ESMA Guidelines on the Enforcement of Sustainability Information (GLESI)

Corporate Sustainability Reporting Directive (CSRD)  2022/2464, published in the Official Journal of the European Union on 16 December 2022, expands the range of businesses that must report on sustainability and requires the European Commission to adopt mandatory European sustainability reporting standards as delegated acts. In order to promote convergent supervision of sustainability reporting by issuers covered by the Transparency Directive, the CSRD mandates ESMA to issue guidelines on the supervision of sustainability reporting by competent national authorities.

On December 15, 2023, ESMA, in accordance with Article 16 par. 2 of the Regulation on ESMA has published a consultation document (CP) with proposed draft guidelines on the enforcement of sustainability information (GLESI).

• The aim of the regulation is to improve the reporting of sustainability information by businesses. This should benefit citizens, savers, trade unions and employee representatives, who will have access to relevant information and will be able to better engage in social dialogue. Savers who want to invest in a sustainable way will have more information at their disposal.
• The regulation extends the obligation to report sustainability information to other categories of businesses. In addition to large enterprises that are subjects of public interest, this also applies to all large enterprises and enterprises with the exception of micro-enterprises whose securities are traded on a regulated market in the EU. The reason is the growing interest of investors and civil society in information about sustainability.
• The obligation to report information on sustainability also applies to companies from third countries whose securities are traded on a regulated market in the EU. The aim is to satisfy the needs of investors and ensure a level playing field for companies operating in the EU internal market. These businesses must provide information on their impact on social and environmental issues.
• Small and medium-sized enterprises, with the exception of micro-enterprises whose securities are traded on a regulated market in the EU, must also disclose information on sustainability. This measure is intended to protect investors and ensure the access of smaller listed companies to financial capital.
• The regulation introduces the concept of "double significance". Businesses must report information about their impact on people and the environment (business impact) as well as how aspects of sustainability affect the business (business risks).
• The due diligence process is also an important part of sustainability reporting. Businesses must identify, monitor and address actual and potential adverse impacts of their activities on people and the environment.
• The regulation sets standards for reporting information on sustainability. These standards should take into account existing EU legislation on environmental and social issues. They should be understandable and comparable.
• Sustainability reporting should be subject to assurance. Initially, assurance will be required based on limited verification. Subsequently, it is transferred to assurance based on adequate verification.
• Member States must ensure that sustainability information is publicly available. Companies whose securities are not traded on a regulated market must publish their management report in electronic format.
• Member States may introduce measures to support small and medium-sized enterprises in applying sustainability reporting standards.
• The regulation also establishes sanctions for non-compliance with obligations in the field of reporting information on sustainability.