ESRS-40a: who Article 40a actually catches

ESRS-40a is the draft set of European Sustainability Reporting Standards for certain non-EU undertakings — groups headquartered outside the EU that sell into it at scale. EFRAG published the exposure draft on 23 July 2026 and the consultation closes 31 October 2026. Its formal title is “European Sustainability Reporting Standards for certain non-EU undertakings (ESRS-40a)”, and the “40a” is Article 40a of the Accounting Directive, the provision it serves. It is an exposure draft: it is not adopted, not in force and not law.

Yes — one standard, three names. EFRAG’s own launch announcement records that it was “previously called Non-EU ESRS (N-ESRS) or ESRS for third countries (ESRS-TC)”. N-ESRS was the 2024 working name, ESRS-TC was carried through the spring 2026 board papers, and ESRS-40a has been the name since 23 July 2026. Documents predating that date use the older names, and documents predating Omnibus I also use superseded thresholds — so a 2024 gap analysis is out of date on two counts, not one.

A UK parent is a third-country parent for this purpose, and Article 40a reaches it where both limbs are met: net turnover generated in the European Union above €450 million in each of the last two consecutive financial years, and an EU subsidiary with net turnover above €200 million in the preceding year or, where there is no such subsidiary, an EU branch above that figure. There is no employee test at either limb — unlike the entity-level CSRD test, which requires both 1,000+ employees and €450m+ turnover. A lean, high-revenue UK group can be caught where a larger EU competitor is not.

No. ESRS-40a uses impact materiality only. EFRAG’s Log of Amendments records the deletion of the entire financial materiality assessment — section 3.2.2, paragraphs 45–50 — together with the dependency assessment, and replaces references to “double materiality” with “impact materiality”. Voluntary disclosure of financially material matters is still permitted under new AR 20; it is simply not required. Note that impact materiality is the axis the ISSB baseline does not use, so a group that has done all the work UK SRS asks for has done none of the assessment ESRS-40a asks for.

It is an option in new section 1.3 — paragraphs 27–31 with AR 6–7 — that lets an undertaking limit its reporting to EU-related impacts: impacts arising from products and services sold or provided in the EU market, plus EU activities and the related value chain. Climate is the stated exception and remains global. The option is granular, and it is conditional: AR 6 requires the EU-related impacts to be meaningfully identifiable, by separate business segments, EU-designed products or dedicated value chains. It is also the most contested provision in the draft — EFRAG’s own Sustainability Reporting Board wrote to the Commission recording seven concerns about it.

Yes. New paragraph 4 of the draft exempts a group from ESRS-40a where the parent prepares a report under full ESRS or an equivalent. It is not obviously the heavier choice at group level: where a third-country parent applies full ESRS, EU subsidiaries that would otherwise report in their own right under Articles 19a or 29a can be exempted. A group with two or more in-scope EU subsidiaries is choosing between one larger parent report and a lighter parent report plus several subsidiary reports, and the arithmetic can invert. Where no EU subsidiary carries its own obligation, the exemption buys nothing and full ESRS is a straight addition of work.

They sit on different materiality axes. UK SRS S1 and S2 are ISSB-based and use single, financial materiality — UK SRS S1 ¶18 asks whether information could reasonably be expected to 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, not “enterprise value”. ESRS-40a uses impact materiality only. Three practical consequences. The climate data transfers — both are global on climate, so a group-wide GHG inventory serves both. The climate risk and resilience analysis does not — UK SRS S2 requires it and ESRS-40a deleted its equivalents, so the work has nowhere to land in the EU report. And the impact assessment across the other eleven topical standards has no UK SRS counterpart at all, which makes it net new work and the largest single planning item for a group facing both.

The obligation attaches to the EU subsidiary or branch, but the report covers the ultimate third-country parent undertaking or group — new paragraphs 13 and 27 of the draft. An assurance opinion is required, per Article 40a(3) and new paragraph 11. Where information is not available, new paragraph 12 provides a route, and paragraph 96 requires the undertaking to disclose “the actions it has taken to increase the coverage and quality of reported information in future periods”. In short: report the gap and the plan to close it, rather than staying silent. The commoner problem in practice is not refusal but timing — the EU entity’s filing deadline is not one the parent can negotiate.

No. As at 19 August 2026 it is an exposure draft out for public consultation until 31 October 2026. EFRAG delivers technical advice to the European Commission in January 2027, and adoption would follow after that. No adoption date has been committed by EFRAG or by the Commission. You will find “mid-2027” and “before 1 October 2027” in professional commentary; neither traces to an official statement and they disagree with each other.

On the draft, reporting would apply for financial years beginning on or after 1 January 2028, with the first reports published in 2029. Reports are published within twelve months of the financial year end, so a calendar-year group in scope would prepare for the year beginning 1 January 2028 and publish in 2029. That is around two and a half years from now — but the impact assessment across eleven topical standards sits well before the reporting date, so the useful runway is shorter than the headline.

€450 million and €200 million. The €150m / €40m pair is the pre-Omnibus position and was superseded when Directive (EU) 2026/470 came into force on 18 March 2026. It is still published by a number of Big-4 and law-firm pages, some updated as recently as December 2025, because they were correct when written and have not been revisited. Note the direction of travel: both thresholds went up, so a group told in 2024 that it was comfortably in scope may now be outside it.

Nobody knows yet, and any figure in circulation is unsourced. EFRAG’s own announcement says “the List of datapoints included in ESRS-40a will be published in due course”. The “more than 60 per cent” and “over 70 per cent” reductions you will see attached to ESRS-40a describe something else: the revised ESRS adopted on 3 July 2026, measured against ESRS Set 1 of 2023 — mandatory datapoints cut 61%, from roughly 1,144 to about 500. That revised set is the baseline ESRS-40a is built on, not a further cut on top of it.

Twelve, the same architecture as the ESRS: two cross-cutting standards (ESRS-40a 1 General Requirements and ESRS-40a 2 General Disclosures), five environmental (E1 Climate Change, E2 Pollution, E3 Water, E4 Biodiversity and Ecosystems, E5 Resource Use and Circular Economy), four social (S1 Own Workforce, S2 Workers in the Value Chain, S3 Affected Communities, S4 Consumers and End-users) and one governance (G1 Business Conduct). The simplification is not in the topic list — it is in the materiality basis and the reporting scope.

No. Paragraph 106 of the draft provides that an undertaking making EU Taxonomy disclosures under Regulation 2020/852 “may do so in a separate appendix”, and that such disclosures “are not subject to the provisions of ESRS”. That is a real difference from the position of an EU-established reporter, for whom Taxonomy reporting forms part of the management report obligation. It is also one of the things a group takes back on if it elects to report under full ESRS instead.

No, at either limb. This is the most consequential difference between Article 40a and the CSRD test most readers have already encountered. Omnibus I set entity-level CSRD scope for EU-established undertakings at both more than 1,000 employees and more than €450m of net turnover. Article 40a asks only about turnover — €450m generated in the EU across two consecutive years, plus a €200m EU foothold. The two tests are not calibrated against each other.

It is turnover generated in the EU — not group turnover, and not the turnover of your EU-established entities. It is also a figure most consolidated accounts do not present: regional segments are usually drawn as “EMEA” or “Europe”, neither of which is the Union. Establishing it is the first piece of work Article 40a creates, and it is work you have to do before you know whether the standard applies to you at all. It is worth doing this quarter regardless, because it is a slice of data you already hold rather than an assessment you have to build.

No — it is a fallback. Article 40a reaches an EU branch above €200 million only “where there is no such subsidiary”. So a group with a €250m EU subsidiary and a €50m branch is caught on the subsidiary; a group with a €50m subsidiary and a €250m branch is caught on the branch; and a group with both above the line is caught on the subsidiary, with the branch limb never reached. Most summaries write this as “a subsidiary or branch above €200m”, which gets the right answer for the wrong reason most of the time.

Backwards, at the two financial years just closed, and it re-runs every year. You do not cross this threshold once and stay across it: a group that dips below €450m of EU turnover for a single year has broken the consecutive run. Equally, you can cross into scope with no transaction, no restructuring and no board decision — two strong years of EU sales will do it. That makes the Article 40a test something to re-run annually as routine rather than answer once and file.

The subsidiary exemptions under Articles 19a and 29a of the Accounting Directive are engaged where the parent reports under full ESRS, which is route 3. That is the mechanism that makes route 3 arguable for a group with several in-scope EU subsidiaries, and it is the variable no published comparison models. This is a question about your group structure rather than about the standard, and the honest answer for any specific group depends on how many EU subsidiaries would otherwise carry their own obligation — a number you have and this page does not.

Yes. New paragraph 11 of the draft requires an assurance opinion, per Article 40a(3). This is worth reading alongside the seventh of the EFRAG SRB Chair’s recorded concerns about the mixed approach — that it “entails significant limitations for external assurance”. If a scope boundary drawn under the mixed approach cannot be assured, the relief it offers is worth less in practice than it appears on paper. See our page on sustainability assurance.

Through EFRAG’s online questionnaire, before 31 October 2026. EFRAG has put four things in issue: the removal of risk-and-opportunity disclosures, the mixed approach, interoperability with ISSB-based reporting, and the use of EU-law concepts in a global reporting context. A UK group already preparing UK SRS or IFRS S2 disclosures has the strongest standing on interoperability, because it can say concretely what transfers and what does not — which is evidence rather than opinion. Read the Log of Amendments before the Exposure Draft; it is far shorter and it tells you exactly what changed.

Materially, yes — and one provision more than the rest. On 6 July 2026 the Chair of EFRAG’s own Sustainability Reporting Board wrote to the European Commission recording seven concerns about the mixed approach, including that its “legal basis is unclear” and that it “entails significant limitations for external assurance”, and stating that the Board is consulting on it “because, and only because, this reflects the Commission’s request”. A provision the drafting body has publicly disclaimed is not a stable planning assumption.