European Securities Regulator Prioritises ‘Double Materiality’ in CSRD Enforcement. ESG Broadcast Shares Key Takeaways.
Regulatory Extract
The European Securities and Markets Authority (ESMA) released its annual Public Statement on October 14, 2025, detailing the European Common Enforcement Priorities (ECEP) for the 2025 corporate reporting cycle of issuers admitted to trading on European Economic Area (EEA) regulated markets. The statement notably placed a firm emphasis on sustainability statements, marking 2025 as the first reporting year for certain large public-interest entities (“Wave 1” companies) under the Corporate Sustainability Reporting Directive (CSRD). Due to uncertainty linked to the evolving regulatory landscape, ESMA took the exceptional step of carrying over two core priorities from its 2024 ECEP related to sustainability reporting: Materiality considerations in reporting under ESRS and the Scope and structure of the sustainability statement.
Regarding materiality, ESMA underscored its structural importance, stressing that the two-step double materiality assessment—covering Impacts, Risks, and Opportunities (IROs) and the materiality of information—served as the critical filter ensuring the decision-usefulness of reports. National enforcers were directed to scrutinise the process and related disclosures, which ESMA found to be sometimes boilerplate in the first reporting cycle. Issuers were urged to provide entity-specific details on their assessment process, including input parameters, the thresholds used (such as the severity scale for negative impacts), and how they considered gross impacts. Furthermore, issuers were reminded to clearly disclose the results of the assessment, specifically how material IROs related to the entity’s strategy and business model, and to map these IROs to the European Sustainability Reporting Standards (ESRS) topics using the correct terminology to improve comparability.
On the scope and structure of the sustainability statement, ESMA called for improvements in usability and readability. Issuers were reminded that a consolidated sustainability statement must align with the same scope of consolidation used for the consolidated financial statements, while extending coverage to material IROs within the entity’s value chain. The four-part structure (General, Environment, Social, Governance) prescribed by ESRS 1 should be followed, but issuers needed to find a balance in using cross-referencing to avoid both unnecessary duplication and information scattering. A suggested good practice to increase accessibility was including the relevant Disclosure Requirement reference (e.g., “E2-5”) and employing hyperlinks. Finally, ESMA reinforced the necessity of illustrating the connectivity between the sustainability statement and other corporate reporting, specifically for monetary or quantitative information present in both the sustainability and financial statements.
Strategic significance lies in ESMA’s firm signal to the market that despite the regulatory flux caused by the EC’s Omnibus package, fundamental principles of high-quality sustainability reporting remained a top-tier enforcement priority. By focusing on materiality and structure, the European regulator essentially sought to accelerate issuers’ progress along their learning curve and ensure that the newly mandated sustainability statements delivered clear, comparable, and decision-useful information to stakeholders from the outset of the CSRD era.
