas when examining the application of the relevant reporting requirements.
Based on the examinations performed, enforcers will take enforcement actions whenever material misstatements are identified and ESMA will subsequently report on their findings.
ESMA underlines the responsibility of management and supervisory bodies of issuers as well as the importance of the oversight role of audit committees to:
- ensure the overall internal consistency of the annual financial report [including the sustainability statement],
- implement and supervise internal controls, and
- ultimately contribute to high-quality annual financial reports [including sustainability statements].
Cleerit’s summary and recommendations
- Conduct your DMA at the level of IRO (and not at the higher level of topics / sub-topics), and map your IROs to the sustainability matters in ESRS 1 AR 16.
- Add your entity specific topics when relevant if they are not present in AR 16.
- Mark your entity-specific topics disclosures for their easier identification within the statement.
- Describe the specific steps in your specific DMA process in detail as required by IRO-1, do not just reproduce ESRS 1 instructions or EFRAG guidance.
- The datapoint (ESRS2.53.g) describing the input parameters (evidence, data sources, scope of operations covered, assumptions…) used in process to identify, assess and manage material impacts, risks and opportunities (IROs), is particularly important.
- When disclosing on your materiality thresholds, be specific (per type of IRO, topic, etc) and not boilerplate generic, and detail the scales applied.
- Be transparent on how you have considered gross impacts (i.e., before the effect of any prevention, mitigation or remediation actions) .
- Do not confuse negative impact mitigation with positive impact, nor risk mitigation with opportunity.
- Affected stakeholders should be identifiable, and related disclosures should give an understanding of how their interests and views were integrated in the materiality process, when that was the case.
- Disclosures (especially SBM-3) should provide a complete view of your material IROs and how they relate to your strategy and business model and how you manage them.
- In this regard, ESMA reminds you of the embedded logic of the ESRS, whereby this objective is being achieved through disclosing the policies, actions and targets (MDR) – or the absence thereof – and metrics related to the corresponding sustainability matters.
- Ensure that the information is not excessively scattered in your report as this would defeat the overall purpose of readability and clarity.
- Include a reference to the Disclosure Requirement (and the datapoint) to increase the accessibility and readability of the sustainability statement. ESMA points out that this way, the disclosures are complete and adapted to the future digital tagging of the information.
- ESMA also encourages the use of hyperlinks to facilitate internal references.
- Use the IRO-management models provided in Cleerit to structure the description of your IROs, policies, targets, actions and related metrics.
- Use the ESRS templates provided in Cleerit, and click on the “?” of each datapoint to read and take into account the expected information. (Do not rely only on the information provided in the datapoint name.)
ESMA’s priorities related to sustainability statements
Due to the uncertainty linked to the current regulatory context, ESMA has exceptionally carried over two of the priorities from its ECEP 2024, namely the
- implementation of the ESRS requirements on materiality, and the
- scope and structure of the sustainability statement.
Both areas relate to fundamental features of sustainability reporting.
This year’s priorities on materiality considerations were also informed by the results of a fact-finding exercise ESMA conducted to take stock of evidence from the first cycle of ESRS reporting.
Read more about this analysis here: https://cleeritesg.com/index.php/2025/10/14/esma-has-analysed-91-esrs-statements-for-fy-2024-key-findings/
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Implementation of the ESRS requirements on materiality
Materiality considerations play a key role in sustainability reporting under the ESRS as the results of the two-step assessment (materiality of Impacts, Risks and Opportunities – IROs and materiality of information) determine the topical disclosures to be provided by the undertaking. As such, double materiality is the filter which ensures the decision-usefulness of reported information for all users of the sustainability statement.
Disclosure Requirement IRO-1
In the light of this structural importance of materiality, ESMA stresses the particular care that should be brought to the disclosures in ESRS 2 pertaining to the assessment process followed by the issuer.
The related Disclosure Requirement (IRO-1) is broken down in several datapoints in the current set of ESRS.
While ESMA’s fact-finding showed that this led to detailed accounts of the methodology and procedural steps taken, the resulting disclosures were in some cases boilerplate when they mostly reproduced the concepts defined in ESRS 1 or the generic approach suggested in EFRAG’s Implementation Guidance on Materiality Assessment (IG1).
Insufficient insight was sometimes provided on how individual issuers had adapted these criteria and steps to their facts and circumstances.
In this regard, ESMA wishes to highlight the datapoint related to the input parameters to the materiality assessment process.
This datapoint is meant to shed light on the basis for determining whether an IRO is material.
These inputs include the data sources, scope of operations that are covered (including in relation to specific geographies or activities) and other considerations, such as the key assumptions relied upon.
On the same line, the disclosures related to the thresholds should help users of the sustainability statement understand the main considerations relied upon for the determination of material sustainability matters, most notably for the matters whose materiality issuers were most uncertain of during the assessment process.
For negative impacts, this can be done through detailing the severity scale that was applied for particular matters.
For risks, disclosure of the indicator used for setting the threshold, or even of the quantitative threshold itself may be most enlightening.
ESMA also expects issuers to be transparent on how they have considered gross impacts (i.e., before the effect of any prevention, mitigation or remediation actions) in their materiality assessment process.
ESMA finally reminds issuers that information regarding the engagement with internal and external stakeholders for the purpose of the materiality assessment refers to affected stakeholders. This group of stakeholders should be identifiable, and related disclosures should help users understand how their interests and views were integrated in the materiality process, when that was the case.
Disclosure Requirement SBM-3
As for information on the results of the assessment process, ESMA underlines the importance of the ESRS 2 disclosures (SBM-3 and IRO-2) which can serve as entry points to the sustainability statement for users.
These disclosures should provide a complete view of the issuer’s material IROs and how they relate to its strategy and business model and also guide the user to where and how the management of these.
IROs (including entity-specific ones) is addressed in the topical sections of the sustainability statement.
In this regard, ESMA reminds issuers of the embedded logic of the ESRS, whereby this objective is being achieved through disclosing the policies, actions and targets – or the absence thereof – and metrics related to the corresponding sustainability matters.
Regarding the description of the IROs, ESMA recalls the disclosure requirement in SBM-3 of ESRS 2, including the related time horizon and whether the IROs arise in the issuer’s own operations or in the value chain.
ESMA recommends that this description also includes explanations of any interdependency among the material IROs, where relevant, and help ensure that the positive impacts identified are not confused with mitigation of negative impacts.
Regarding connection between the IROs and the topical disclosures, ESMA notes that comparability among issuers is better achieved when IROs are mapped to the ESRS topics and sub-topics and when the ESRS terminology is used in the description of the IROs, whenever relevant.
Together with the table of disclosures required in IRO-2 and EFRAG’s explanation of the links between ESRS sustainability matters and disclosure requirements, such mapping can assist the users of sustainability statements in more easily navigating through the topical disclosures. This mapping would also help with the identification of the IROs which are addressed by entity-specific disclosures, as required by SBM-3.
More generally, ESMA encourages as a good practice the systematic signposting of the entity-specific disclosures for their easier identification within the statement.
Non-material information
ESMA finally reminds issuers that non-material information, in cases allowed by the ESRS, should be clearly identified and not obscure material information.
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Scope and structure of the sustainability statement
Scope of the sustainability statement
Regarding the scope of the sustainability statement, ESMA reminds issuers that, according to ESRS 1, the sustainability statement shall be for the same reporting undertaking as the financial statements.
When the sustainability statements are subject to scope limitations with regards to entities in the value chain (see paragraph 133 of ESRS 1), ESMA stresses the need to be fully transparent and report on any consequences of such limitations.
In addition, in case the scope of targets has evolved compared to the previous year, issuers should be transparent about any adjustment to the baseline of their targets.
Structure of the sustainability statement
In line with its recommendations in the priority above, ESMA urges issuers to consider the usability and readability of the sustainability statement in line with paragraph 111 (b) of ESRS 1 which sets as a general objective for the presentation of the disclosures to facilitate access and understanding of the reported information.
A structure of the sustainability statement in four parts (General, Environment, Social, Governance) is prescribed by ESRS 1 but the ESRS also allow for some flexibility in the presentation of the different elements.
Cross-referencing within the sustainability statement, for instance, can be used to avoid unnecessary duplication and emphasise connections among disclosures.
However, issuers need to find a balance to ensure that the information is not excessively scattered as this would defeat the overall purpose of readability and clarity.
Similar considerations are valid for the issuers using the possibilities for incorporation by reference mentioned in ESRS 1.
ESMA notes that a practical solution for issuers to increase the accessibility and readability of the sustainability statement while making use of the flexibilities allowed by the ESRS can be to include a reference to the Disclosure Requirement (e.g., “E2-5”, “S1-5”) when disclosing the related information.
This way, the disclosures are complete and adapted to the future digital tagging of the information.
ESMA also encourages the use of hyperlinks to facilitate internal references.
Connectivity to other parts of the issuer’s corporate reporting
Finally, ESMA recalls that ESRS 1 requires issuers to illustrate the connections to other parts of their corporate reporting.
In this regard, ESMA highlights the requirement in ESRS 1 regarding the monetary amounts or other quantitative information included in the sustainability statement that are also presented in the financial statements (direct connectivity).
Taxonomy disclosures
As for Taxonomy disclosures, the Omnibus package included a Delegated Act amending the Taxonomy Disclosures Delegated Act and the Climate and Environmental Delegated Act.
The EC adopted this Delegated Act in July 2025. It will be in force after the scrutiny period if the co-legislators do not raise objections.
Undertakings are encouraged to apply the revised rules to their 2026 disclosures (financial year 2025) but have the option to apply the previous rules to that reporting cycle.
Acknowledging the changing regulatory environment, ESMA has not included specific recommendations on Taxonomy disclosures in the ECEP 2025.
Access the full document from ESMA here: https://www.esma.europa.eu/sites/default/files/2025-10/ESMA32-2064178921-9254_Public_Statement_-_2025_European_Common_Enforcement_Priorities.pdf
Access the full ECEP package from ESMA here: https://www.esma.europa.eu/document/2025-ecep-package
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