European Securities and Markets Authority (ESMA) has published a statement on the first application of the European Sustainability Reporting Standards, along with its final guidelines on enforcement of sustainability information (GLESI). ESMA considers that regulatory enforcement of sustainability information plays an important role in sustainability reporting achieving the same quality as financial information.
ESMA identifies focus areas that are appropriate for first-time reporting under the European Sustainability Reporting Standards. While recognising that there is a learning curve for companies reporting under the standards, it emphasises that this does not relieve companies from the responsibility to ensure compliance with the ESRS. In this regard, it points out that the ESRS themselves do not generally envisage omission of disclosure of material information because of lack of data. ESMA reminds companies of the importance of transparency on uncertainties, data limitations, significant uncertainties and use of transitional reliefs. It emphasises the importance of a robust and thorough double materiality assessment, and connectivity with financial information.
The statement underlines the oversight responsibility of those charged with governance in achieving a high-quality sustainability statement that is consistent with other parts of the annual report. In particular, ESMA focuses on the need for robust processes and internal controls that contribute to the quality and credibility of the sustainability statement and are important preconditions for external assurance.
Assurance, along with regulatory enforcement, supports a system of high-quality corporate sustainability reporting which, as ESMA notes, is critical to address greenwashing and promote the well-functioning of the sustainable investment value chain, thereby supporting the transition towards a sustainable economy.
