More than 100 sustainability reports triggered enforcement action last year

European supervisor’s latest data comes as study shows spike in firms identifying negative impacts in workforce disclosures

Europe’s regulators took enforcement action against more than 100 companies over their sustainability disclosures last year.   

The European Securities and Markets Authority (ESMA) has revealed that, during 2025, supervisors examined the contents of 367 statements produced in compliance with either the Non Financial Reporting Directive or the Corporate Sustainability Reporting Directive (CSRD). 

In 30% of cases, the inspections resulted in enforcement action. 

“Most actions required the issuer to make a correction in a future sustainability statement,” explained ESMA. 

It did not name any of the companies. 

For CSRD reports, the lion’s share (40%) of enforcement action related to climate disclosures, followed by general disclosures (36%). 

A further 8% concerned disclosures companies made about their own workforces.

Academic research published last week showed that companies are increasingly recognising their workforces – captured under ‘S1’ of the EU’s reporting rules – as potential drivers of negative sustainability impacts.  

The study found that firms were broadly identifying fewer ‘material’ impacts, risks and opportunities in their FY2025 CSRD reports than for FY2024.  

“That’s to be expected, as companies work out which issues really matter,” said Jan Nahrstedt, a research assistant at Hamburg University, and author of the research. 

Contrary to this trend, though, there was a 7.4% increase in entities identifying potential negative impacts as part of their S1 disclosures.  

“Almost every company has identified S1 as material, so there’s been no change in terms of overall materiality,” Nahrstedt told Real Economy Progress. 

“What’s striking is that the workforce is now being seen more from a negative perspective.”

He said most negative impacts under S1 stem from issues like gender pay gaps or accidents in the workplace.  

“Positive impacts have dropped, whereas negative impacts rise, which creates an increasingly negative framing for materiality on S1.” 

ESMA’s Sustainability Reporting Working Group addressed a number of issues relating to S1 during its 2025 discussions, including whether franchise workers were covered, and what companies should do if their CEO is not their highest-paid employee. 

The European Commission wants to remove explicit requirements for the disclosure of some workforce metrics under a proposed new version of the European Sustainability Reporting Standards, published last week.