CSRD for Non-EU Groups: EFRAG Issues Draft Reporting Standards

The expert group appointed by the European Commission to draft the EU CSRD reporting standards, EFRAG, has released an updated public consultation draft ("Exposure Draft") of the reporting requirements that would apply to non-EU entities and groups in scope for global reporting obligations under Article 40a of the CSRD.  These requirements were previously referred to as the “N-ESRS” - the non-EU entity European Sustainability Reporting Standards - and are now referred to by EFRAG as the “ESRS-40a.” 

EFRAG has helpfully provided a redline against the Revised ESRS of July 3, 2026 draft, a Log of Amendments, and a basis for its current conclusions. All of these resources are available via the EFRAG website.  

The first sustainability reports prepared under the future ESRS-40a are expected to cover financial years starting in 2028, with publication in 2029.

The Exposure Draft proposes a number of significant changes.  Firms will now only have to report on material impacts. Reporting will no longer be required on sustainability-related risks, opportunities, resilience and dependencies (even if material). This change alone, assuming it makes it to the final version, would significantly reduce the work firms will need to do to prepare for CSRD Article 40a reporting.

Notably, for topics other than climate change, the Exposure Draft proposes to permit firms to use what is referred to as the “mixed approach”.  This mixed approach proposes allowing reporting to be limited to:

(a) impacts that arise from products and services that were or can be reasonably assumed to be sold or provided in the EU market, including by third parties (downstream value chain actors such as distributors and traders); and  

(b) impacts of the undertaking’s European Union activities.

However, the mixed approach can only be used when it is possible for firms to distinguish an impact as specifically relating (or not relating) to the EU, as opposed to being an impact that is of general global application.  EFRAG expands on this point in the Basis of Conclusions document as follows, offering some insights as to the situations when EFRAG expects the mixed approach to be available:

“The mixed approach is only applicable when a meaningful identification of EU-related impacts is possible and allows for a faithful representation of the undertaking’s impacts. This is expected to be the case when the undertaking’s operations, products, services, management structures or value chains are organised in a way that enables EU-related impacts to be distinguished from impacts arising in other jurisdictions. To support consistency in application, examples of relevant factors were included in Application Requirements, such as examples on dedicated EU business segments, EU-specific products or services, separate management of EU-related impacts, and value chains linked to products and services sold in the EU market.”

Permitting ESRS-40a reports to be limited to matters that have a connection to the EU is something that many firms and industry groups have pressed for, so this should be a welcome proposal.  However, as the text above shows, further analysis will be required to understand how much flexibility this new mixed approach might provide in practice.  

Climate-related impacts must always be reported on a global basis - the mixed approach is not available. 

EFRAG's Basis for Conclusions records that this "mixed approach" was included at the European Commission's specific request and that EFRAG would not have proposed it on its own initiative; it drew a dissent at technical expert group level and was approved by the EFRAG Sustainability Reporting Board only with reservations and four abstentions. 

Further, EFRAG is expressly consulting on whether (i) human rights impacts should be carved out from the mixed approach and reported globally, and (ii) the mixed approach should be unavailable where impacts cannot be geographically contained. The consultation period runs from July 23, 2026, to October 31, 2026 (100 days).

Jones Day will review this latest version of the Exposure Draft of the “ESRS-40a” and provide a fuller analysis in due course. Please reach out to any of the authors of this post or your usual Jones Day contacts should you have any questions.