ESMA Report Shows Progress on Corporate Reporting but Warns Against Boilerplate Disclosures

Key Takeaways

• ESRS Enforcement Debuts: 2025 marked the first year regulators across the EEA enforced sustainability disclosures under the European Sustainability Reporting Standards (ESRS) and ESMA’s sustainability enforcement guidelines.
• Entity-Specific Reporting Still a Challenge: ESMA said many issuers improved disclosures around liquidity, accounting judgments, and sustainability risks, though a meaningful minority still relied on reporting that lacked sufficient specificity.
• Digital Reporting Remains a Focus Area: National enforcers continued scrutinizing ESEF filings, pushing issuers to improve the quality, consistency, and usability of digitally tagged financial information.
• Sustainability Reporting Gaps Persist: Regulators identified weaknesses in how some issuers connected sustainability disclosures with financial reporting and taxonomy-related transition plan information.

Deep Dive

The European Securities and Markets Authority (ESMA) published its annual review of corporate reporting enforcement activity across the European Economic Area, offering a snapshot of how national regulators supervised financial, sustainability, and digital reporting throughout 2025, which was a year that marked a  turning point for ESG disclosures in Europe.

While the report spans traditional financial reporting and electronic filing requirements, much of the attention centered on the first full year of enforcement tied to the European Sustainability Reporting Standards (ESRS), the EU’s sweeping sustainability disclosure framework that is reshaping how companies communicate climate, governance, and broader sustainability risks to investors.

The challenge in 2025 was not simply whether companies disclosed sustainability information, but whether those disclosures were meaningful, connected, and useful.

ESMA said enforcement efforts throughout the year continued to promote reporting that is “material, transparent, entity specific, and useful for decision-making,” language that reflects the regulator’s growing frustration with overly standardized or boilerplate disclosures that fail to explain how risks actually affect a business.

The report draws on supervisory activity carried out by national enforcers across the EEA and assesses how companies performed against ESMA’s 2024 European Common Enforcement Priorities.

In several areas, regulators saw signs of progress.

ESMA said most issuers provided sufficiently transparent information around liquidity-related risks and arrangements, a notable focus area given the broader economic uncertainty that has continued to pressure corporate balance sheets across Europe. Companies also generally improved disclosures tied to accounting policies, judgments, and significant estimates, with many issuers delivering more tailored and decision-useful reporting.

Still, regulators stopped short of giving companies a clean bill of health.

According to the report, a “meaningful minority” of issuers continued to fall short by failing to align disclosures with identified risks, reinforcing ESMA’s longstanding push for reporting that reflects company-specific realities rather than templated language.

The same pattern emerged in sustainability reporting.

National enforcers found that first-year ESRS disclosures on materiality assessments and descriptions of material impacts, risks, and opportunities were satisfactory for a majority of issuers, but they also identified several areas requiring improvement.

Companies generally complied with requirements governing the scope and structure of sustainability statements, ESMA said, though regulators flagged concerns over how some issuers used incorporation by reference. In several cases, companies failed to fully meet prescribed conditions, while direct links between sustainability disclosures and financial statements were often missing.

The review also examined disclosures tied to Article 8 of the EU Taxonomy Regulation, where regulators found inconsistencies between taxonomy objectives and ESRS transition plan disclosures in cases where those requirements applied. While many issuers linked key performance indicators back to financial statements and notes, ESMA said partial connections and incomplete integration remained an issue.

Alongside sustainability reporting, regulators continued devoting a lot of attention to digital reporting under the European Single Electronic Format (ESEF), which requires issuers to publish annual financial reports in XHTML format and digitally tag IFRS consolidated financial statements using iXBRL.

ESMA said national enforcers worked throughout the year to improve the quality, consistency, and usability of marked-up financial information. Most issuers demonstrated “clear progress” in implementing the regulator’s expectations, particularly around common errors in statements of financial position, though some lingering issues remained among a smaller group of companies.

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