The European Securities and Markets Authority (ESMA) has told listed companies that balanced materiality assessments, connected disclosures and transparent targets will be the focus of its reviews of 2026 sustainability statements.
ESMA published its European Common Enforcement Priorities (ECEP) on 13 October, 2026. The annual statement sets out where ESMA and national enforcers will concentrate when reviewing the annual reports of companies listed on EEA regulated markets, and enforcers will take action where they find material misstatements.
On sustainability reporting, ESMA's first priority is materiality. One way this will be assessed is through reporting balance. It has observed that "some issuers provide more extensive disclosure on positive impacts than on negative impacts", and encourages both to be assessed with equal rigour across own operations and the value chain. Enforcers will also assess the connectivity of disclosures. The impacts, risks and opportunities (IROs) a company identifies should link clearly to its policies, actions, targets and metrics, and be consistent with the risks reported elsewhere in its annual report. Reviews will focus on climate change (ESRS E1) and own workforce (ESRS S1).
This year, particular attention is paid to targets. ESMA recommends they are measurable, time-bound and reported in absolute terms, not only as intensity measures. Companies claiming targets are “science-based” or aligned with “1.5 degrees” will need to explain whether and how they meet that description. Those with an updated target year, baseline year, value, or calculation methodology are urged to report this with transparency.
FY2026 is also a transitional year for sustainability, as companies can report under the original ESRS, the simplified "Set 2" standards or the original standards with certain Set 2 reliefs. ESMA expects them to state which version they have used and flag where this affects comparability with last year.
On the financial side, geopolitical risk tops the list, with the Authority calling for clearer disclosure of liquidity, covenants and fair value assumptions. Restructuring is the second priority, alongside a reminder for companies to prepare for IFRS 18, which takes effect in 2027.
Why it matters: ESMA's priorities closely track the questions investors already ask of corporate sustainability reports. For investors reviewing FY2026 disclosures, unexplained climate claims, missing absolute targets and shifts between ESRS versions are the points to watch.
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