ESMA Sets 2026 Enforcement Priorities for ESRS Sustainability and IFRS Reporting

The European Securities and Markets Authority (ESMA) has published its 2026 European Common Enforcement Priorities (ECEP), identifying the areas regulators will examine when reviewing annual financial reports of companies listed on regulated markets in the European Economic Area. Announced on 13 October 2026, the priorities cover sustainability reporting under the European Sustainability Reporting Standards (ESRS), IFRS financial statements and digital reporting through the European Single Electronic Format (ESEF). ESMA said the framework aims to improve reporting quality while supporting regulatory simplification and reducing unnecessary compliance burdens.

 

For sustainability reporting, ESMA will focus on how companies conduct and disclose their double materiality assessments, which determine the sustainability impacts, risks and opportunities considered significant for reporting. The regulator wants companies to assess positive and negative impacts with equal rigour and explain how material issues have been identified across their operations and value chains. Companies should also clearly identify which version of the ESRS they have applied, as transitional reporting options are available for the 2026 financial year.

 

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Another priority is improving the connection between identified impacts, risks and opportunities (IROs), corporate policies, actions and targets (PATs), and reported sustainability metrics. ESMA will pay particular attention to disclosures under ESRS E1 Climate Change and ESRS S1 Own Workforce. Companies are expected to explain how their sustainability policies and targets address material risks, disclose where targets do not cover the full scope of an identified issue and provide information about resources allocated to relevant actions. ESMA also emphasised consistency between sustainability statements and financial reports, including the disclosure of material financial effects associated with sustainability risks.

 

For IFRS financial statements, ESMA identified geopolitical uncertainty and corporate restructuring as major enforcement areas. Companies should provide relevant disclosures about liquidity risks, financing arrangements, asset valuations and the financial consequences of geopolitical developments. The regulator will also examine how issuers recognise restructuring provisions and account for changes to debt arrangements, including whether modifications require financial liabilities to be derecognised. These priorities reflect the potential effects of economic uncertainty on financial reporting estimates, judgements and disclosures.

 

ESMA's digital reporting priority addresses recurring ESEF filing errors in the statement of changes in equity, particularly incorrect tagging, incomplete disclosures and inconsistencies in numerical information. The regulator also published its 31st extract from the European enforcement database, containing seven decisions relating to IFRS Accounting Standards and Alternative Performance Measures guidelines. ESMA and national enforcement authorities will consider the priorities when reviewing 2026 reports and may take enforcement action where material misstatements are identified. Issuers, auditors and supervisory bodies are expected to apply the recommendations according to their relevance and materiality.

 

Source: The European Securities and Markets Authority (ESMA)