• ESMA’s 2024 enforcement priorities include double materiality assessments, detailed sustainability disclosures, and taxonomy alignment for corporate reporting.
• Sustainability reporting under CSRD now affects 50,000+ companies, requiring expanded disclosures on environmental, social, and governance impacts.
• The regulator’s statement signals stricter compliance expectations, with readiness for enforcement action where necessary.

The European Securities and Markets Authority (ESMA) has released its 2024 European Common Enforcement Priorities (ECEP) Statement, setting strict guidelines on corporate reporting requirements. This year’s priorities focus heavily on sustainability reporting, specifically under the Corporate Sustainability Reporting Directive (CSRD), with emphasis on materiality assessments, taxonomy compliance, and integration with financial reporting.

Enforcement Priorities for 2024

ESMA and European enforcers are sharpening their focus on the following areas for the upcoming reporting cycle:

1. Double Materiality Assessments
   A core component of the CSRD, double materiality requires companies to assess and report on both the impact of sustainability issues on business and the company’s impact on the environment and society. ESMA stressed the importance of conducting thorough materiality assessments and reporting transparently on the process.“Conducting a thorough materiality assessment covering both impact and financial materiality is the starting point for the determination of the information to be disclosed in the sustainability statement,” ESMA stated.
2. Connectivity Between Sustainability and Financial Statements
   ESMA’s statement underscores the need for alignment between financial and sustainability reports, including consistency in reporting entities and quantitative information. This year, companies are required to ensure that sustainability statements reflect value chain risks and opportunities, even as they navigate transitional value chain reporting reliefs.
3. Taxonomy Compliance for Environmental Goals
   The EU Taxonomy serves as a classification system for sustainable economic activities. ESMA reminded issuers to use the mandated taxonomy templates, especially for activities aligned with multiple environmental objectives. Proper taxonomy disclosure ensures transparency and comparability, which remain central to the EU’s sustainability framework.

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Industry Reactions and Future Considerations

Following the release of ESMA’s priorities, sustainability reporting experts observed the regulator’s strong stance on compliance.

Tom Willman, Regulatory Lead at Clarity AI, commented on the shift in tone from the European Commission’s approach, stating:

“The overall message of ESMA’s statement is that it stands ready to inspect and take enforcement action wherever necessary. This appears to diverge from the European Commission’s recent messaging, which suggests that the rollout of CSRD continues to be a bumpy road, with potential room for proportionality in supervision and enforcement.”

ESMA’s clear expectations set the stage for a rigorous approach to corporate sustainability reporting under the CSRD, signaling to issuers, auditors, and supervisors the importance of compliance as sustainability reporting becomes a central element of EU financial oversight.