EFRAG consults on proposed sustainability reporting standards for non-EU companies

What you need to know

• On 23 July 2026, the European Financial Reporting Advisory Group (EFRAG) launched a consultation on an exposure draft of ESRS-40a. The Exposure Draft provides the proposed European sustainability reporting standards for non-EU companies that are required to publish a sustainability report under the Corporate Sustainability Reporting Directive ((EU) 2022/2464) (CSRD).
• EFRAG is anticipated to provide technical advice to the EU Commission on ESRS-40a in January 2027. Following a public consultation, the Commission is expected to adopt a delegated act on ESRS-40a in time for non-EU companies to report in 2029 for financial years starting on or after 1 January 2028.

What you need to do

• Identify whether your group, or any subsidiary or branch, is in-scope of the non-EU entity CSRD requirements in Article 40a of the Accounting Directive (EU) 2013/34).
• Based on the requirements in the draft ESRS-40a, in-scope entities, should start a gap analysis of the availability of the required data across their value chain to establish reporting processes ahead of the FY2028 reporting deadline.

Background

As part of the simplification of CSRD requirements under the First Omnibus Package, EFRAG was tasked with reviewing the original European Sustainability Reporting Standards (ESRS) that were adopted in 2023 by the EU Commission.

In July 2026, the EU Commission adopted delegated regulations on the ESRS for EU companies in-scope of the CSRD and a voluntary sustainability reporting standard for entities not in-scope of the CSRD regime (see EU adopts simplified ESRS and sustainability reporting standard for voluntary use).

EFRAG's work on developing a reporting standard for non-EU companies in-scope of CSRD was paused during the Omnibus simplification process.

The EU Commission is obliged by Article 40b of the Accounting Directive, to adopt a delegated act by 30 June 2026 specifying the sustainability information to be included in their reports by non-EU entities in-scope of the CSRD. EFRAG's 2026 work plan that was published in April 2026, provided for an extended timeframe in developing the ESRS for non-EU companies.

EFRAG Consultation on ESRS-40a exposure draft

On 23 July 2026, EFRAG published a consultation on an exposure draft of ESRS-40a, a dedicated set of ESRS for non-EU undertakings.

ESRS-40a will inform EFRAG's technical advice to the EU Commission on the development of ESRS to support compliance by in-scope non-EU entities with their reporting obligations under the CSRD.

Who will ESRS-40a apply to?

The ESRS-40a exposure draft is aimed at EU subsidiaries and EU branches of non-EU parent undertakings.

Under the Accounting Directive 2013, as amended by the Content Directive ((EU) 2024/470), an EU subsidiary or branch established in the EU will fall in scope where:

• its net turnover exceeds EUR 200 million in the preceding financial year; and
• its ultimate non-EU parent (at group or, where relevant, individual level) generated net turnover in the EU exceeding EUR 450 million in each of the last two consecutive financial years.

Where these thresholds are met, the EU subsidiary or branch must publish and make accessible an ESRS-40a sustainability report covering the material impacts of the wider non-EU parent undertaking or group, not just the EU entity itself.

An EU subsidiary does not need to produce a separate ESRS-40a report where its non-EU parent already reports under full ESRS, or an equivalent standard, with the required assurance and accessibility.

Key features of the Exposure Draft

• ESRS-40a retains the same overall architecture as the revised ESRS adopted in July, with 12 standards covering general requirements, general disclosures, environmental topics, social topics and business conduct.
• The Exposure Draft is based on the same double-materiality-derived, impact-focused approach used in the ESRS, but adapted and simplified for a non-EU reporting population.
• The Exposure Draft introduces a proposed “mixed approach” to reporting scope where, other than for climate-related impacts, an undertaking may in certain circumstances limit reported information to impacts connected with products, services or activities sold, provided or carried out in the EU market (“EU-related impacts”), rather than reporting on a fully global basis.
• The option to use the mixed approach is available only where the undertaking can meaningfully identify EU-related impacts. AR 6 for paragraph 29 of the Exposure Draft provides guidance on the factors that in-scope non-EU companies should consider when determining EU-related impacts. They include whether value chains are dedicated to products and services that were, or can be reasonably assumed to be, sold or provided in the EU market.
• Value chain and due diligence provisions are broadly aligned with the mainstream ESRS, including reliance on reasonable and supportable information available without undue cost or effort, and reliefs for newly acquired or disposed subsidiaries.
• The Exposure Draft includes transitional provisions for undertakings applying ESRS-40a for the first time, as well as phase-ins for specified disclosure requirements.
• The consultation also asks for feedback on interoperability with other jurisdictional or international sustainability reporting frameworks, including IFRS Sustainability Disclosure Standards-aligned regimes, to help reduce duplicative reporting burdens for groups already reporting elsewhere.

Timing and deadline for responses

The consultation runs until 31 October 2026. EFRAG expects to deliver its final technical advice to the European Commission in January 2027.

Following a public consultation, the Commission is expected to adopt a delegated act on the ESRS for non-EU entities in time for them to publish their first sustainability reports, which are due in 2029, for financial years starting on 1 January 2028.

Practical implications for clients

The proposals will be relevant to non-EU headquartered groups operating through EU subsidiaries or branches in capital-intensive or high-turnover sectors:

• Financial services and insurance groups should assess how ESRS-40a interacts with existing sustainability, prudential and investor-facing reporting processes, particularly where group reporting is already aligned with other regimes.
• The climate-related impacts of energy, industrial, transport and other high-impact sectors will require particular scrutiny, because it is proposed that the mixed approach will not apply to them.

More broadly, in-scope groups face a significant new compliance and data-governance exercise of aligning group-level sustainability data, often held outside the EU, and not always structured in ESRS-compatible form, with EU disclosure and assurance requirements.

What clients should consider doing now

• Map your group structure against the Article 40a turnover thresholds to identify whether EU subsidiaries or branches are likely to be in scope.
• Identify what group-level impact data is currently available and where key gaps may arise, including in upstream and downstream value-chain information.

For support on how the proposals may affect your group, preparation of a consultation submission or beginning compliance planning, please contact the individuals below.

Want to know more?

• EU adopts simplified ESRS and sustainability reporting standard for voluntary use.
• EU sustainability reporting Omnibus reaches destination as Content Directive agreed.
• First European Sustainability Reporting Standards (ESRS) apply from 1 January 2024.

Other authors: Becky Clissmann, Counsel; Giovanna Ventura, Senior Regulatory Affairs Adviser