Non-EU groups · exposure draft · consultation open to 31 October 2026
ESRS-40a: who Article 40a catches, and what the draft asks
ESRS 40a is the draft EU sustainability reporting standard for groups headquartered outside the EU that sell into it at scale, and a UK parent is one of them.
The test is set by Article 40a of the Accounting Directive: EU turnover above €450 million in each of the last two years, an EU subsidiary or branch above €200 million, and no employee count at all.
The standard itself is an exposure draft, which EFRAG published on 23 July 2026 with consultation open until 31 October 2026.
An Article 40a scoping file
What evidence supports the non-EU group decision?
Record the legal reporting route before treating the ESRS-40a exposure draft as an adopted reporting standard.
| Decision | Evidence to record | Read the detailed test |
|---|---|---|
| Identify the ultimate parent and group | The parent’s jurisdiction and the group perimeter relevant to Article 40a. | The non-EU group test |
| Measure turnover in the Union | The relevant EU turnover calculations for each required financial year, rather than substituting global turnover. | EU turnover and its judgements |
| Identify the EU subsidiary or branch route | The qualifying EU entity or branch, its relevant turnover and who publishes the statement. | Reporting and publication routes |
| Separate the route from the draft standard | The status and version of the standard, reporting timetable and any consultation response being prepared. | The exposure draft and consultation |
Use the route comparison to keep an EU undertaking’s own CSRD duty distinct from its role in a non-EU group report.
One standard, three names
N-ESRS, ESRS-TC and ESRS-40a are the same draft
EFRAG’s launch announcement records the history in one line: ESRS-40a standards “were previously denominated in EFRAG preliminary documents as Non-EU ESRS (N-ESRS) or ESRS for third countries (ESRS-TC)”.
N-ESRS was the working name while EFRAG built the first draft in 2024 and early 2025, before it paused the work during the Omnibus negotiations.
Read the naming history
ESRS-TC was the name in the board papers of early summer 2026, including the SRB Chair’s letter of 6 July 2026.
ESRS-40a has been the name since the exposure draft was published, and the “40a” is Article 40a of the Accounting Directive, not a version number.
A gap analysis from 2024 therefore describes a draft with a different name, a different structure and thresholds that have since moved.
ESRS-40a is not a version of the ESRS that EU undertakings use; it is a separate standard for a separate population, marked up against the revised ESRS of 3 July 2026.
EFRAG drafts and advises, and the Commission adopts by delegated act; EFRAG’s role in the ESRS is set out separately, and its advice has no effect in the UK.
Article 40a(1)
The test: two limbs in series, no headcount in either
The group limb: the non-EU undertaking, at group level, “generated a net turnover in the Union exceeding EUR 450 000 000 for each of the last two consecutive financial years”.
The foothold limb: an EU subsidiary exceeding €200 million of net turnover in the preceding financial year.
A branch is reached “only … where the third-country undertaking does not have a subsidiary undertaking” of that size, and must itself exceed €200 million in the preceding year.
Both limbs are needed, and the foothold limb is only asked once the group limb is met.
There is no employee test, and Omnibus I recital 26 explains why: the EU entity only publishes a report the group provides, so the thresholds need not match Articles 19a and 29a.
Read the three traps in limb 1
Three traps sit inside limb 1.
“Net turnover in the Union” is not a number most consolidated accounts present, because an “EMEA” or “Europe” segment is not the Union.
The two-year look-back re-runs every year, so one year below €450 million breaks the run.
And a group can cross the line with no transaction or board decision, simply through two strong years of EU sales.
Omnibus I added a final subparagraph to Article 40a(1): where the non-EU undertaking is “a financial holding undertaking whose subsidiary undertakings’ business models and operations are independent of one another”, Member States “shall ensure that the subsidiaries and the branches may decide not to publish” the report.
It is delivered through national law, and “independent of one another” is not defined, so it is a question for counsel in the relevant Member State.
Article 40a · scope check · € millions
No answer without the EU-generated turnover figures
Limb 1 is the whole of the first question: net turnover generated in the Union, at group level, for each of the last two financial years.
Most consolidated accounts do not present that number, because "EMEA" or "Europe" is not the Union.
Producing it is the first piece of work.
Rule: Directive 2013/34/EU Art 40a(1), as amended by Directive (EU) 2026/470 Art 2(13).
“Exceeding” is strict: €450.0m is not over the line.
A provisional reading of published thresholds, not a determination for your group.
What the test leaves out
No headcount, and no size test on the parent
Almost every reader arrives at Article 40a having read about ordinary CSRD scope first, and the two tests work differently.
The entity-level test for EU undertakings asks for more than €450 million of net turnover and more than an average of 1,000 employees, both at once.
Article 40a asks only about turnover, twice over, and never asks how many people the group employs.
The consequence is easy to state: a lean, high-revenue UK group selling into the EU — a software business, a licensor, a trading house, a distributor-led brand — can be caught where a far more labour-intensive EU competitor of the same revenue is not.
Read the four cases, with illustrative figures
| EU subsidiary | EU branch | Who is caught (limb 1 met) |
|---|---|---|
| €250m | €50m | The subsidiary |
| €50m | €250m | The branch, because no subsidiary exceeds €200m |
| €250m | €250m | The subsidiary; the branch limb is never reached |
| €150m | €150m | Nobody: neither exceeds €200m |
Nothing in the drafting suggests the two tests were meant to line up, and Omnibus I recital 26 gives the reason they need not: the EU entity only publishes what the group provides.
The second limb carries its own trap, shown in the table: a branch is reached only where there is no EU subsidiary above €200 million.
A summary that writes “a subsidiary or branch over €200 million” reaches the right answer for the wrong reason most of the time, and the wrong answer when both exist.
The order matters in practice because it decides which EU entity publishes, and so whose Member State law and filing deadline apply.
Who publishes
Branch €250m
The first piece of work
Building the number nobody reports yet
The test turns on “net turnover in the Union”, at group level, and most groups have never produced that figure.
Consolidated accounts present turnover by segment or by region, and a region called “Europe” or “EMEA” includes countries that are not in the Union, the UK among them.
Read the three judgements
We have found no rule in Article 40a itself for attributing turnover to the Union, so the basis is a judgement the group makes and should agree with its auditor before relying on it.
Whatever basis is chosen, apply it the same way in every year, because the test compares two consecutive years and a change of method between them can manufacture or break a run.
Currency is the second judgement: the thresholds are in euros and a UK group reports in sterling, so the translation method matters most for a group close to the line.
The third is the perimeter: the test is at the level of the ultimate non-EU parent’s group, or the individual undertaking where there is no group, so a mid-level holding company’s accounts are the wrong place to look.
Produce the figure for financial years 2026 and 2027 now, because those are the years that decide a first report on financial year 2028.
It is the cheapest piece of work Article 40a creates, and until it exists every other question on this page is guesswork.
- 1
Perimeter
The ultimate non-EU parent’s group, not a mid-level holding company.
- 2
Basis
A rule for attributing turnover to the Union, agreed with the auditor.
- 3
Currency
Sterling translated into euros on a stated method.
- 4
Consistency
The same basis in both years tested.
- 5
Years
Financial years 2026 and 2027 decide a 2028 obligation.
Worked example
Three UK groups, with the arithmetic
Every figure here is invented.
The rule applied is the one on EFRAG’s project page and in Article 40a(1).
“Exceeding” matters: €450.0m is not over the line.
Group A · the two-year run
A UK software group with 600 employees and a large EU subsidiary.
| Years | EU turnover · limb 1 |
|---|---|
| 2026, 2027 | €470m, €440m · fails |
| 2027, 2028 | €440m, €495m · fails |
| 2028, 2029 | €495m, €510m · met |
The 600 employees are irrelevant.
Agree with the auditor how sterling is translated before relying on a margin this thin.
Group B · subsidiary before branch
EU turnover €620m and €640m, so limb 1 is met.
| Step | Test · result |
|---|---|
| Subsidiary | €185m > €200m? No |
| Branch | €230m > €200m? Yes — caught on the branch |
| Variant | Subsidiary at €205m — caught on the subsidiary |
The order decides which EU entity files, and so whose deadline and national law apply.
Group C · three near misses
Exactly €450m in both years: not caught, because €450m does not exceed itself.
A €900m EU subsidiary but €430m of group EU turnover: not caught under Article 40a, though the subsidiary may report in its own right if it also has more than 1,000 employees.
Securities on an EU regulated market: EFRAG describes the Article 40a population as undertakings “not listed on EU regulated markets”; a listed issuer is tested as an issuer instead.
What to do, and by when
A timetable for a UK group that may be caught
Only one row of this table rests on law already made: the thresholds.
The rest follow EFRAG’s published timetable for a standard that is still a draft.
- Now to 31 October 202601
Consultation open
Produce EU-generated net turnover for each year from financial year 2026; list every EU subsidiary and branch with its prior-year net turnover; decide whether to respond. - January 202702
EFRAG technical advice
Read what changed from the exposure draft, above all the mixed approach and the impacts-only basis. - 2027, no date set03
Commission consultation, then a delegated act
Plan on the draft, and treat any adoption date you are quoted as a guess. - From 1 January 202804
First year reported
Capture the data during the year; it is easier than rebuilding it afterwards. - 202905
First reports, with an assurance opinion
The EU subsidiary or branch publishes, and its own Member State deadline is the one that binds.
Read the timetable as a table
| When | What happens | What a UK group does |
|---|---|---|
| Now to 31 October 2026 | ESRS-40a consultation open, 100 days from 23 July 2026 | Produce EU-generated net turnover for each year from financial year 2026; list every EU subsidiary and branch with its prior-year net turnover; decide whether to respond |
| January 2027 | EFRAG delivers its technical advice to the Commission | Read what changed from the exposure draft, above all the mixed approach and the impacts-only basis |
| 2027, no date set | Commission consultation, then a delegated act | Plan on the draft, and treat any adoption date you are quoted as a guess |
| Financial years from 1 January 2028 | First year reported under Article 40a | Capture the data during the year; it is easier than rebuilding it afterwards |
| 2029 | First reports published, with an assurance opinion | The EU subsidiary or branch publishes, and its own Member State deadline is the one that binds |
The first row is the only piece of work that is cheap and certain to be useful: a figure for net turnover generated in the Union, year by year.
It is a slice of data the group already holds, not an assessment it has to build, and until it exists every other question on this page is unanswerable.
Article 40a is one of four ways the CSRD reaches a UK group.
The other three are an EU subsidiary above the thresholds in its own right, securities on an EU regulated market, and customers’ value-chain requests.
A group can face two at once: an EU subsidiary reporting on itself from financial year 2027, and the same subsidiary publishing the Article 40a group report from financial year 2028.
The subsidiary’s own test under Article 19a is more than 1,000 employees and more than €450 million of net turnover, so the two tests can catch different entities in the same group.
A correction in circulation
If you have read €150m, it is the pre-Omnibus figure
Before Omnibus I, Article 40a reached a non-EU group with €150 million of EU turnover, and its foothold limb was a qualitative “large subsidiary” test or an EU branch above €40 million.
Directive (EU) 2026/470, in force since 18 March 2026, raised the first to €450 million and replaced both of the second with a single €200 million figure.
Read the old and new figures, and the datapoint labels
| Before 18 March 2026 | Now | |
|---|---|---|
| Group EU turnover | €150m | €450m, each of two years |
| EU subsidiary | A qualitative “large” test | €200m, preceding year |
| EU branch | €40m | €200m, and only if no qualifying subsidiary |
| Employees | None | None |
Both lines moved up, so a group told in 2024 that it was comfortably in scope may now be outside it.
A second number travels with the wrong label: the “over 60%” and “more than 70%” datapoint cuts describe the revised ESRS the Commission adopted on 3 July 2026, not ESRS-40a.
The 61% often printed beside them is, in the explanatory memorandum to C(2026) 5010, EFRAG’s measure of its own revised draft of the ESRS, again not of ESRS-40a.
EFRAG has published no ESRS-40a datapoint count; its announcement says the list “will be published in due course”.
For the before-and-after of the whole Omnibus package, see CSRD after Omnibus I.
What each published datapoint figure for the revised ESRS actually measures is set out in the ESRS datapoints guide.
Before and after Omnibus I
Group turnover
Before and after Omnibus I
EU subsidiary
Before and after Omnibus I
EU branch
Test yourself
Six things most summaries get wrong
Each statement here circulates in commentary on Article 40a, and each is checkable against a document named beside it.
The first two errors share a cause: the pages carrying them were right when written and have not been revisited since Omnibus I.
The third is a misreading of “each of the last two consecutive financial years”, which is a run, not a single crossing.
The fourth matters because a 2024 gap analysis against N-ESRS measured a draft with a different structure and thresholds that have since moved.
The fifth is a question of law: Article 40b set a date for the Commission, not for groups, and missing it created no right to wait.
The sixth is the one date EFRAG has committed to, and even that is a draft’s timetable rather than a rule in force.
Article 40a and ESRS-40a: true or false?
Article 40a counts employees as well as EU turnover.
The Article 40a EU-turnover threshold is €150 million.
One year above €450 million of EU turnover is enough to be caught.
N-ESRS, ESRS-TC and ESRS-40a are three different standards.
The Article 40b deadline for adopting the standard is still ahead.
On EFRAG’s timetable, the first reporting year is a financial year starting on or after 1 January 2028.
0 of 6 answered.
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The draft
Twelve standards, impacts only
ESRS-40a keeps the architecture of the revised ESRS: two cross-cutting standards and ten topical ones, each with an ESRS-40a prefix.
The simplification is in the materiality basis, not the topic list.
EFRAG’s Log of Amendments marks every removal of “risks, opportunities, resilience, and dependencies” with one rationale: ESRS-40a considers the undertaking’s impacts.
The report is about the group’s impacts on people and the environment, so the financial half of double materiality is not asked for.
Read the standards, and what changes for a UK group
| Standard | Covers |
|---|---|
| ESRS-40a 1 | General Requirements |
| ESRS-40a 2 | General Disclosures |
| E1–E5 | Climate, pollution, water, biodiversity, resource use |
| S1–S4 | Own workforce, value-chain workers, communities, consumers |
| G1 | Business conduct |
The word “statement” becomes “report” throughout, which is a filing point too: an EU undertaking’s sustainability statement sits inside its management report, and a non-EU group’s ESRS-40a report does not.
For a UK group building UK SRS S2 capability, the consequence is lopsided: the climate risk and resilience work UK SRS asks for has no home in ESRS-40a, and the impact assessment ESRS-40a asks for has no UK counterpart.
The double materiality assessment guide covers how impacts are scored; ESRS-40a needs only that half.
Twelve ESRS-40a standards
ESRS-40a 1 and 2
Twelve ESRS-40a standards
S1–S4
The materiality basis
Impact materiality only: what went, and what survives
Double materiality is not softened in the draft; its financial half is deleted, leaving impact materiality alone.
The Log of Amendments renames the chapter heading “Double materiality as the basis for sustainability reporting” to “Impact materiality”, and marks the whole of section 3.2.2, the financial materiality assessment, as deleted.
Read what went, and what survives
Three things travel with it: the assessment of risks and opportunities, the assessment of dependencies, and the step of the nature-assessment approach that turns dependencies into risks.
What survives is more than the headline suggests.
The top-down and bottom-up routes to the assessment carry over word for word, and so does the rule that the undertaking need not assess every possible impact but focuses where material impacts are likely.
Engagement with affected stakeholders remains “a key input to the impact materiality assessment”.
The users of the report are still primary users of general-purpose financial reports and other users such as business partners, social partners, civil society and non-governmental organisations.
And the prohibition carries too: information that is not material shall not be disclosed, in the ESRS-40a text as in the revised ESRS 1 ¶24.
The new AR 20 is the paragraph a UK group should read twice.
It lets a group that already runs a financial materiality assessment — for UK SRS S1 or IFRS S1 — start from it, and then obliges it to add the impacts that would never reach its accounts.
That is the honest size of the job: not a new assessment from nothing, and not a re-labelled UK one, but the impact layer on top.
“While ESRS-40a require the undertaking to report on impacts only, this does not exclude reporting on impacts that do or may result in sustainability-related risks and opportunities…”
“If the undertaking prepares information on its sustainability-related risks and opportunities and for that purpose performs a materiality assessment, it can leverage on such assessment in the identification of its material impacts… In this case, it shall also consider impacts that are material for ESRS-40a reporting but which are not reasonably expected to affect the undertaking’s financial performance, financial position, cash flows, or its access to finance or cost of capital…”
Source: ESRS-40a Log of Amendments, AR 20 (new)
The EU Taxonomy
Taxonomy reporting attaches to a different article
The EU Taxonomy disclosure duty in Article 8 of Regulation (EU) 2020/852 binds undertakings subject to Article 19a or Article 29a of the Accounting Directive.
An Article 40a report is published under a separate article, by an EU subsidiary or branch, about a non-EU group, so on the text Article 8 does not attach to it as such.
That is one of the real differences between an EU reporter and an Article 40a group, and it changes the arithmetic of the three routes.
A group that chooses the full ESRS instead, to exempt its EU subsidiaries under Articles 19a(9) and 29a(8), meets conditions that include publishing the Taxonomy disclosures, so Taxonomy work comes back with that route.
For an EU undertaking’s own Taxonomy work, see green taxonomy.
The new work
An impact screen across the topics UK reporting never asked about
The topical standards keep the architecture of the revised ESRS.
For a UK group whose reporting so far is climate-led, these are the places to look for evidence of impacts.
The middle column is the topic each standard covers; the right-hand column is our suggestion of where evidence usually already sits, not a requirement of the draft.
| Standard | Topic | Evidence a UK group often already holds |
|---|---|---|
| ESRS-40a E1 | Climate change: mitigation, adaptation, energy | The SECR and UK SRS S2 inventory, the transition plan, energy data |
| ESRS-40a E2 | Pollution | Environmental permits, incident registers, emissions monitoring at sites |
| ESRS-40a E3 | Water | Utility data, abstraction licences, site water assessments |
| ESRS-40a E4 | Biodiversity and ecosystems | Site locations against protected areas, planning conditions, biodiversity net gain work |
| ESRS-40a E5 | Resource use and circular economy | Packaging data, waste returns, product take-back schemes |
| ESRS-40a S1 | Own workforce | HR data, gender pay gap reporting, health and safety records |
| ESRS-40a S2 | Workers in the value chain | Modern slavery statement work, supplier audits, grievance channels |
| ESRS-40a S3 | Affected communities | Community engagement records at operating sites |
| ESRS-40a S4 | Consumers and end-users | Product safety files, complaints data |
| ESRS-40a G1 | Business conduct | Anti-bribery procedures, whistleblowing records, supplier payment practices |
None of the evidence in the right-hand column was gathered as an impact assessment, and none of it answers the draft’s questions on its own.
What it does is shorten the long list: a top-down conclusion that a topic is or is not material can rest on it, provided the analysis is recorded.
The topics where UK reporting gives least to start from are usually value-chain workers, affected communities and biodiversity, because no UK annual-report duty asks about them in impact terms.
That is where the work of an Article 40a report concentrates, and where the mixed approach, if it survives, would matter most.
Paragraphs 27–30
The mixed approach: climate global, the rest EU-only
Paragraph 27 of the draft sets the default: the report covers the same reporting undertaking as the non-EU parent’s group financial statements.
Paragraph 28 then lets a group limit impacts other than climate to “EU-related impacts”: impacts from products and services sold or provided in the EU market, including through distributors, and impacts of its EU activities.
Paragraph 29 allows that only where “a meaningful identification of the EU-related impacts is possible”, aligned with how operations, products and value chains are actually structured.
Read paragraphs 29–30 and the reservations in full
Paragraph 30 makes it granular: a whole topic, a sub-topic, or a group of impacts.
A manufacturer whose EU-market goods come off the same lines, from the same suppliers, as everything else may not be able to draw that line at all.
The EFRAG Sustainability Reporting Board approved the draft for consultation on 1 July 2026 by 13 votes with 4 abstentions, and its Chair wrote to the Commission five days later.
That count is the letter’s; the Basis for Conclusions records 14 in favour, so the two EFRAG documents disagree, and this page reports both rather than choosing.
The Board consulted on the mixed approach, she wrote, “because, and only because, this reflects the Commission’s request and the mandate EFRAG has received”.
It is the part of the draft most likely to change, and the CSDDD guide explains the global due diligence regime it was said to clash with.
“it does not support a level playing field between EU companies and their international peers”
“its legal basis is unclear, as the Level 1 regulation refers only to global reporting”
different scopes for different topics “may impair understandability”
relevant information may be lost, with a “risk of greenwashing”, in particular on human rights and environmental impacts
“it is not compatible with the CSDDD, which foresees only the global approach”
“the feasibility of separating EU-related impacts is uncertain”
“it entails significant limitations for external assurance”
Seven reservations
Level field
Seven reservations
Legal basis
Seven reservations
Understandability
Seven reservations
Lost information
Seven reservations
CSDDD
Seven reservations
Feasibility
Seven reservations
Assurance
The mixed approach, by business model
Where the EU line can be drawn, and where it cannot
Three illustrative UK groups, invented, read against paragraphs 28 to 30 of the draft.
The test in each is the one paragraph 29 sets: whether EU-related impacts can be “meaningfully” identified, in line with how the business is actually structured.
A software group
EU customers are served from the same data centres and the same engineering teams as everyone else.
Impacts on its own workforce, or on consumers through data handling, are not sliced by where the customer sits.
The EU line is hard to draw for most topics; the mixed approach may offer little.
A manufacturer
Goods sold in the EU come off the same lines, from the same suppliers, as goods sold elsewhere.
Pollution at a plant or conditions at a supplier are impacts of the whole operation.
The line may be drawable for products’ use-phase impacts in the EU, and not for production.
A retailer with EU stores
EU stores, EU staff and EU logistics are physically separate operations.
Impacts of those activities are identifiable as EU activities in the draft’s sense.
The clearest case for the mixed approach — though supply-chain impacts behind EU-sold goods still need a basis.
Paragraph 28 names two kinds of EU-related impact: those arising from products and services sold or provided in the EU market, and those of the group’s EU activities.
The first kind follows the customer; the second follows the operation; and a group can find one drawable and the other not.
Paragraph 30 lets the choice be made topic by topic, sub-topic by sub-topic, or for a group of impacts, so a group need not take the mixed approach everywhere to take it anywhere.
Climate is outside it in every case: the climate standard stays global.
None of this is settled law, and the SRB Chair’s letter named the feasibility of separating EU-related impacts as one of its seven reservations.
A group that expects to rely on the mixed approach has a concrete answer to give the consultation: which of its impacts it could separate, on what basis, and at what cost.
Reading the letter
What the SRB Chair’s letter does and does not tell you
The letter does not say the mixed approach will be dropped; nobody knows that, and the Commission asked for it.
It tells a planner three narrower things.
First, this is the part of the draft most likely to change: a provision its own drafting body has publicly doubted, on grounds that include legal basis and assurability, is not a stable planning assumption.
A group building its reporting architecture on the mixed approach is building on the least settled part of an unadopted draft.
Second, the seventh reservation is the operational one, because an assurance opinion is required on the report under Article 40a(3).
If the boundary between EU-related and other impacts cannot be assured, the relief it offers is worth less than it looks.
Third, it is a reason to respond: EFRAG is consulting on exactly this point, and has said in writing that its own Board shares the doubts.
The Chair’s public statement at the launch was framed the other way, around the mandate: Article 40a gives EFRAG “a clear and focused mandate: to develop a standard that captures how large non-EU companies impact people and the environment”.
Both are true at once, and a respondent can engage with either.
Why climate is the exception
A greenhouse gas inventory has no border
Climate is excepted from the mixed approach for a reason that is easy to state: Scope 1, 2 and 3 emissions are a property of the group.
A figure computed on the EU slice of a global business is not a smaller version of the group figure; it answers a different question.
So the climate data assembled for ESRS-40a E1 is group-wide, which is also what UK SRS S2 requires.
Route 1 is usually called the light option, and for a UK group that is only partly true.
What ESRS-40a removes against the revised ESRS is the financial side: climate risk identification, scenario analysis, resilience and anticipated financial effects.
Those are close to exactly what UK SRS S2 and IFRS S2 ask for, so a UK parent building UK SRS capability does that analysis anyway.
The simplification therefore deletes a disclosure the group has already done the work for, while adding an impact assessment across eleven topics it has not.
That is an argument, not a fact, and a group should test it against its own position.
ESRS-40a E1, UK SRS S2 and IFRS S2 all take climate at group level.
A group-wide inventory built once to the GHG Protocol serves all three.
One difference to plan for: the revised ESRS E1 asks for Scope 2 on both the location-based and market-based methods, where UK SRS S2 asks for location-based.
Sources: Delegated Regulation (EU) 2026/1563 · UK SRS
Three ways to comply
ESRS-40a global, mixed, or the full ESRS
The draft’s paragraph 4, read with Articles 19a(9) and 29a(8) of the Accounting Directive, gives a group in scope three routes.
Route 1 · ESRS-40a, global
All twelve ESRS-40a standards across the consolidated group, impacts only.
The most complete picture; the heaviest impact assessment.
Route 2 · ESRS-40a, mixed
As route 1, with non-climate topics limited to EU-related impacts where paragraph 29 is met.
Climate stays global.
The least settled option in the draft.
Route 3 · full ESRS
The parent prepares a statement under the full ESRS or an equivalent, with assurance and accessibility met, and the EU entities need not publish an ESRS-40a report.
Double materiality and EU Taxonomy disclosure come back with it.
The usual reading is that route 1 is light and route 3 heavy, which is true of one report and can be false of a group.
Under Articles 19a(9) and 29a(8), an EU subsidiary included in a non-EU parent’s consolidated sustainability reporting under the ESRS, or an equivalent, is exempt from its own reporting, subject to conditions that include publishing the parent’s report and its assurance opinion.
A group with two or three EU subsidiaries that would otherwise report in their own right is choosing between one larger parent report and a lighter parent report plus several subsidiary reports.
Where no EU subsidiary carries its own obligation, the exemption buys nothing and route 3 is simply more work.
The variable that decides it is your group structure, which is a question for your own advisers; the CSRD explainer covers the subsidiary exemption from the EU side.
The three routes, dimension by dimension
What each route asks of the group and its EU entities
Routes 1 and 2 rest on the exposure draft; route 3 rests on the full ESRS and the subsidiary exemption in the Directive.
Read the route 3 column as conditional on meeting the exemption’s conditions.
| Dimension | Route 1 · ESRS-40a, global | Route 2 · ESRS-40a, mixed | Route 3 · full ESRS or equivalent |
|---|---|---|---|
| Materiality | Impacts only | Impacts only | Double: impacts and financial |
| Climate | Group-wide | Group-wide | Group-wide |
| Other topics | Group-wide | May be limited to EU-related impacts where they can be meaningfully identified | Group-wide |
| Risks, opportunities, resilience | Not asked for | Not asked for | Asked for where material |
| EU Taxonomy | Not attached to the Article 40a report | Not attached to the Article 40a report | Among the conditions of the subsidiary exemption |
| EU subsidiaries’ own CSRD reports | Still due where a subsidiary is in scope in its own right | Still due where a subsidiary is in scope in its own right | May be exempt under Articles 19a(9) and 29a(8) |
| Assurance | An opinion required (Art 40a(3)) | Required, with the SRB’s reservation about assurability | Required on the parent’s statement |
| Settled? | Draft | Draft, and the least settled part of it | The ESRS are law; the route depends on the draft’s paragraph 4 and the Directive |
The table shows why “route 1 is light and route 3 is heavy” is a statement about one report, not about a group.
Route 3 adds the financial half and the Taxonomy to the parent’s work, and can take away the separate reports of every EU subsidiary that would otherwise file in its own right.
Where a group has no EU subsidiary in scope in its own right, that saving is zero and route 3 is simply more work.
Where it has several, the comparison is between one larger parent report and a lighter parent report plus several subsidiary reports, each with its own assurance engagement.
From the EU entity’s desk
A subsidiary that may owe two reports
Consider a Dutch subsidiary of a UK group with more than 1,000 employees and more than €450 million of net turnover.
It is in CSRD scope in its own right under Article 19a, so it reports on itself under the revised ESRS from financial year 2027, on double materiality, with a limited assurance opinion.
If the group also meets Article 40a, the same subsidiary may be the entity that publishes the Article 40a report on the whole UK group from financial year 2028.
Two reports, two standards, two materiality bases, one finance team.
The exemption in Articles 19a(9) and 29a(8) lifts the subsidiary’s own report only where the parent’s consolidated reporting is done under the ESRS or an equivalent, so ESRS-40a reporting by the parent does not by itself remove it.
The draft’s own paragraph 4 works in the opposite direction: full-ESRS reporting by the parent lifts the duty to publish an ESRS-40a report.
For the subsidiary, the practical questions are who owns the group data, on what timetable it arrives, and which Member State’s filing rules it is publishing under; CSRD reporting requirements for UK groups covers its own statement.
Who does what
Who publishes, who assures, and what if the parent is silent
The obligation and the subject of the report are different entities: the EU subsidiary or branch publishes, and the report covers the non-EU parent or group.
A Dutch or Irish subsidiary of a UK parent therefore carries a duty to publish information about a group it does not control.
Read the draft paragraphs
| Draft paragraph | What it says |
|---|---|
| 1 | An EU subsidiary or branch whose ultimate parent is non-EU publishes the ESRS-40a report. |
| 3 | The report is prepared at the level of the ultimate parent or its group. |
| 10 | Where information is missing, the EU entity requests it; if not provided, it publishes what it has. |
| 11 | The report is accompanied by an assurance opinion, per Article 40a(3). |
| 12 | Missing information, or a missing assurance opinion, is stated clearly. |
| 13 | “Undertaking” means the ultimate parent or group throughout. |
The draft’s answer to an uncooperative parent is to report what is available and say what is missing, not to stay silent.
The commoner problem is timing: the EU entity’s filing deadline is set by its own Member State, and the parent cannot negotiate it.
Assurance is required, and the SRB’s seventh reservation — that the mixed approach limits external assurance — lands exactly here; sustainability assurance covers how engagements are run.
The EU’s own limited assurance regime for in-scope undertakings, and its deleted reasonable path, is set out on assurance under the CSRD.
Who does what
¶1 Publisher
Who does what
¶3 Level
Who does what
¶10 Gaps
Who does what
¶11 Assurance
Who does what
¶12–13
Your position
Parent, EU entity or supplier
The same article lands differently depending on where in the group, or outside it, you sit.
| UK parent group | EU subsidiary or branch | UK supplier to EU customers | |
|---|---|---|---|
| Does Article 40a apply? | Yes, if the group has EU net turnover above €450m in each of the last two years and an EU subsidiary, or failing that a branch, above €200m | The duty to publish attaches to you, but the report covers the non-EU parent group | No |
| What to do first | Establish EU-generated net turnover for the last two years, then plan the group data the EU entity must publish | Agree with the parent how group data reaches you and on what timetable | Answer what the voluntary standard covers when customers ask |
| Timing | Financial years from 1 January 2028 on the draft, reports in 2029 | The same first year as the parent’s, on your own Member State’s filing deadline | The voluntary standard has been in force since 24 September 2026 |
| The other EU route | — | Your own CSRD duty if you exceed 1,000 employees and €450m | With 1,000 employees or fewer you sit under the value-chain cap |
For the supplier, Article 40a is the wrong question: the mechanism is a customer’s data request, and the value-chain cap limits what can be demanded.
That route is worked through in the double materiality assessment guide, which carries a check on what a supplier may decline.
Dates
From exposure draft to first report — and which dates are law
- 2024–202501
- 30 June 202402
- 18 March 202603
- 30 June 202604
- 6 July 202605
- 23 July 202606
- 31 October 202607
- January 202708
- No date09
Commission adoption
Not committed by anyone. - FY202810
One row is settled law: the thresholds Omnibus I set.
Article 40b told the Commission to adopt this standard by 30 June 2024, and Directive (EU) 2024/1306 replaced that with 30 June 2026, as the Parliament’s legislative summary records.
That date has passed too; the empowerment survives and the deadline has lapsed twice.
EFRAG’s Basis for Conclusions places the first reporting year at financial years starting on or after 1 January 2028, with reports in 2029.
The reporting date has not moved while the adoption date slipped, so every month of delay comes out of the preparation window.
When the adoption deadline moved in 2024 it moved by amending the Directive, and the first reporting year stayed where it was.
Two years of adoption slippage have therefore been absorbed by the groups that will report, not by the timetable they report to.
EFRAG’s own chronology explains the pause: the technical work was done in 2024, then stopped while Omnibus I rewrote the baseline the standard is built on.
A missed statutory date does not create a right to wait, and it does not make the obligation go away; it means the content is still genuinely open, which is the practical case for responding.
The revised ESRS the draft is built on are law already: Delegated Regulation (EU) 2026/1563, in force 10 November 2026; see the news note on the adoption.
Your own dates
Which of your years are measured, and which is reported
Article 40a looks back at “each of the last two consecutive financial years”, so the years that decide an obligation are always behind it.
On EFRAG’s draft timetable the first reporting year is a financial year beginning on or after 1 January 2028, so for a calendar-year group the measured years are 2026 and 2027.
A group with a March, June or September year-end shifts every row, and the planner beside this text does that arithmetic for you.
It also shows the first year under the ordinary CSRD test and the FCA’s UK SRS rules, because a UK group of Article 40a size often faces all three.
The report itself is the commoner pressure point than the test: the EU entity that publishes is downstream of the UK head office, and its deadline is set by its own Member State, not negotiated with the parent.
So the data pipeline has to end at the EU entity in time for it to publish, whatever the group decides about routes.
A group that is near the line should re-run the turnover test at each year-end as routine, rather than answer it once and file it.
Your first year under each regime
CSRD · Articles 19a and 29a
1 January 2027 to 31 December 2027
The first year the revised ESRS apply, and the first CSRD year for an in-scope undertaking that did not report in the first wave.
Publication follows your Member State’s transposing law.
CSRD · Article 40a, measured
1 January 2026 to 31 December 2026, then 1 January 2027 to 31 December 2027
EU net turnover must exceed €450m in each of these two years; the EU subsidiary or branch is measured on the second.
CSRD · Article 40a, reported
1 January 2028 to 31 December 2028
The first reporting year on EFRAG’s draft timetable, published the following year by the EU subsidiary or branch.
UK SRS · FCA rules (listed only)
1 January 2027 to 31 December 2027
Comply or explain against UK SRS; the annual financial report is due by 30 April 2028.
Rules: Directive (EU) 2026/470 recital 31 and Delegated Regulation (EU) 2026/1563 Art 3 (financial years beginning on or after 1 January 2027); Directive 2013/34/EU Art 40a(1) and the ESRS-40a Basis for Conclusions BC11 (financial years from 1 January 2028); FCA PS26/19 ¶3.12 and DTR 4.1.3R.
Dates for year-ends other than 31 December are our arithmetic from those rules, for twelve-month years.
A provisional reading, not advice.
Nothing is stored or sent.
The UK position
What Article 40a means for a UK parent group
The UK left the EU; Article 40a does not care, because the test is turnover in the Union, not establishment in it.
A group of that size will usually meet UK regimes too, on different materiality axes and different clocks.
If it is listed in the UK, the FCA’s final rules in PS26/19 ask it to report against UK SRS on a comply-or-explain basis for periods beginning on or after 1 January 2027; who is in scope of UK SRS sets out the listing categories.
UK SRS applies single (financial) materiality: UK SRS S1 ¶18 asks whether information could influence the decisions of primary users of general purpose financial reports, and ¶3 frames the effect as cash flows, access to finance or cost of capital.
That is the axis ESRS-40a removed, which is why the UK SRS consultation (GOV.UK) and the ESRS-40a consultation ask such different things of the same group.
The climate data transfers: both are global on climate, so a group-wide inventory built to the GHG Protocol serves IFRS S2, UK SRS S2 and ESRS-40a E1 alike.
The impact assessment across eleven topical standards does not transfer, because nothing in IFRS S1 or UK SRS S1 and S2 produces it.
SECR and ESOS still apply at home, and the UK ESG reporting requirements page sets out the domestic stack.
Nobody has published a post-Omnibus count of UK groups in Article 40a scope, and this page does not estimate one; the only reliable answer for a group is the two-limb test run on its own figures.
The other routes into CSRD are worked through in whether CSRD applies to a UK company, and an in-scope subsidiary’s own obligations in CSRD reporting requirements for UK groups.
Below the thresholds, a UK supplier meets EU reporting through customers’ questionnaires instead, which the VSME and value-chain cap guide covers.
The other non-EU test
Article 40a and the CSDDD: two tests a UK group can confuse
The due diligence directive has its own route for companies formed outside the EU, and it is easy to mistake for Article 40a because both run on EU turnover and neither counts employees.
The consolidated CSDDD reaches a third-country company with more than €1.5 billion of net turnover in the Union in the financial year preceding the last, met in two consecutive years.
Read the two tests side by side
| Article 40a (CSRD) | CSDDD, third-country limb | |
|---|---|---|
| What it creates | A sustainability report, published by an EU entity | Due diligence obligations on the company |
| EU turnover | More than €450m, each of the last two years | More than €1.5bn in the year before the last |
| Employees | No test | No test |
| EU foothold | Subsidiary, or failing that branch, above €200m | None required |
| Persistence | Two consecutive years | Conditions met in two consecutive years |
| From | FY2028 on EFRAG’s draft timetable | Applied by Member States from 26 July 2029 |
It imposes due diligence obligations on the company itself; Article 40a imposes a reporting obligation on an EU subsidiary or branch about the group.
The thresholds are far apart, so many UK groups caught by Article 40a will sit below the CSDDD line.
The timetables differ too: Member States apply the CSDDD from 26 July 2029, after Omnibus I abolished its phase-in.
The two meet in the SRB Chair’s letter, whose fifth reservation was that the mixed approach “is not compatible with the CSDDD, which foresees only the global approach”.
Omnibus I also deleted the CSDDD’s duty to adopt a climate transition plan, so neither instrument now requires a non-EU group to have one; the CSDDD guide covers the directive in full.
The two directives are compared in general, beyond their non-EU limbs, on reporting against due diligence.
Two non-EU tests
What it creates
Two non-EU tests
EU turnover
Two non-EU tests
From
“Or equivalent”
The equivalence route: why UK SRS does not count by itself
Two provisions on this page turn on whether a parent’s reporting is “equivalent” to the ESRS: the draft’s paragraph 4 and the subsidiary exemption in Articles 19a(9) and 29a(8).
In the Directive, equivalence is not a judgement a group makes for itself: Article 19a(9) refers to equivalence as determined in an implementing act on the equivalence of sustainability reporting standards, adopted under Article 23(4) of the Transparency Directive.
So a UK group cannot rely on UK SRS, or on IFRS S1 and S2, as “equivalent” merely because they share an architecture with the ESRS.
Until an equivalence act covers the standards a group reports under, the practical choice is between ESRS-40a and the full ESRS.
The interoperability work between the ESRS and the ISSB standards is real — the joint guidance says almost all ISSB climate disclosures are included in the ESRS — but interoperability is not equivalence.
This is also the strongest reason for a UK group to answer the consultation’s interoperability question: the closer ESRS-40a sits to what ISSB-based reporters already produce, the less the absence of an equivalence decision costs.
Two regimes, two axes
ESRS-40a against UK SRS and the ISSB baseline
These are not two strengths of one test.
A group facing both runs two assessments.
| Dimension | UK SRS S1 and S2 | ESRS-40a (draft) | Revised ESRS |
|---|---|---|---|
| Materiality basis | Single, financial (S1 ¶18) | Impact only | Double |
| Risks and opportunities | The core of the standards | Removed | Kept |
| Climate | Group-wide | Group-wide, excepted from the mixed approach | Group-wide |
| Other topics | Where financially material (S1 ¶3) | May be limited to EU-related impacts | Group-wide |
| Topic standards | Two standards | Twelve standards | Twelve standards |
| Assurance | Listed companies say whether they obtained it; none required | An assurance opinion required (Art 40a(3)) | Limited assurance required |
| Status | Published by DBT on 25 February 2026; FCA rules comply-or-explain from 2027 | Exposure draft to 31 October 2026 | In force 10 November 2026, financial years from 2027 |
The climate data transfers, because both regimes take climate at group level.
The climate risk analysis transfers in the direction nobody expects: the UK asks for it and ESRS-40a deleted it, so the work has nowhere to land in the EU report.
The impact assessment across the other eleven topical standards has no UK SRS counterpart, which makes it the largest single planning item for a group facing both.
Governance and process partly transfer: the architecture of governance, strategy, risk management, and metrics and targets is common ground, and so is much of the internal control work.
For the two frameworks compared in general rather than in their Article 40a variant, see UK SRS against the ESRS.
What it is for
Level playing field and transparency: EFRAG’s stated purpose
EFRAG’s launch announcement gives the objective in one sentence: to ensure “a level playing field for undertakings operating in the EU market” and “transparency on impacts on people and the environment of non-EU undertakings with relevant EU activities”.
The impacts-only basis follows directly from that second half, and the level-playing-field half is the ground on which the SRB Chair’s first reservation about the mixed approach rests.
Chiara Del Prete, who chairs EFRAG’s sustainability reporting technical expert group, called the draft “the last piece of the CSRD to come into effect”.
She also acknowledged the difficulty a UK group will recognise: topics other than climate “are covered by mandatory reporting in only a few jurisdictions”.
EFRAG said it planned a field test and outreach, including to help groups “that already report based on financial materiality”, which is the population a UK SRS reporter belongs to.
The same announcement said a cost-benefit analysis would follow in mid-August 2026; read it, if it has appeared, before answering the consultation’s questions on cost.
None of these statements is law, and none commits the Commission, which will run its own consultation after EFRAG’s advice before adopting anything.
Open until 31 October 2026
How to respond, and what EFRAG put in issue
EFRAG invites anyone, inside or outside the EU, to respond through its online questionnaire before 31 October 2026.
Read the Log of Amendments first: it is far shorter than the draft and shows exactly what changed against the ESRS you may already know.
Read the SRB Chair’s letter next, because it tells you where EFRAG itself thinks the draft is weakest.
The questions most worth answering are the impacts-only basis, the mixed approach, and interoperability with ISSB-based reporting.
A UK parent preparing UK SRS or IFRS S2 disclosures has the strongest standing on the last, because it can say concretely what transfers and what does not.
EFRAG will analyse the responses for its technical advice in January 2027, after which the Commission runs its own consultation; the CSRD gives the Commission the power to adopt, and no date has been set.
Secondary commentary we read, not relied on for any fact: EY on the consultation and Paul Hastings on Article 40a businesses.
The UK SRS reference holds the home-side position, and the standards editorial at sustainabilityreportingstandards.co.uk covers the wider landscape.
Spotted an error?
Write to hello@uksrs.org.uk, or book a free 15-minute call to talk your group through.
Writing a response
A consultation response that will be read
Consultation responses that change standards are usually specific, evidenced and short, and a UK group is well placed to write one.
Start from the questionnaire’s structure rather than a letter, because EFRAG analyses responses question by question.
On the impacts-only basis, say what the group already produces for financial-materiality reporting and how much of it the new AR 20 would let it reuse.
On the mixed approach, give the separability evidence: which topics the group could limit to EU-related impacts, on what data, and what assurance of that boundary would involve.
On interoperability, compare the draft’s climate requirements with what UK SRS S2 or IFRS S2 already asks of you, paragraph by paragraph if you can.
On timing, say what the gap between EFRAG’s advice in January 2027 and a first reporting year beginning on or after 1 January 2028 means for systems and assurance.
Quote the provisions you are responding to, by paragraph, and keep each answer to the question asked.
Respond before 31 October 2026; a response that arrives later cannot shape the technical advice.
Terms
The words Article 40a turns on, defined
| Term | What it means here | Where |
|---|---|---|
| Third-country undertaking | An undertaking governed by the law of a country outside the EU; a UK parent is one | Directive 2013/34/EU Art 40a(1) |
| Net turnover in the Union | Turnover generated in the EU, at the group level of the ultimate non-EU parent, or the individual level where there is no group | Art 40a(1) |
| Each of the last two consecutive financial years | A run of two years, re-tested every year; one year at or below €450m breaks it | Art 40a(1) |
| Preceding financial year | The single year on which the EU subsidiary or branch is measured against €200m | Art 40a(1) |
| Branch fallback | A branch is reached only where the group has no EU subsidiary above €200m | Art 40a(1), as amended |
| ESRS-40a report | The report the EU entity publishes about the group; “report”, not “statement”, because it sits outside a management report | ESRS-40a ED, Log of Amendments |
| Impact materiality | The only materiality basis in the draft: impacts on people and the environment | ESRS-40a ED, chapter 3 |
| RORD | EFRAG’s shorthand for what the draft removed: risks, opportunities, resilience and dependencies | ESRS-40a Log of Amendments |
| EU-related impacts | Impacts from products and services sold or provided in the EU market, and impacts of the group’s EU activities | ESRS-40a ED ¶28 |
| Full-ESRS route | The parent reports under the full ESRS or an equivalent, so its EU entities need not publish an ESRS-40a report | ESRS-40a ED ¶4 |
| Financial holding derogation | A national option letting the EU entities of certain financial holding undertakings decide not to publish | Art 40a(1), final subparagraph |
For the board paper
Five questions a UK board should be able to answer
One: what was the group’s net turnover generated in the Union in financial years 2026 and 2027, on a basis the auditor accepts, and how far is it from €450 million in each?
Two: which EU subsidiaries and branches exceed €200 million of net turnover, and therefore which entity would publish?
Three: is any EU subsidiary in CSRD scope in its own right, so that the full-ESRS route might replace several reports with one?
Four: how much of the climate work for UK SRS, IFRS S2 or SECR already exists group-wide, and who would own the impact assessment across the other topics that ESRS-40a adds?
Five: does the group want to respond to the consultation before 31 October 2026, and on which question — the impacts-only basis, the mixed approach, or interoperability with ISSB-based reporting?
None of the five needs the standard to be final, and the first two decide whether the others matter at all.
The UK SRS readiness assessment covers the home-side questions in the same spirit, and ESG governance covers who in the organisation should own them.
Dated negatives
What on this page could change, and when
Everything on this page that is not the Article 40a thresholds describes a draft, and a draft moves.
The mixed approach is the provision most likely to move, because the body that drafted it recorded seven reservations about it before publication.
Read each statement, true on 30 September 2026
| Statement, true on 30 September 2026 | What would change it |
|---|---|
| ESRS-40a is not law | A Commission delegated act |
| No ESRS-40a datapoint count exists | EFRAG publishing the list “in due course” |
| No adoption date is committed | A Commission statement |
| No UK-specific scope count exists | Anyone publishing one from primary data |
| The mixed approach is in the draft | EFRAG’s advice in January 2027 |
Two of those reservations go to legal basis and to assurance, which are not questions a consultation response can settle.
Estimates of the number of non-EU groups caught circulate, but none published since Omnibus I raised both thresholds traces to a primary count, so this page prints none.
The date on this page, below the sources, is the date it was last checked against them.
The record
Every figure on this page, and where it comes from
Each row repeats a fact stated and cited above.
Filter by whether it is law, a draft, or a date; or search.
Filter by status
Showing 18 of 18
| Fact | Figure or wording | Source |
|---|---|---|
| Group limb | EU net turnover exceeding €450m for each of the last two consecutive financial years | Directive 2013/34/EU Art 40a(1), as amended by Directive (EU) 2026/470 Art 2(13) |
| Foothold limb | An EU subsidiary exceeding €200m net turnover in the preceding financial year; a branch above €200m only if there is no such subsidiary | Directive 2013/34/EU Art 40a(1) |
| Employees | No employee test at either limb | Directive 2013/34/EU Art 40a(1) |
| Financial holding derogation | Member States shall ensure subsidiaries and branches may decide not to publish where the subsidiaries’ business models and operations are independent of one another | Directive 2013/34/EU Art 40a(1), final subparagraph |
| Assurance | The report is accompanied by an assurance opinion | Directive 2013/34/EU Art 40a(3) |
| Omnibus I in force | 18 March 2026 | Directive (EU) 2026/470 Art 6 |
| Before Omnibus I | €150m group turnover; a €40m branch test; a qualitative “large subsidiary” test | Directive (EU) 2026/470, recital 26 |
| Article 40b deadline | 30 June 2024, moved to 30 June 2026; both passed without adoption | Directive (EU) 2024/1306 |
| Names | ESRS-40a, previously N-ESRS and ESRS-TC | EFRAG, 23 July 2026 |
| Materiality | Impacts only; the financial materiality assessment (section 3.2.2) deleted | ESRS-40a Log of Amendments |
| Mixed approach | Non-climate topics may be limited to EU-related impacts where these can be meaningfully identified | ESRS-40a ED ¶¶28–30 |
| Full-ESRS route | EU entities need not publish an ESRS-40a report if the parent reports under the full ESRS or an equivalent, with assurance and accessibility met | ESRS-40a ED ¶4 |
| Standards | Twelve, each with the ESRS-40a prefix | ESRS-40a markup against the 2026 ESRS |
| SRB vote | Approved for consultation on 1 July 2026 by 13 votes with 4 abstentions | Letter from the EFRAG SRB Chair, 6 July 2026 |
| Consultation | 23 July to 31 October 2026, 100 days | EFRAG, 23 July 2026 |
| Technical advice | January 2027 | ESRS-40a Basis for Conclusions, BC1 |
| First reporting year | Financial years from 1 January 2028; reports published in 2029 | ESRS-40a Basis for Conclusions, BC11 |
| Datapoints | No count published; the list “will be published in due course” | EFRAG, 23 July 2026 |
Law means the Accounting Directive as amended; draft means EFRAG’s exposure draft and its supporting documents, which are not law.
Nothing you choose is stored or sent.
Frequently asked
Questions people ask
What is ESRS-40a?
ESRS-40a is the draft set of European Sustainability Reporting Standards for certain non-EU undertakings, written for groups caught by Article 40a of the EU Accounting Directive.
EFRAG published the exposure draft on 23 July 2026, and the consultation closes on 31 October 2026.
The "40a" is the article number, not a version. It is not adopted and not in force.
Is ESRS-40a the same as ESRS-TC or N-ESRS?
Yes.
EFRAG says ESRS-40a standards "were previously denominated in EFRAG preliminary documents as Non-EU ESRS (N-ESRS) or ESRS for third countries (ESRS-TC)".
N-ESRS was the 2024 working name and ESRS-TC the name in the early-summer 2026 board papers.
Which non-EU groups does Article 40a catch?
A group whose ultimate parent is outside the EU, which generated net turnover in the Union exceeding €450 million for each of the last two consecutive financial years, and which has an EU subsidiary with net turnover exceeding €200 million in the preceding financial year or, where there is no such subsidiary, an EU branch above that figure.
A UK parent is a non-EU parent for this purpose.
Is there an employee threshold in the Article 40a test?
No, at either limb.
The 1,000-employee test belongs to EU undertakings under Articles 19a and 29a.
Article 40a asks only about turnover, so a lean, high-revenue group can be caught where a larger EU company of the same turnover is not.
Is the Article 40a threshold €150 million or €450 million?
€450 million of EU net turnover, with €200 million for the EU subsidiary or branch.
The €150 million group figure and the €40 million branch test were the position before Directive (EU) 2026/470, which entered into force on 18 March 2026.
When would the first ESRS-40a report be due?
EFRAG says the first reports are expected to cover financial year 2028, with publication in 2029.
Because the turnover test looks back two years, financial years 2026 and 2027 are the years that decide a 2028 obligation.
Does ESRS-40a use double materiality?
No. The exposure draft reports impacts on people and the environment only.
EFRAG’s Log of Amendments removes risks, opportunities, resilience and dependencies throughout, because the Article 40a report is about the group’s impacts.
What is the mixed approach?
An option in paragraphs 28 to 30 of the draft that lets a group limit its non-climate reporting to EU-related impacts: impacts from products and services sold in the EU market and impacts of its EU activities.
Climate stays global.
Paragraph 29 allows it only where EU-related impacts can be meaningfully identified.
EFRAG’s own board recorded seven reservations about it and consulted on it because the Commission asked.
Who publishes an Article 40a report?
The EU subsidiary or branch that meets the €200 million test.
The report covers the ultimate non-EU parent or group, must be accompanied by an assurance opinion, and where the parent does not provide all the information the EU entity publishes what it has and says so.
Can a UK parent report under the full ESRS instead?
Yes.
Paragraph 4 of the draft relieves the EU entities of publishing an ESRS-40a report where the ultimate parent prepares a sustainability statement under the full ESRS, or an equivalent, that meets the assurance and accessibility requirements.
Articles 19a(9) and 29a(8) of the Accounting Directive can also exempt EU subsidiaries included in that parent reporting, which is what can make the full-ESRS route lighter across a group.
Is the Article 40b deadline still ahead?
No. Article 40b first required the Commission to adopt the third-country standard by 30 June 2024.
Directive (EU) 2024/1306 moved that to 30 June 2026, which has also passed without adoption.
The empowerment survives; the deadline has lapsed twice.
How many datapoints does ESRS-40a have?
EFRAG has not said.
Its launch announcement says the list of datapoints "will be published in due course".
The "over 60%" and "more than 70%" reductions often attached to ESRS-40a describe the revised ESRS, which ESRS-40a is built on, not a further cut.
What is Article 40a of the Accounting Directive?
Article 40a of Directive 2013/34/EU requires an EU subsidiary or branch of a non-EU group to publish a sustainability report covering the whole group where the group generated more than €450 million of net turnover in the EU in each of the last two consecutive financial years and the subsidiary or branch exceeds €200 million.
It was inserted by the CSRD and amended by Omnibus I, Directive (EU) 2026/470, from 18 March 2026.
Is ESRS-40a in force?
No. As at 30 September 2026 it is an exposure draft out for consultation until 31 October 2026.
EFRAG delivers technical advice to the Commission in January 2027 and adoption would follow by delegated act, on a date nobody has committed to.
How many standards are in ESRS-40a?
Twelve, the same architecture as the ESRS: two cross-cutting standards (general requirements and general disclosures), five environmental (E1 to E5), four social (S1 to S4) and one governance (G1), each carrying the ESRS-40a prefix.
The simplification is in the materiality basis and the reporting scope, not the topic list.
What counts as net turnover generated in the Union?
Turnover generated in the EU, at group level.
It is not total group turnover and not the turnover of your EU-established entities.
Most consolidated accounts do not present it, because regional segments are drawn as EMEA or Europe, and neither is the Union.
Producing it is the first piece of work Article 40a creates.
Is the EU branch test an alternative to the subsidiary test?
No, it is a fallback.
Article 40a reaches an EU branch above €200 million only where the group has no EU subsidiary above that figure.
A group with a qualifying subsidiary is caught on the subsidiary and the branch limb is never reached.
Does the two-year Article 40a test look forwards or backwards?
Backwards, at the two financial years just closed, and it re-runs every year.
One year below €450 million of EU turnover breaks the consecutive run, and two strong years can bring a group into scope with no transaction or board decision.
Does an ESRS-40a report exempt our EU subsidiaries from their own CSRD reporting?
The subsidiary exemptions in Articles 19a(9) and 29a(8) of the Accounting Directive are engaged where the non-EU parent reports under the full ESRS or an equivalent, subject to conditions including publishing the parent report and its assurance opinion.
Whether that makes the full-ESRS route lighter depends on how many EU subsidiaries would otherwise report in their own right.
Is assurance required on an ESRS-40a report?
Yes.
Article 40a(3) requires the report to be accompanied by an assurance opinion, and the draft repeats that.
Where the parent does not provide an opinion, the EU entity states that it has not been provided.
How do I respond to the ESRS-40a consultation?
Through EFRAG’s online questionnaire, before 31 October 2026.
Read the Log of Amendments first, then the SRB Chair’s letter of 6 July 2026.
A UK group already preparing UK SRS or IFRS S2 disclosures has the strongest standing on interoperability with ISSB-based reporting, because it can say what transfers and what does not.
Could the ESRS-40a proposals still change?
Yes, and the mixed approach most of all.
EFRAG’s own Sustainability Reporting Board Chair wrote to the Commission recording seven reservations about it, including an unclear legal basis and significant limitations for external assurance, and said the Board consulted on it only because the Commission asked.
Does the CSRD apply to non-EU companies?
Yes, in two ways.
A non-EU group’s EU subsidiaries are tested on the ordinary thresholds of more than 1,000 employees and more than €450 million of net turnover.
Separately, Article 40a reaches the non-EU group itself through a report published by its EU subsidiary or branch, starting with financial year 2028 on EFRAG’s timetable.
How does ESRS-40a interact with UK SRS?
They sit on different materiality axes.
UK SRS uses single, financial materiality; ESRS-40a uses impact materiality only.
The group-wide climate inventory serves both.
The climate risk and resilience analysis UK SRS S2 asks for has no home in ESRS-40a, and the impact assessment ESRS-40a asks for has no UK SRS counterpart.
When does the ESRS-40a consultation close?
On 31 October 2026, 100 days after EFRAG published the exposure draft on 23 July 2026.
Responses feed EFRAG’s technical advice to the Commission in January 2027.
Does ESRS-40a require EU Taxonomy reporting?
Not as such.
Article 8 of the Taxonomy Regulation binds undertakings subject to Article 19a or 29a of the Accounting Directive, and an Article 40a report is published under a separate article.
A group that instead reports under the full ESRS so that its EU subsidiaries are exempt under Articles 19a(9) and 29a(8) meets conditions that include the Taxonomy disclosures.
Can an ESRS-40a report include financial materiality?
It is not required, but it is not excluded.
The new AR 20 in the draft says reporting on impacts only does not exclude reporting on impacts that do or may result in risks and opportunities, and a group that already runs a financial materiality assessment may start from it — while also considering impacts that would never affect its finances.
What is ESRS-40a for?
EFRAG states its objective as ensuring a level playing field for undertakings operating in the EU market and transparency on the impacts on people and the environment of non-EU undertakings with relevant EU activities. That second purpose is why the draft reports impacts only.
Who are the users of an ESRS-40a report?
The same two groups as under the ESRS: primary users of general-purpose financial reports, and other users such as business partners, social partners, civil society and non-governmental organisations.
The draft changes what is reported, not who it is written for.
How do I work out net turnover generated in the Union?
At the level of the ultimate non-EU parent’s group, for each of the two financial years being tested.
Article 40a itself sets out no allocation rule that we have found, so agree a basis with your auditor, apply it consistently in both years, and settle how sterling is translated into euros before relying on a result close to €450 million.
Is Article 40a the same as the CSDDD test for non-EU companies?
No. Article 40a creates a reporting obligation for an EU subsidiary or branch of a non-EU group with more than €450 million of EU turnover in each of the last two years.
The CSDDD imposes due diligence obligations on a third-country company with more than €1.5 billion of net turnover in the Union, applied by Member States from 26 July 2029.
Neither has an employee test.
Can a UK group use UK SRS as an equivalent to the ESRS?
Not on its own judgement.
The Directive ties equivalence to an implementing act on the equivalence of sustainability reporting standards.
Until such an act covers the standards a group uses, the practical choice for an Article 40a group is between ESRS-40a and the full ESRS.
Do the ESRS-40a standards cover the same topics as the ESRS?
Yes.
The draft keeps the twelve-standard architecture of the revised ESRS — two cross-cutting standards and ten topical ones on the environment, social matters and business conduct — and changes the materiality basis and the reporting scope rather than the topic list.
Sources
Primary sources
Every figure, date and status on this page traces to the instrument’s owner.
Secondary commentary is never the source for a number.
- EUR-LexDirective 2013/34/EU, consolidated 18 March 2026 — Article 40a(1), and Articles 19a(9) and 29a(8)
The two limbs, the branch-only-where-no-subsidiary rule, the financial holding derogation, and the exemption for EU subsidiaries of a third-country parent reporting under ESRS.
- EUR-LexDirective (EU) 2026/470 (Omnibus I), Article 2(13) and recital 26
Raised the group limb from €150m to €450m and set €200m for subsidiaries and branches, replacing the €40m branch test.
- EUR-LexDirective (EU) 2024/1306 — the Article 40b date moved to 30 June 2026
“in Article 40b, the date ‘30 June 2024’ is replaced by ‘30 June 2026’”.
- European ParliamentLegislative Observatory summary of Directive (EU) 2024/1306
Records the original 30 June 2024 adoption date.
- EFRAGEFRAG launches public consultation on the ESRS-40a Exposure Draft, 23 July 2026
The naming history, the 100 days to 31 October 2026, technical advice in January 2027, first reports on financial year 2028.
- EFRAGESRS for certain non-EU undertakings (ESRS-40a) — project page
Both limbs stated in full, and the project chronology from N-ESRS.
- EFRAGESRS-40a Exposure Draft — Log of Amendments
New paragraphs 1–13 (who publishes, assurance, unavailable information, the meaning of “undertaking”), paragraph 4 (the full-ESRS exemption), paragraphs 27–30 (the mixed approach), and the removal of risks, opportunities, resilience and dependencies.
- EFRAGLetter from the EFRAG SRB Chair to DG FISMA, 6 July 2026
The seven reservations about the mixed approach; approval for consultation by 13 votes with 4 abstentions.
- EFRAGESRS-40a Exposure Draft — Basis for Conclusions
BC1 (advice by January 2027) and BC11 (financial years from 1 January 2028, reports in 2029).
- EFRAGESRS-40a Exposure Draft — markup against the revised ESRS of 3 July 2026
The twelve ESRS-40a standards, each carrying the ESRS-40a prefix.
- EUR-LexCommission Delegated Regulation (EU) 2026/1563 (the revised ESRS)
The baseline ESRS-40a is marked up against; in force 10 November 2026.
- EUR-LexDirective (EU) 2024/1760 (CSDDD), consolidated 18 March 2026 — Arts 2(2), 2(5) and 37(1)
The third-country due diligence test (more than €1.5bn of EU turnover) and its application from 26 July 2029.
- EUR-LexRegulation (EU) 2020/852 (the Taxonomy Regulation), Article 8
The Taxonomy disclosure duty attaches to undertakings subject to Articles 19a or 29a of the Accounting Directive.
- Department for Business and TradeUK SRS S1, ¶3 and ¶18
The UK standards’ single, financial materiality test.
- Financial Conduct AuthorityPS26/19 — listed companies report against UK SRS on a comply-or-explain basis
The UK regime a group of Article 40a size is likely to meet at home.
Continue reading
Read next
ESRS, read from the UK
The twelve standards, the 2026 revision and which UK groups report under them.
ESRS and UK SRS compared
The two frameworks side by side, beyond the Article 40a variant.
Does CSRD apply to a UK company?
The four routes in, and who files on each.
CSRD thresholds and scope checker
The EU entity test and the Article 40a test, run on your figures.
See also: EU taxonomy.