EFRAG has opened a public consultation on draft sustainability reporting standards for certain non-EU undertakings, setting out how large international groups with significant EU activity may have to report under the Corporate Sustainability Reporting Directive.
The exposure draft, known as ESRS-40a, is open for consultation from 23 July to 31 October 2026. It follows Article 40a of the Accounting Directive, under which the European Commission is required to adopt dedicated European Sustainability Reporting Standards for certain non-EU companies.
Reporting under ESRS-40a is expected to become mandatory for financial years starting on or after 1 January 2028, with the first sustainability statements expected to relate to financial year 2028 and be published in 2029.
The proposed standards apply to non-EU undertakings that generate more than €450m net turnover in the EU during each of the previous two consecutive financial years and either have an EU branch generating more than €200m or are the ultimate parent of EU subsidiaries generating more than €200m.
EFRAG said the objective is to ensure a level playing field for EU market operators and transparency over how large non-EU undertakings with significant EU activities affect people and the environment.
The consultation asks for feedback on several sensitive areas, including the removal of requirements relating to risks, opportunities, resilience, and dependencies, references to EU legislation where operations sit outside the bloc, interoperability with IFRS-based sustainability standards, and whether a “mixed approach” to global and EU-related reporting is workable.
That mixed approach is likely to attract close scrutiny. EFRAG documents say the proposal would allow reporting companies to limit some reporting to EU-related impacts rather than global impacts, except in certain areas. EFRAG has acknowledged that the approach reflects a European Commission request and that its Sustainability Reporting Board expressed reservations.
ESG Today reported that EFRAG members raised concerns that the mixed approach may weaken comparability, impair understanding, and make it difficult to separate EU-related impacts from global impacts. Those concerns are especially acute in areas such as human rights, climate, pollution, supply chains, and biodiversity, where impacts do not always map neatly onto jurisdictional boundaries.
The consultation follows the European Commission’s adoption of revised sustainability reporting standards intended to reduce administrative burdens for EU companies while maintaining disclosure quality. The Commission said the revised ESRS reduce mandatory datapoints by more than 60% and total datapoints by more than 70%, forming part of a wider Omnibus simplification package.
European policymakers are trying to reduce reporting cost and complexity while preserving transparency, investor usefulness, and accountability. Non-EU groups are now being drawn into the same debate, particularly where they compete in the EU Single Market against companies already subject to CSRD disclosure obligations.
UK-headquartered groups with substantial EU operations should not treat the draft standards as a remote Brussels technicality. The thresholds mean only larger groups are likely to be caught directly, but companies below formal scope may still feel the pressure through customers, lenders, investors, suppliers, and procurement questionnaires. Sustainability reporting requirements often travel through value chains before they apply directly.
Systems architecture will be another pressure point. Multinational groups may already be building reporting processes around IFRS Sustainability Disclosure Standards, UK transition plan expectations, voluntary frameworks, investor reporting, and internal climate risk governance. ESRS-40a adds another layer, and the interoperability question will determine whether companies can avoid duplicate data collection, inconsistent definitions, and conflicting assurance processes.
Assurance and governance will also require attention. Sustainability data still often sits across finance, procurement, risk, legal, operations, HR, and environmental teams, with different levels of control and documentation. A large group caught by ESRS-40a will need to show that its reporting perimeter, methodology, and evidence base can withstand scrutiny.
The consultation period gives companies, advisers, investors, auditors, NGOs, and standard setters a chance to shape the final technical advice. EFRAG expects to launch a cost benefit analysis in mid-August and is encouraging stakeholders to provide views on expected costs and benefits.
The direction of travel remains clear despite simplification. Sustainability reporting is becoming more selective, more focused on large entities, and more tightly connected to market access. The companies most exposed will be those with complex global supply chains, significant EU revenue, and public commitments on climate, labour, and environmental impact that require robust data behind them.
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