International,Comment letter on the European Sustainability Reporting Standards (ESRS) for certain non-EU Undertakings (ESRS-40a) Exposure Draft

Key dates

2026-07-23

EFRAG published the ESRS-40a Exposure Draft and opened a 100-day public consultation.

2026-10-28

The Government of Japan dated its comment letter on the ESRS-40a Exposure Draft.

2026-10-31 Deadline

EFRAG's public consultation on the ESRS-40a Exposure Draft closes.

2027-01-01

EFRAG is expected to deliver technical advice on ESRS-40a to the European Commission.

2028-01-01

The first financial years to which the proposed Article 40a reporting framework is expected to apply are expected to begin on or after this date, subject to adoption of the final rules.

2029-01-01

The first ESRS-40a reports are generally expected to be published in 2029 for financial years beginning on or after 2028-01-01, subject to the final delegated act and applicable publication timing.

Suggested considerations

• Compliance teams may wish to map group and EU-entity turnover against the Article 40a thresholds, using the preceding financial year for the EUR 200 million subsidiary or branch test and each of the preceding two financial years for the EUR 450 million EU-turnover test.
• In-scope groups should monitor the outcome of the EFRAG consultation, the expected January 2027 technical advice and the European Commission's subsequent delegated act before treating any ESRS-40a exposure-draft provision as final.
• Reporting teams should compare existing ISSB-aligned or jurisdictionally mandated sustainability reporting with the ESRS-40a requirements and identify likely top-ups, particularly disclosures not covered by ISSB Standards.
• Groups may wish to model the data, governance and assurance consequences of global reporting, the proposed mixed approach and Japan's suggested EU-impact-focused alternative.
• EU subsidiaries and branches should clarify with their non-EU parent whether the reporting obligation will be met through an incorporated group report, an ESRS-40a report or another permitted equivalent, including arrangements for publication, accessibility and assurance.
• Stakeholders wishing to influence the final standard should consider submitting comments to EFRAG by the consultation deadline, including evidence on duplicative disclosures, EU-impact scoping and interoperability with ISSB-aligned standards.

What changed

The Government of Japan proposed that EFRAG clarify which ESRS-40a disclosure requirements would remain as top-ups where a non-EU group incorporates by reference a group sustainability report prepared under jurisdictionally mandated standards functionally aligned with ISSB Standards. Japan also proposed adding an alternative to the Exposure Draft's mixed approach that would reduce the reporting burden on non-EU companies while requiring reporting of all EU-related impacts. The Exposure Draft itself is a consultation proposal rather than a final binding standard. Independent commentary indicates that the draft would generally apply to non-EU undertakings generating more than EUR 450 million of net turnover in the EU in each of the previous two consecutive financial years and having an EU su

Who is affected

• Non-EU parent undertakings and groups with more than EUR 450 million of EU net turnover in each of the last two consecutive financial years
• EU subsidiaries of in-scope non-EU undertakings with more than EUR 200 million of net turnover in the preceding financial year
• EU branches of in-scope non-EU undertakings with more than EUR 200 million of net turnover in the preceding financial year
• Japanese and other non-EU groups seeking to use ISSB-aligned jurisdictional sustainability reports by incorporation by reference

Related regulations

• Directive 2013/34/EU (Accounting Directive), Article 40a
• Directive (EU) 2022/2464 (Corporate Sustainability Reporting Directive)
• European Sustainability Reporting Standards (ESRS)
• IFRS Sustainability Disclosure Standards, including IFRS S1 and IFRS S2
• EU Omnibus amendments to the corporate sustainability reporting framework