The scope of enforcement and regulatory activities reported relate to listed companies. As such, the report does not cover all enforcement and regulatory activities undertaken by enforcers.<\/p>\n
At the end of 2025, approximately 2,000 issuers\u2019 sustainability statements were within the scope of ESRS\u2011based enforcement in the EEA (Articles 19a and 29a), the Top-3 being:<\/p>\n
- \n
- 299 in Sweden,<\/li>\n
- 268 in Germany,<\/li>\n
- 223 in France \u2013<\/li>\n
- followed by 142 in Italy.<\/li>\n<\/ul>\n
2025 was the first year of ESRS enforcement for many issuers. In some Member States, CSRD was not yet transposed, so issuers remained under NFRD but some voluntarily applied ESRS.<\/p>\n
63% of issuers reported under ESRS following national CSRD transposition and 37% reported voluntarily under ESRS in jurisdictions where NFRD still applied (based on the analyzed sample).<\/p>\n
Enforcers continued to focus on improving the quality of sustainability reporting in 2025, in a way that acknowledges the learning curve which issuers are on and the changing regulatory environment during the Omnibus period. Expect less tolerance for shortcomings as ESRS moves into full enforcement.<\/p>\n
Most enforcement actions taken on statements prepared in accordance with the CSRD\/ESRS related to reporting on climate change under ESRS E1 (40%) and on the general disclosures required by ESRS 2 (36%).<\/p>\n
The high proportion of actions relating to the topical area of climate change reporting might be due to this area being more mature than other reporting areas and enforcers therefore having slightly higher expectations of issuers.<\/p>\n
Key takeaways for 2026 ESRS Preparers<\/strong><\/h2>\n
ESMA\u2019s 2025 enforcement cycle highlights three dominant themes for sustainability reporting:<\/p>\n
- \n
- Materiality disclosures remain overly generic<\/strong> – issuers must demonstrate how<\/em> they performed double materiality, not merely state that they followed ESRS instructions.<\/li>\n<\/ol>\n
- \n
- Terminology, referencing and connectivity are insufficient<\/strong> \u2013<\/li>\n<\/ol>\n
- \n
- frequent use of non\u2011ESRS terminology hinders mapping to ESRS topics and obscures the applicable disclosure requirements,<\/li>\n
- inconsistent referencing makes required information difficult to locate and hinders the overall cohesiveness of the sustainability narrative, and<\/li>\n
- missing links to the financial statements makes it difficult to understand how sustainability topics affect financial reporting.<\/li>\n<\/ul>\n
- \n
- Taxonomy Article 8 disclosures remain inconsistent<\/strong> – particularly the alignment between transition plans and Taxonomy objectives, and incomplete or unclear KPI referencing.<\/li>\n<\/ol>\n
In addition, two additional areas of attention emerge:<\/p>\n
- \n
- Preparing for digital mark\u2011up and XBRL tagging of sustainability statements <\/strong>– with particular emphasis on tagging completeness and machine readability: we learn that mandatory financial information must be presented as text and correctly marked up, not embedded in images.<\/li>\n
- Emerging interpretative issues discussed within the SRWG<\/strong> – enforcers continue to exchange cases to ensure consistent application of ESRS requirements, including: Portraying remediation of negative impacts as positive impacts; Treatment of franchise workers (S1 vs S2); Remuneration ratio when the CEO is not the highest\u2011paid individual (S1\u201116); Explaining how Taxonomy alignment was assessed; Financial undertakings stating they have no Taxonomy\u2011aligned activities.<\/li>\n<\/ol>\n
Materiality Assessment (ESRS 2 + topical standards)<\/strong><\/h2>\n
Overall quality of first<\/strong>\u2011<\/strong>year ESRS materiality reporting\u00a0 <\/strong><\/h3>\n
Most issuers described their double\u2011materiality assessment, but many disclosures remained generic and did not explain how the methodology was adapted to the issuer\u2019s own business model, value chain, or risk profile. Enforcers frequently noted boilerplate language and missing topical\u2011level detail, especially where issuers did not explain why certain sustainability matters were deemed not material.<\/p>\n
Process disclosures: thresholds, parameters, stakeholder engagement\u00a0 <\/strong><\/h3>\n
Around 60% of issuers provided adequate information on thresholds, input parameters, and stakeholder engagement. However, in many cases the disclosures lacked entity\u2011specific reasoning, making it difficult to understand how the assessment was actually performed or how decisions were reached.<\/p>\n
IRO identification and terminology issues\u00a0 <\/strong><\/h3>\n
Enforcers found frequent use of non\u2011ESRS terminology, which complicated the mapping to ESRS topics and sometimes obscured which topical disclosure requirements should apply.<\/p>\n
Completeness of ESRS disclosure requirement (DR) lists\u00a0 <\/strong><\/h3>\n
Most issuers provided a list of ESRS DRs they complied with, but lists were often incomplete, especially regarding datapoints derived from other EU legislation. Some issuers omitted DRs that should have been disclosed based on their own materiality conclusions.<\/p>\n
What this signals for 2026 (implicit expectations)<\/strong><\/h3>\n
- \n
- Describe your actual process, not the ESRS textbook steps.<\/li>\n<\/ul>\n
- \n
- Explain thresholds, parameters, weighting, stakeholder engagement, and how they influenced outcomes.<\/li>\n
- Use ESRS terminology consistently (impacts, risks, opportunities; sustainability topics).<\/li>\n<\/ul>\n
- \n
- Ensure traceability between IROs, sustainability topics, and topical DRs.<\/li>\n<\/ul>\n
- \n
- Provide a complete list of ESRS DRs complied with and datapoints from other EU legislation.<\/li>\n<\/ul>\n
- \n
- Ensure topical disclosures match the materiality results – no missing DRs for material topics.<\/li>\n<\/ul>\n
In short, mature, entity specific, auditable materiality processes<\/p>\n
Scope & Structure of the Sustainability Statement, including connectivity and financial linkages<\/strong><\/h2>\n
Scope and structure<\/strong><\/h3>\n
Most issuers confirmed that they prepared the sustainability statement for the same scope as that of the financial statements, but enforcers noted some cases of misalignment.<\/p>\n
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.<\/p>\n
Referencing practices and connectivity<\/strong><\/h3>\n
Only 35% of the issuers in the sample provided full information to enable an understanding of the connections to other parts of the issuers\u2019 corporate reporting.<\/p>\n
For some issuers who made use of incorporation by reference, enforcers identified situations where the use of incorporation by reference impaired the overall cohesiveness and readability of the sustainability statement, notably<\/p>\n
- \n
- when hyperlinks were broken or led to non\u2011existent webpages,<\/li>\n
- when large portions of governance and strategy, business model and value chain sections were redirected to broad sections of the Board of Directors\u2019 report spanning multiple pages and<\/li>\n
- when references to other reports (such as the consolidated management report) did not align with the sections indicated by the issuer, making required disclosures difficult to locate.<\/li>\n<\/ul>\n
These issues, combined with inconsistent referencing practices, created fragmentation and hindered users\u2019 ability to follow the sustainability narrative.<\/p>\n
Cross\u2011references were often incomplete, non\u2011specific or missing altogether, with many references pointing to broad financial statement notes that did not isolate sustainability\u2011related CapEx, OpEx, financial effects or resources required under ESRS.<\/p>\n
In other cases, issuers stated that no significant financial effects or dedicated resources existed and therefore did not reference the financial statements, while in others they disclosed financial effects without linking them to the corresponding accounting figures.<\/p>\n
Outside of Taxonomy issuers rarely provided page numbers, explicit datapoint identification or quantitative linkages, and in some cases the financial statements themselves did not contain the information implied in the sustainability report, resulting in fragmented, inconsistent and only partially connected reporting.<\/strong><\/p>\n
In many cases issuers either disclosed no current financial effects or had no action plans requiring significant CapEx or OpEx.<\/p>\n
References, when provided, were generic, incomplete or limited to taxonomy disclosures, with missing cross\u2011references, mismatched figures or unclear indications of whether effects were current or anticipated.<\/p>\n
Several issuers relied solely on qualitative descriptions of risks and opportunities and stated that no material financial effects existed, while others disclosed CapEx or OpEx amounts without connecting them to the financial statements.<\/p>\n
As a result, enforcers concluded that the disclosures did not provide the required linkage between sustainability information and the financial statements, leading to no or only very limited connectivity.<\/p>\n
What this signals for 2026 (implicit expectations)<\/strong><\/h3>\n
- \n
- Confirm full alignment between financial and sustainability consolidation scopes; explain any exceptions.<\/li>\n
- Follow ESRS structure and terminology rigorously to avoid ambiguity and ensure traceability.<\/li>\n
- Use incorporation by reference only when all ESRS conditions are met.<\/li>\n
- Ensure explicit cross\u2011references with page numbers, datapoint identifiers, and quantitative reconciliation.<\/li>\n
- Provide clear, traceable links between sustainability disclosures and the financial statements; no more generic or boilerplate connectivity statements.<\/li>\n
- Ensure consistency between sustainability statements and accounting figures.<\/li>\n
- Ensure Taxonomy KPIs tie back to the financial statements.<\/li>\n
- Clearly articulate current and anticipated financial impacts.<\/li>\n
- Reconcile CapEx, OpEx and other financial effects with the financial statements.<\/li>\n
- Ensure clear linkage between IROs, sustainability topics and their financial consequences, including how these relate to Taxonomy KPIs and transition planning.<\/li>\n
- Provide entity\u2011specific explanations of how sustainability topics affect financial reporting.<\/li>\n
- Substantiate when claiming no significant financial effects exist, supported by data rather than generic statements.<\/li>\n<\/ul>\n
Disclosures relating to Article 8 of the Taxonomy Regulation<\/strong><\/h2>\n
Consistency with transition plan<\/strong><\/h3>\n
Only 24% of issuers in the sample provided explanations in their ESRS E1-1 transition plan disclosures which showed consistency with any objective or plans reported for the alignment of activities with the Taxonomy criteria.<\/p>\n
For 40% of issuers in the sample there was no information under E1\u20111 and no Taxonomy objectives because the issuers explained that they had not yet developed a transition plan, lacked the necessary data, methodologies, evidence systems or sectoral frameworks to set Taxonomy\u2011related objectives, and therefore postponed alignment work to future years.<\/p>\n
What this signals for 2026 (implicit expectations)<\/strong><\/h3>\n
- \n
- Clearly articulate Taxonomy\u2011related objectives within transition plans, showing how activities will align with Taxonomy criteria over time.<\/li>\n
- Demonstrate consistency between ESRS E1\u20111 transition plan disclosures and Taxonomy alignment objectives, avoiding disconnects between climate strategy and Taxonomy reporting.<\/li>\n
- Ensure transparent disclosure of current and anticipated financial effects linked to transition pathways and Taxonomy alignment.<\/li>\n<\/ul>\n
Digital mark<\/strong>\u2011<\/strong>up and XBRL tagging <\/strong><\/h2>\n
To prepare for digital mark\u2011up, sustainability report preparers should also consider ESMA\u2019s and national enforcers\u2019 key messages on the compliance of Annual Financial Reports (AFRs) prepared and published in the ESEF format in 2025 (p.\u202f34):<\/p>\n
Machine<\/strong>\u2011<\/strong>readability requirements:<\/strong> To safeguard machine readability, issuers must avoid embedding mandatory elements of AFR and relevant financial information within images, ensuring that all mandatory disclosures are properly marked up and text\u2011based<\/strong>, where such disclosures are applicable.<\/p>\n
Use of PDF version:<\/strong> Where a PDF AFR is provided as an additional convenience – \u00a0for example, as a voluntary extra language version – issuers must include a clear disclaimer stating that the PDF is not the official report and that the ESEF version prevails for Transparency Directive purposes. Any inconsistencies or outdated PDFs should be corrected or replaced without delay.<\/p>\n
Tagging all numeric data:<\/strong> Issuers should ensure that all numbers in a stated currency are marked up even if part of a footnote, and that empty fields and\/or hyphens which represent the meaning \u201cnil\u201d are also transformed and marked up. This means that every single numeric value – even tiny ones in footnotes, and even \u201czero\u201d represented by a dash – must be tagged in XBRL, because un\u2011tagged numbers break machine\u2011readability, comparability, and automated analysis. (In XBRL\/ESEF, \u201cnil\u201d is a data point, not an absence of data.)<\/p>\n
Other issues that were discussed<\/strong><\/h2>\n
Within the Sustainability Reporting Working Group (SRWG), enforcers also discuss the application and enforcement of the sustainability information framework in regular meetings, ad-hoc conference calls or through written procedure. Case discussions enable enforcers to learn about the experience of other enforcers who have already encountered similar issues and to gather useful input for the analysis of technical issues.<\/p>\n
Examples of cases discussed:<\/p>\n
Portraying remediation of negative impacts as positive impacts <\/strong><\/h5>\n
Enforcers discussed the case of an issuer which had presented the possible remediation of negative impacts coming from its own business as positive impacts, using EFRAG\u2019s guidance as a reference point. The case was useful since it illustrates a tendency which enforcers might encounter and it furthermore provided enforcers with the occasion to discuss the clarification of this matter which is included in the draft revised ESRS.<\/p>\n
How to treat franchises in the sustainability statement <\/strong><\/h5>\n
The discussion revolved around whether to cover franchise workers under S1 (Own workforce \u2013 as non-employees) or S2 (Workers in the value chain). As the reporting obligations under S1 are more substantial, this question is 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.<\/p>\n
Remuneration disclosure when CEO is not highest paid individual <\/strong>(S1-16, paras 95 and 97b ESRS Set 1)<\/h5>\n
In relation to the requirement to disclose the ratio between the remuneration of an issuer\u2019s highest paid individual and the median remuneration for all employees excluding the highest paid individual, enforcers discussed an 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 \u201cCEO\u201d in the footnote reference to an SFDR PAI indicator whereas S1-16 itself consistently refers to \u201chighest paid individual\u201d which enforcers therefore agreed was the reference point.<\/p>\n
Disclosure on how alignment in relation Article 8 of the Taxonomy Regulation was assessed <\/strong><\/h5>\n
Enforcers discussed the requirement for disclosures explaining how issuers assessed the Taxonomy alignment of their activities. In one specific case, the issuer only briefly stated that it complied with the disclosure requirements regarding technical screening criteria and do no significant harm without providing any explanation or analysis regarding how it assessed its alignment. However, enforcers had generally seen several such cases and agreed that explanation was needed on the way in which issuers had assessed their alignment, notably for some activities where alignment is less obvious.<\/p>\n
Statement that financial undertakings have no Article 8 Taxonomy-aligned economic activities\u00a0 <\/strong><\/h5>\n
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.<\/p>\n
\nThe best way to prepare? Guided digital ESRS end-to-end templates.<\/strong><\/h2>\n
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\u00a0Contact us<\/a> if you want to use our guided and pre-markedup digital ESRS end-to-end templates to get a head start.<\/p>\n—<\/p>\n
The full Report on 2025 Corporate reporting enforcement and regulatory activities published on 7 May 2026 by ESMA is available here:<\/p>\n
- Ensure topical disclosures match the materiality results – no missing DRs for material topics.<\/li>\n<\/ul>\n
- Provide a complete list of ESRS DRs complied with and datapoints from other EU legislation.<\/li>\n<\/ul>\n
- Ensure traceability between IROs, sustainability topics, and topical DRs.<\/li>\n<\/ul>\n
- Emerging interpretative issues discussed within the SRWG<\/strong> – enforcers continue to exchange cases to ensure consistent application of ESRS requirements, including: Portraying remediation of negative impacts as positive impacts; Treatment of franchise workers (S1 vs S2); Remuneration ratio when the CEO is not the highest\u2011paid individual (S1\u201116); Explaining how Taxonomy alignment was assessed; Financial undertakings stating they have no Taxonomy\u2011aligned activities.<\/li>\n<\/ol>\n
- Preparing for digital mark\u2011up and XBRL tagging of sustainability statements <\/strong>– with particular emphasis on tagging completeness and machine readability: we learn that mandatory financial information must be presented as text and correctly marked up, not embedded in images.<\/li>\n
- Taxonomy Article 8 disclosures remain inconsistent<\/strong> – particularly the alignment between transition plans and Taxonomy objectives, and incomplete or unclear KPI referencing.<\/li>\n<\/ol>\n
- Terminology, referencing and connectivity are insufficient<\/strong> \u2013<\/li>\n<\/ol>\n
- Materiality disclosures remain overly generic<\/strong> – issuers must demonstrate how<\/em> they performed double materiality, not merely state that they followed ESRS instructions.<\/li>\n<\/ol>\n