ESMA issues public statement on ESRS

Find out more about the public statement on ESRS 

ESMA calls on members of the governing bodies of issuers, as well as on those providing assurance on sustainability statements, to ensure that the aspects highlighted in this public statement are carefully considered.

ESMA emphasises, in particular, the responsibility of the governing bodies, as well as the importance of the oversight role of the audit committee and other relevant committees, to (i) ensure the internal consistency of the sustainability statement and its consistency with the other parts of the annual financial report; (ii) implement and supervise internal controls; and ultimately (iii) contribute to a high-quality sustainability statement.

In practice, ESMA’s statement focuses on two main areas:

·   the resources that preparers and auditors should draw on when preparing and auditing the first sustainability statements: ESMA reminds them of the support material provided by the European Commission and EFRAG. It is important to consult the support material already published (FAQs, implementation guidance, explanations, etc.; see “European Highlights” in this issue) and to escalate unanswered questions through EFRAG’s Q&A platform, which was launched last October. EFRAG observes that, while most of the issuers who will publish a sustainability statement in 2025 already have experience with the Non-Financial Reporting Directive (NFRD), the novelty and depth of the exercise when applying the CSRD create challenges;

·   2025 reporting marks the start of a multi-year learning curve; however, ESMA notes that acknowledging this learning curve does not relieve issuers of their responsibility to ensure compliance with ESRS. The key areas to consider in 2025 are as follows:

    • establishing governance arrangements and setting up appropriate information systems and internal controls – even companies with experience of the NFRD must carefully assess whether the existing processes, systems and controls are still fit-for-purpose;

    • carrying out a robust double materiality assessment – an undertaking that previously reported under the NFRD will often need to reconsider the process and its associated disclosures. ESMA therefore encourages companies to consider the process described as an illustration in chapter 3 of EFRAG’s implementation guidance on the materiality assessment (IG 1) in the design or update of their materiality assessment. Moreover, ESMA emphasises that properly applying the qualitative characteristics of sustainability information (cf. Appendix B of ESRS 1) is essential to prevent greenwashing. ESMA also underlines that transparency is required on how the materiality assessment has been carried out, and points out that the information required by Disclosure Requirement IRO-1 (a description of the processes to identify and assess material impacts, risks and opportunities) is mandatory for all the topics covered by ESRS, regardless of the outcome of the materiality assessment. ESMA also reminds issuers of the principles governing disclosure requirements on material impacts, risks and opportunities identified. In particular, ESMA emphasises the importance of the materiality assessment in the case of metrics, since if a metric is not published, this implicitly suggests that the metric is not material (with the exception of metrics required under other European legislation such as the SFDR, for which an undertaking must indicate where the metric is presented, or state that it is not material);

    • being transparent about the use of transitional reliefs permitted by ESRS 1 and about any uncertainties and data limitations, as well as the methodologies applied and significant assumptions used. This is essential to enable users of the sustainability statement to evaluate any limitations in comparability of information. ESMA notes that, as a general rule, the ESRS do not envisage cases in which a lack of data justifies the omission of disclosure of material information. Finally, ESMA reminds issuers that any complementary information that is not specifically required by ESRS must not obscure material information;

    • preparing a sustainability statement whose structure facilitates the future digitisation of published disclosures, with close attention paid to historical practices that may no longer be consistent with the legislation (cf. especially the conditions that must be met to incorporate information by reference);

    • creating connectivity between financial and sustainability information.

ESMA also emphasises the importance for issuers of engaging in continuous training and dialogue with industry peers, as well as with auditors (or independent assurance services providers, if appropriate).

The public statement will be complemented by the publication at year-end of ESMA’s annual European Common Enforcement Priorities, which will cover sustainability reporting under ESRS, as well as disclosures required under the Article 8 of the Taxonomy Regulation that must be included in the sustainability statement.