"ESMA exposes the shortcomings of Europe's non-financial reporting regulation", 20 April 2020

The European Securities and Market Authority (ESMA) has published its report “Enforcement and regulatory activities of European enforcers in 2019”, which includes the results of its assessment and actions taken to ensure the correct implementation of the reporting requirements introduced by the EU Non-Financial Reporting Directive...

The report frequently mentioned shortcomings such as the lack of quantitative disclosure, objective targets and accompanying assessment of whether the issuer was meeting those targets. Similarly, they referred to insufficient or missing descriptions of due diligence processes – particularly in relation to human rights and social matters - and mentioned insufficient description of risks and disclosures on environmental and climate change-related matters. This is in line with every major qualitative assessment of corporate sustainability reporting, including the research on 1000 EU companies non-financial statements carried out by the Alliance for Corporate Transparency...

ESMA’s report provided some numbers that could appear fairly optimistic concerning compliance of examined companies with the Directive. So, where is the catch?  

This is explained by the limits of enforcement of the law, as the requirements included in the Directive are vague and do not specify what concrete sustainability information should be disclosed... In other words, there is a significant difference between meeting the basic requirements and providing good disclosure. This is confirmed by the ESMA report, which states in general conclusion to the sample reviewed that there is significant room for improvement in the disclosures examined by enforcers...