The ESMA publishes guidelines for the enforcement of sustainability information under CSRD

On 5 July 2024, the European Securities and Markets Authority (ESMA) published its 'Guidelines for the Enforcement of Sustainability Information' (the GLESI), which set out its expectations of national competent authorities' (NCAs) approach to enforcement with respect to companies reporting under the EU Corporate Sustainability Reporting Directive (CSRD).

Background

The CSRD entered into force on 5 January 2023 and requires in-scope EU companies to report on specified sustainability matters (including, in some cases, on their third country parents), with the first wave of reports expected to be published next year in respect of financial years commencing on or after 1 January 2024. Our previous blog on the CSRD is available here.

Being an EU Directive rather than a Regulation, the CSRD does not have direct effect in EU Member States' national legal systems but must be transposed into national law by implementing legislation (the deadline for which was on 6 July 2024). ESMA issues the GLESI in order to coordinate and align national enforcement practices for which the NCAs are responsible.

The GLESI

The GLESI comprises 22 guidelines grouped into six key areas:

• 'Basic concepts' – sets out the key objective of enforcement action by NCAs;
• 'Enforcers' internal organisation' – guidelines for NCAs to ensure an effective enforcement process;
• 'Selection' – guidelines on how NCAs should approach the selection of securities issuers whose sustainability reports they choose to examine;
• 'Examination' – guidelines for NCAs in examining selected sustainability reports;
• 'Enforcement actions' – enforcement actions to be taken by NCAs; and
• 'European coordination' – guidelines for NCAs to ensure a high level of harmonization in their respective approaches to enforcement.

While the GLESI is not strictly binding on NCAs, NCAs must make every effort to comply with it and must notify ESMA whether they:

• comply with the GLESI;
• do not comply but intend to comply; or
• do not comply and do not intend to comply, and the reasons for such non-compliance.

Notably, the GLESI includes direct responses by ESMA (in Q&A format) to feedback received in response to a Consultation Paper issued on 15 December 2023, which invited public comment on an initial draft of the GLESI.

Comment

While the GLESI is principally aimed at NCAs rather than companies required to report under the CSRD, in-scope companies should nonetheless be aware of ESMA's expectations with respect to NCAs' approach to enforcement. In particular, companies whose reports are subject to examination, investigation or enforcement action from NCAs will want to know whether the manner in which such examination, investigation or enforcement action is conducted is compliant with the GLESI in order to be better equipped in their dealings with NCAs. ESMA has separately issued a 'Public Statement' setting out guidance for companies preparing sustainability statements under the CSRD due to be published in 2025, which we cover separately here.