On 5 July 2024, the European Securities and Markets Authority (ESMA) published a 'Public Statement' setting out its expectations for the first wave of sustainability statements due to be submitted under the EU Corporate Sustainability Reporting Directive (CSRD) in 2025.
Background
The CSRD entered into force on 5 January 2023 and requires in-scope EU companies to report on specified sustainability matters (in some cases including their third country parents). Reporting standards are set out in the European Sustainability Reporting Standards (ESRS) and information will need to be disclosed in a 'sustainability statement', with the first wave of sustainability statements expected to be published by relevant in-scope companies next year in respect of their relevant financial year commencing on or after 1 January 2024. Our previous blogs on the CSRD and ESRS are available here and here.
Public Statement
The Public Statement is intended to assist in-scope companies in preparing the first sustainability statements due to be published in 2025 by pointing to key elements of guidance previously published by the EU Commission and EFRAG (the EU Commission's technical advisors in drafting the ESRS), and highlighting key areas ESMA views as being particularly important for reporting companies to implement in preparing their sustainability statements.
In its Public Statement, ESMA sets out a number of principles that companies should observe in preparing their first sustainability statements for publication which are set out in the table below. Some of these principles and expectations set a relatively high bar for companies.
| Management / the supervisory board (including the audit committee) are responsible for ensuring, through internal processes and controls that the sustainability statement is consistent and of high quality. | Companies should consider all guidance from the EU Commission and EFRAG and raise any questions via the EFRAG platform or submit them to the national supervisory authorities. |
| Companies should collect and analyse data in such a way to ensure the data meets the quality requirements of ESRS 1. The sustainability statement should contain meaningful information on internal controls and processes. | Companies should review and reassess existing processes, systems and controls that are in place under NFRD or other standards, including materiality assessments, to determine if they continue to be suitable for the requirement of CSRD and ESRS and are in accordance with EFRAG guidelines. |
| Companies are to be transparent about any data that is missing or of limited reliability. However, in ESMA's view, the ESRS do not allow omission of information on material topics to be omitted, even if the data is missing. This should be covered by the transitional provisions in the value chain, but beyond that, a lack of data is no excuse. | Companies should ensure that the sustainability statement is consistent with their financial reports and includes relevant links across the reports. |
| Companies should include all data points required under other EU requirements even where not material, but they should explicitly state which data points are not material. | The sustainability statement should only include information by reference (e.g. lists used for GRI reporting) if the statement maintains its readability and does not require further context. |
| For each topic identified as material, all related disclosure requirements and data points must be reported. However, the company must acknowledge if there is no relevant information to report. Companies must also include detailed information on the materiality assessment process for all topics, even those not ultimately considered material. | Only relevant company-specific topics (outside the ESRS topics) should be included in the sustainability statement. |
Comment
While the Public Statement does not shed new light on the obligations of companies reporting under the CSRD, it is nonetheless a useful summary of key areas likely to be scrutinized by stakeholders and national competent authorities. It also provides useful guidance on the limited leeway that will be offered to first time reporters. Accordingly, companies preparing their sustainability statements under the CSRD for publication in 2025 should ensure that they address the key areas highlighted in the Public Statement.
ESMA has separately issued Guidelines on Enforcement of Sustainability Information (GLESI), which set out its expectations of national competent authorities' approach to enforcement with respect to companies reporting under the CSRD. Please see our separate coverage of the GLESI here.
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