• 69% of companies disclosed climate transition plans for FY2025, up from 55% a year earlier.
• Only 57% reported near-term and long-term targets aligned with a 1.5°C pathway.
• Companies set measurable targets for just half of the sustainability topics they identify as material.

Brussels-based EFRAG has found that European companies are rapidly expanding climate transition planning, but many still lack measurable targets across their wider sustainability priorities.

The 2026 State of Play Report reviewed 905 sustainability statements prepared for fiscal year 2025. Each statement had received third-party assurance under the EU Corporate Sustainability Reporting Directive, or CSRD.

EFRAG assessed the reports against 18 questions covering the European Sustainability Reporting Standards. The sample grew from 656 statements in the inaugural study, providing a broader view of reporting practices across countries and sectors.

Climate planning expands across Europe

The proportion of companies declaring a climate transition plan rose to 69% in FY2025. That compares with 55% in the previous reporting cycle.

EFRAG recorded the same 14-percentage-point increase when comparing companies included in both annual studies. Spain led national adoption at 89%, followed by France at 85% and Denmark at 81%.

Real estate companies reported the highest sectoral adoption rate, at 95%. Administrative and support services followed at 82%. Banks led among financial institutions, with 78% disclosing a plan.

The results suggest that transition planning is moving closer to standard corporate practice. However, the quality and ambition of those plans remain uneven.

Only 57% of companies disclosed both near-term and long-term decarbonisation targets compatible with limiting warming to 1.5°C.

EFRAG said this was 12 percentage points below the climate transition plan adoption rate. It added that “a meaningful share of preparers who report having a Climate Transition Plan have not yet explicitly referred in their targets to 1.5°C compatibility.”

For investors, the distinction is material. A published transition plan does not automatically provide evidence that capital expenditure, operating plans and emissions targets align with global climate goals.

Material issues still lack measurable targets

EFRAG also examined how companies connect materiality assessments with strategic management.

On average, companies identified 6.4 of the ten ESRS topics as material. Yet they established measurable targets across only 3.3 topics.

EFRAG described the difference as “a widening discrepancy between what companies have defined as their strategic priorities and what emerged to be a material topic.”

Climate change and workforce issues received the strongest target coverage. Some 98% of companies reported at least one climate target, while 82% reported a target covering their own workforce.

The weaker coverage across pollution, water, biodiversity, affected communities and value-chain workers may attract greater scrutiny. Boards increasingly face questions about whether double materiality assessments influence resource allocation or remain largely reporting exercises.

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Executive incentives show stronger governance links

The report found that 63% of companies embedded sustainability targets into executive incentive schemes.

That leaves 37% without a formal connection between sustainability performance and executive remuneration.

Spain recorded the highest national rate at 92%. France followed at 90%, while Germany reached 84%.

Manufacturing led by sector at 74%. Electricity, gas, steam and air-conditioning companies reached 69%. Financial institutions averaged only 52%, although the insurance sector reached 70%.

Remuneration links can strengthen accountability, but investors will still need to examine target weightings, performance thresholds and payout outcomes.

Reporting broadens beyond climate

Climate change, own workforce and business conduct remained the most commonly identified material topics. Each was considered material by at least 95% of companies.

However, environmental coverage also widened. In like-for-like comparisons, pollution rose from 40% to 45%, water and marine resources from 33% to 38%, biodiversity from 40% to 44%, and circular economy issues from 65% to 69%.

For corporate leaders, the report presents a mixed picture. CSRD reporting is becoming more established, and climate planning is advancing. Yet measurable targets, executive accountability and 1.5°C alignment remain incomplete.

As the EU continues simplifying its sustainability reporting framework, these gaps will shape the debate over how to reduce compliance burdens without weakening decision-useful disclosure.

Read the EFRAG State of Play 2026 Report here.