ESRS-40a — the EU standard that reaches UK parent groups
ESRS-40a is the draft European Sustainability Reporting Standard for third-country undertakings with significant EU activity.
EFRAG published the exposure draft on 23 July 2026 and the consultation runs for 100 days, closing on 31 October 2026.
The UK is a third country for this purpose, and on EFRAG’s own preliminary estimate the UK is the second most affected jurisdiction after the United States.
No headcount test applies — the trigger is turnover, which is why groups that assumed CSRD had passed them by are now checking again.
N-ESRS, ESRS-TC and ESRS-40a are the same standard
This is the first thing to get straight, because most published commentary is filed under a name EFRAG has already retired.
The project began as N-ESRS, the ESRS for Non-EU Groups.
EFRAG renamed it ESRS-TC, the ESRS for Third-Country Undertakings, in June 2026.
On publication of the exposure draft it became ESRS-40a, after Article 40a of the Accounting Directive, and EFRAG states the equivalence of all three names on its own consultation page.
If you are searching for guidance, search all three — and treat anything written before 23 July 2026 as describing a draft that has since changed.
Two turnstiles in series, and no employee count in either
The Article 40a trigger has two limbs, and a group must pass both.
Limb one. The third-country undertaking generated net turnover in the Union above €450 million in each of the last two consecutive financial years, measured at group level.
Limb two. The group has an EU subsidiary with net turnover above €200 million in the preceding financial year — or, only where there is no such subsidiary, an EU branch above the same figure.
Both figures were raised by Directive (EU) 2026/470, the Omnibus I directive, which has been in force since 18 March 2026.
Before Omnibus the same limbs sat at €150 million and €40 million, per the Commission’s 2024 CSRD FAQs, which is why so much older guidance is now wrong by a factor of three.
The branch limb is subordinate rather than alternative, and a great deal of secondary commentary renders it as a free choice between subsidiary and branch, which the directive text does not support.
Are you caught by Article 40a?
Enter the group’s figures.
The thresholds are the statutory ones in Article 40a of the consolidated Accounting Directive as amended by Omnibus I.
Nothing is sent anywhere, and this is indicative only rather than advice.
Twelve standards, the same shape as ESRS
ESRS-40a keeps the architecture of the revised ESRS — two cross-cutting standards and ten topical ones.
EFRAG’s Basis for Conclusions states that the draft has the same structure as ESRS (2026) and the same articulation of reporting areas.
That matters commercially: a group already building for ESRS is not building a second system, it is building a subset of the first.
Three ways to satisfy Article 40a
An in-scope group is not obliged to use ESRS-40a at all.
There are three routes, and the third one carries a consequence for the group’s EU subsidiaries that is easy to miss.
Impact materiality only — and that is a Level 1 consequence
ESRS-40a does not apply double materiality.
Risks, opportunities, resilience and dependencies are excluded from Article 40a itself, so EFRAG removed the disclosures, application requirements and definitions that carried them.
This is not a simplification EFRAG chose — it follows from the directive, which is a distinction worth keeping straight when comparing the two standards.
Climate is global. Everything else may stop at the EU border.
The draft offers an option to limit reported impacts to those related to the EU, for every topic except climate change.
Pick a topic and see whether the option is available.
From exposure draft to first report
Two of these dates are settled in the directive and the rest are EFRAG’s stated plan.
The one that is neither is marked as such.
Roughly 1,200 groups, and the UK is second
EFRAG put a preliminary estimate on the record at its 22 July 2026 launch webinar: about 10,000 groups before Omnibus I, about 1,200 after.
EFRAG states in the same slide that no official list exists and that the estimate rests on its own analysis of available data.
The figures below are therefore ranges, and this page will not render them as a count.
EFRAG’s own board wrote to the Commission against the mixed approach
EFRAG’s Basis for Conclusions records that the mixed approach was included at the European Commission’s specific request, and that the Sustainability Reporting Board would not have proposed it on its own initiative.
The Board approved the draft for consultation on 1 July 2026, expressly conditional on its reservations being made public.
The Basis for Conclusions records the vote at fourteen in favour with reservations and four abstentions — eighteen of twenty-one members, the chair not voting and two absent.
Those reservations were then set out in a signed letter to DG FISMA dated 6 July 2026.
One small discrepancy is worth flagging rather than smoothing over: that letter puts the vote at thirteen in favour, where the Basis for Conclusions says fourteen and reconciles to eighteen participants.
The statutory deadline for this standard has already passed
Article 40b of the Accounting Directive requires the Commission to adopt the third-country reporting standards by 30 June 2026.
The exposure draft was published on 23 July 2026, three weeks after that date, and the Commission cannot adopt anything until EFRAG delivers its technical advice.
Nothing about the first reporting year has moved as a result, and the deadline miss carries no stated consequence — but it is a real feature of the file, and it is the kind of thing that precedes a Level 1 amendment.
Read it as a reason to watch the directive as well as the standard.
What ESRS-40a is
ESRS-40a is the set of European Sustainability Reporting Standards that certain non-EU groups will have to use for the sustainability report required by Article 40a of the Accounting Directive.
The obligation itself is unusual, and it is worth stating plainly.
The report covers the whole global group of the third-country parent, including parts of it that have no EU business at all.
It is prepared by the ultimate parent but published and made accessible by the EU subsidiary or branch, and legal responsibility for publication sits with the EU entity under Article 40c.
It must carry an assurance opinion, which may be given by a person or firm authorised under the law of the third country rather than of a Member State.
The directive also plans for the parent refusing to co-operate: where the parent does not supply the information, the EU subsidiary or branch must publish what it holds and state that the parent did not make the necessary information available, and there is a parallel statement where no assurance opinion is supplied.
EFRAG embeds both statements in the draft’s BP-2 disclosure.
Publication is due within twelve months of the balance sheet date under Article 40d.
The full exposure draft, the Basis for Conclusions and the consultation questionnaire are all on EFRAG’s consultation page.
What this means for a UK parent group
A UK-parented group is caught if it clears both limbs of the Article 40a test, and nothing about being British changes the arithmetic.
EFRAG’s launch deck puts the United Kingdom second only to the United States in its preliminary country breakdown, in a band of roughly 150 to 200 groups.
Three practical consequences follow.
First, this is turnover-driven, not headcount-driven. A UK group with a modest European headcount but heavy European sales can be caught while a larger employer is not.
Second, reporting under ESRS-40a does not discharge an EU subsidiary’s own obligation. Article 40a reporting and Article 19a or 29a reporting are separate tests, and a large EU subsidiary can be caught by both — see CSRD vs UK SRS for the entity-level scope.
Third, applying full ESRS instead can be the cheaper answer. Where the third-country parent applies the full ESRS, its EU subsidiaries in Article 19a or 29a scope can benefit from the subsidiary exemption, which the draft’s Basis for Conclusions states directly.
None of this displaces the UK’s own regime, which runs on a different basis.
UK SRS S1 and S2 were published for voluntary use on 25 February 2026, and SECR continues to apply on a size basis regardless of anything the EU does.
A UK group in Article 40a scope should expect to run an ISSB-based UK regime and an impact-based EU regime side by side, which is exactly the problem the consultation’s interoperability questions are about.
ESRS-40a against UK SRS and the ISSB baseline
The comparison people reach for is ESRS vs UK SRS, and for ESRS-40a it needs one adjustment.
UK SRS, like IFRS S1 and IFRS S2, uses single financial materiality — what affects the entity.
The revised ESRS use double materiality — impact and financial together.
ESRS-40a uses neither of those in full: it is impact materiality alone, which is the mirror image of the UK regime rather than a superset of it.
A group reporting under both is therefore not running one assessment twice, it is running two assessments that barely overlap.
EFRAG has put this squarely in the consultation.
Questions 69 and 72 of the public consultation questionnaire ask whether incorporation by reference should be permitted where a group already reports under jurisdictional requirements based on IFRS S1 and S2, and whether preparers expect that to avoid double reporting.
UK SRS is precisely such a jurisdictional regime, so this is the mechanism a UK group would use — and it is open for consultation rather than settled.
There is also a separate equivalence route in Article 40a(2), operating through an implementing act under the Transparency Directive, and no equivalence determination has been published.
How to respond, and what EFRAG is actually asking
The consultation runs from 23 July to 31 October 2026 and is open to stakeholders worldwide, not only inside the EU.
EFRAG’s questionnaire is organised around five topics: the use of the revised ESRS as the base text, the mixed approach, interoperability and incorporation by reference, references to EU law and their feasibility, and a free comment.
Two questions are worth flagging to anyone drafting a response.
Question 41 asks whether human rights impacts should be excluded from the mixed approach and reported globally regardless of where they occur.
Question 43 asks whether companies should be able to limit disclosure to EU-related impacts without considering whether those impacts can be geographically contained.
EFRAG will publish a cost-benefit analysis in mid-August 2026 and is running a field test alongside the consultation, with a deadline of 30 September 2026.
The technical advice goes to the European Commission in January 2027, after which the Commission runs its own consultation before adopting a delegated act.
What on this page could change, and when
This is a live file, and a page that does not say what might move is not being honest about it.
Mid-August 2026. EFRAG’s cost-benefit analysis may supersede the ~1,200 population estimate.
Autumn 2026. The revised ESRS delegated act is adopted but still in the European Parliament and Council scrutiny period, so its entry into force and Official Journal publication are not yet fixed.
31 October 2026. The consultation closes and this page must stop describing it as open.
January 2027. EFRAG’s technical advice could narrow the mixed approach or carve human rights out of it, which would change the central claim of this page’s section six.
19 March 2027. Member States must transpose Omnibus I, and Article 40a bites through national law, so filing mechanics will vary by Member State.
ESRS-40a — frequently asked questions
ESRS-40a is the draft set of European Sustainability Reporting Standards for certain non-EU undertakings with significant activity in the European Union, required by Article 40a of the Accounting Directive. EFRAG published the exposure draft on 23 July 2026 for a 100-day public consultation closing 31 October 2026. Reporting becomes mandatory for financial years starting on or after 1 January 2028, with the first reports published in 2029. Until the European Commission adopts it as a delegated act, it is a draft and not law.
Yes. The project was called N-ESRS (ESRS for Non-EU Groups), renamed ESRS-TC (ESRS for Third-Country Undertakings) in June 2026, and renamed again to ESRS-40a on publication of the exposure draft on 23 July 2026. EFRAG states the equivalence of the three names on its own consultation page. Commentary published before 23 July 2026 will generally use one of the older names, which is worth knowing when searching for guidance.
A UK-parented group is caught where it generated net turnover in the Union above €450 million in each of the last two consecutive financial years, and has an EU subsidiary with net turnover above €200 million in the preceding financial year — or an EU branch above the same figure, where there is no such subsidiary. There is no employee threshold in the Article 40a test. EFRAG’s preliminary estimate places roughly 150 to 200 UK groups in scope, second only to the United States, and EFRAG states in the same material that no official list exists.
No. ESRS-40a is impact materiality only. Risks, opportunities, resilience and dependencies are excluded from Article 40a at directive level, so EFRAG removed the corresponding disclosures, application requirements and definitions from the draft. This is a consequence of the directive rather than a simplification EFRAG chose, and it is the main structural difference between ESRS-40a and the revised ESRS, which retain double materiality in full.
The mixed approach is an option to limit reported information to EU-related impacts for topics other than climate change. Climate is always reported globally, given the global nature of greenhouse gas emissions and their impacts. The option is available only where a meaningful identification of EU-related impacts is possible, enabling a faithful representation of them. The European Commission asked for the option; EFRAG’s Sustainability Reporting Board states it would not have proposed it on its own initiative, and wrote to the Commission on 6 July 2026 setting out seven reservations, including significant limitations for external assurance.
Yes. An in-scope group may apply the full revised ESRS instead, and there is a practical incentive to do so: where the third-country parent applies full ESRS, EU subsidiaries otherwise caught by Article 19a or 29a can benefit from the subsidiary exemption. A separate equivalence route exists under Article 40a(2), operating through an implementing act under the Transparency Directive, but no equivalence determination has been published.
They pull in opposite directions. UK SRS follows the ISSB baseline and uses single financial materiality, while ESRS-40a uses impact materiality only, so the two assessments barely overlap rather than nesting one inside the other. EFRAG is consulting on whether to allow incorporation by reference where a group already reports under jurisdictional requirements based on IFRS S1 and S2 — questions 69 and 72 of the consultation questionnaire — which is the mechanism a UK group would use. That is open for consultation, not settled.
The report is prepared by the third-country ultimate parent and published by the EU subsidiary or branch, which carries the legal responsibility under Article 40c. Where the parent does not supply the information, the EU entity must request it, publish what it holds, and state that the parent did not make the necessary information available. A parallel statement applies where no assurance opinion is supplied. EFRAG embeds both in the draft’s BP-2 disclosure.
Every figure on this page, and where it comes from
Primary sources only — the standard-setter, the directive and the Commission.
Where to go next
ESRS explained
The revised standards adopted 3 July 2026, read from a UK lens.
ComparisonESRS vs UK SRS
Materiality, datapoints, assurance and timelines side by side.
ScopeCSRD vs UK SRS
Entity-level scope, thresholds and dual-compliance planning.
MaterialityDouble materiality
The concept ESRS-40a deliberately does not use.
NewsEU adopts revised ESRS
The 3 July 2026 delegated act and what it changed.
UK standardsUK SRS S1 and S2
The UK regime a caught group would run in parallel.
Also: who is in scope of UK SRS · double materiality assessment · sustainability assurance.
The consultation closes on 31 October 2026
If your group is anywhere near the two limbs, the cheapest hour you will spend this year is the one that establishes which side of them you are on.