Europe’s financial regulators are gearing up to review the 2026 corporate reporting season. The European Securities and Markets Authority (ESMA) recently issued its enforcement priorities for corporate reporting. The agency identifies several sustainability priorities as items of interest for the regulator. At the top of the list is a continued focus on strengthening the double materiality assessment (DMA) process. The ESMA believes that companies are focusing too much on disclosures that paint themselves in a positive light:
“During the DMA process, ESMA encourages issuers to assess positive and negative impacts with the same level of rigour. ESMA has observed that some issuers provide more extensive disclosure on positive impacts than on negative impacts which may not give users a sufficiently balanced view of the issuer. According to the qualitative characteristics, a neutral depiction shall cover favourable/positive and unfavourable/negative aspects in a balanced way and give equal attention to negative impacts, positive impacts, risks and opportunities. As such, issuers should provide clear disclosure on any impact materiality thresholds – especially when they use different thresholds for assessing the materiality of their positive and negative impacts – and disclose their positive and negative impacts with comparable granularity.”
This issue is a natural growing pain during the transition from voluntary to mandatory reporting. In the past, companies have dictated the contents of sustainability disclosures. That often translated to focusing on the positive in an attempt to tell a compelling story. This culture persisted even in the EU, where the NFRD (precursor to the CSRD) prescribed some disclosure standards. While there’s nothing wrong with this approach in a voluntary framework, the CSRD is attempting to cut fluff and narrative and focus on metrics and facts. The ESMA’s enforcement priorities for corporate reporting indicate that regulators are serious about companies striking a neutral tone.
Our members can learn more about corporate ESG reporting practices here.
