European Securities & Markets Authority cracks down on underreporting of negative sustainability impacts

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🗞️ Driving the news: The European Securities and Markets Authority (ESMA) is increasing scrutiny of corporate sustainability reporting, warning against disclosures that give greater prominence to positive impacts than negative ones
• For 2026 reporting, regulators will focus particularly on climate change and companies’ own workforce under the Corporate Sustainability Reporting Directive (CSRD)

🔭 The context: ESMA’s 2026 enforcement priorities call for more rigorous materiality assessments and clearer links between companies’ impacts, risks and opportunities, policies, actions, targets and performance metrics
• Companies are expected to provide balanced information on positive and negative impacts, explain when material issues lack corresponding policies or targets, and substantiate claims that emissions targets are science-based or aligned with 1.5°C

🌍 Why it matters for the planet: More complete and credible climate disclosures can help investors assess corporate transition plans and distinguish measurable progress from unsupported claims
• Greater scrutiny of workforce impacts also reinforces the social dimension of sustainability reporting

⏭️ What’s next: Companies, auditors and national enforcement bodies will need to apply ESMA’s priorities to annual reporting
• The regulator’s focus on climate and workforce disclosures signals that selective or poorly connected sustainability information may face closer examination

💬 One quote: ESMA expects companies to provide “comparable granularity” in disclosures of positive and negative impacts. — European Securities and Markets Authority, as reported in its 2026 enforcement priorities

📈 One stat: 30% — The share of 367 sustainability statement examinations conducted in 2025 that led to enforcement actions, according to ESMA’s report on corporate reporting enforcement

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