The European Securities and Markets Authority (ESMA) has expressed concerns about proposals for permanent relief from reporting requirements outlined by the European Financial Reporting Advisory Group (EFRAG) in its technical advice on the revised European Sustainability Reporting Standards (ESRS). This response follows a formal request from the European Commission on December 16, 2025, seeking ESMA’s input on EFRAG’s recommendations, which were published shortly after on December 3, 2025.
ESMA’s response highlights significant issues with the proposed relief measures for preparers, suggesting they could jeopardize high-quality disclosure of essential information and disrupt the consistent application of reporting standards across the European Union. Among the specific relief areas highlighted are those related to the undue cost of reporting metrics, the omission of quantitative information regarding anticipated financial effects, and the exclusion of joint operations from environmental metrics.
ESMA strongly recommends that all proposed reliefs be given a time limit, potentially aligning with other transitional provisions scheduled for review by fiscal year 2029. The agency emphasizes that these relief measures should be seen as exceptional, warning that their number and permanence might encourage opportunism and undermine the aim of enhancing sustainability reporting quality.
Further concerns arise regarding the difficulty in assuring the definitions and standards for these reliefs, which could increase the reporting burden for organizations while complicating supervisory assessments. This could lead to inconsistencies in the application of the ESRS across member states.
In addressing climate-related reporting requirements intertwined with the Paris Agreement, ESMA pointed out conflicting objectives within the draft standards. It urged for a clearer definition of “compatibility” with the Paris Agreement’s goals and more guidance on how this relates to corporate strategies and greenhouse gas emission reduction targets. The agency also called for clarity surrounding the transition plans for climate change mitigation disclosures.
Despite these concerns, ESMA acknowledged that the draft revised ESRS by EFRAG includes substantial improvements regarding simplification and reducing the reporting burden. Nonetheless, the response indicates that significant issues need addressing before these standards can effectively protect investors and uphold financial stability.
ESMA’s comprehensive feedback signals an ongoing commitment to refining sustainability reporting standards in alignment with rigorous financial oversight and climate goals, highlighting the importance of clarity and consistency in these evolving frameworks.