The European Financial Reporting Advisory Group (EFRAG) has published the Exposure Draft of the European Sustainability Reporting Standard for Non-EU Undertakings (ESRS 40a), providing the first proposed reporting framework for non-EU parent companies that fall within the scope of Article 40a of the Corporate Sustainability Reporting Directive (CSRD). The proposal reflects the revised scope and thresholds introduced through the EU's Omnibus legislative package and is intended to create a reporting framework tailored specifically for qualifying non-EU companies. The draft is now open for a 100-day public consultation through October 31, 2026, after which EFRAG will finalize its technical advice for submission to the European Commission in early 2027.

A More Targeted Reporting Framework

Unlike the European Sustainability Reporting Standards (ESRS) that apply to EU companies, the proposed ESRS 40a adopts a more focused approach. The draft primarily concentrates on reporting a company's impacts on people and the environment, rather than requiring the broader double materiality assessments covering sustainability-related financial risks, opportunities, resilience, and dependencies.

One of the more notable features is a mixed reporting approach, allowing companies to disclose information based on:

• Global operations;

• Activities and products associated with the European Union only; or

• A combination of global and EU-specific information, depending on the sustainability topic.

EFRAG notes that this flexibility is intended to reduce reporting complexity while still providing meaningful sustainability information for stakeholders.

Consultation Period Underway

EFRAG is seeking feedback from companies, investors, assurance providers, regulators, and other stakeholders before finalizing the standard. Alongside the consultation, the organization will conduct field testing and outreach activities to evaluate how the proposed requirements operate in practice.

The consultation remains open until October 31, 2026, with final technical advice expected to be submitted to the European Commission in early 2027.

What This Means for Global Companies

Although the Omnibus reforms significantly reduced the number of non-EU companies expected to fall within CSRD reporting requirements, organizations that remain in scope now have greater clarity regarding the reporting framework they may ultimately need to follow.

The proposal also indicates that reporting obligations for non-EU companies are intended to be more streamlined than those applicable to EU companies, while still providing investors and regulators with consistent sustainability information. Companies with significant operations or revenues in the European Union may wish to evaluate how their existing sustainability reporting processes align with the proposed requirements and consider participating in the consultation process before the standard is finalized.

Key Timeline

Looking Ahead

The publication of ESRS 40a represents another important milestone in completing the CSRD reporting framework. While the final requirements may still evolve through consultation, the draft provides organizations with an early opportunity to understand the proposed reporting expectations and prepare for future compliance. Companies with significant European operations should continue monitoring the standard's development as the European Commission works toward final adoption in 2027.