ESRS-40a: The CSRD Standard for Non-EU Companies Explained

Introduction

ESRS-40a is the draft sustainability reporting standard for large non-EU companies within the scope of CSRD. It focuses exclusively on impact materiality and applies to companies with more than €450 million in EU revenue and an EU subsidiary generating more than €200 million - regardless of where they are headquartered.

Most large non-EU companies have assumed CSRD is someone else's problem.

On July 27, 2026, EFRAG released the Exposure Draft of the European Sustainability Reporting Standards for certain non-EU undertakings, opening a 100-day public consultation that runs through October 31, 2026. The final standard is expected in January 2027. Reporting begins in 2029, covering FY2028.

If your organisation generates significant revenue in the EU, this is the standard you need to understand now.

Who Is In Scope

Under the original CSRD regulation, non-EU companies in scope included those with revenues greater than €150 million and an EU-based subsidiary or branch with revenues of €40 million. The EU Omnibus simplification process significantly narrowed this.

Under the revised thresholds, ESRS-40a applies to non-EU companies with:

• Net revenue in the EU greater than €450 million for two consecutive years, and
• An EU subsidiary or branch with revenues greater than €200 million

No EU headquarters required. No EU incorporation required.

EFRAG estimates that the revised scope reduces the number of non-EU companies subject to CSRD reporting by approximately 88% - from around 10,000 companies to approximately 1,200.

What ESRS-40a Actually Requires

The key difference between ESRS and ESRS-40a is materiality. The full revised ESRS requires double materiality - both financial and impact. ESRS-40a requires impact materiality only.

ESRS vs ESRS-40a: Key Differences

The most significant difference is the removal of financial materiality. ESRS-40a focuses exclusively on impact materiality - how a company's activities affect people and the environment. Risks, opportunities, resilience, and dependencies are out of scope entirely.

This is a narrower ask than the full ESRS. But it comes with a specific implication: companies cannot use financial immateriality as a reason to avoid disclosing an impact. If the impact exists, it gets reported.

The Reporting Scope Decision

One of the most consequential decisions non-EU companies will face under ESRS-40a is the reporting scope choice. The draft standard offers three options:

• Option 1 - Global reporting (default): Report material impacts across the full global group, including all geographies and activities.
• Option 2 - Mixed approach (optional): Report climate impacts globally, but limit other sustainability topics to EU-related impacts only - covering only impacts of products or services sold in the EU or activities conducted in the EU.

  Companies can also apply the mixed approach differently across topics - for example, reporting on microplastics globally while reporting on air pollution on an EU-only basis.

• Option 3 - Full ESRS (voluntary): EU subsidiaries of non-EU parent companies are exempted from ESRS-40a reporting if the parent already prepares a full ESRS report.

This choice is not just a compliance decision. It is a data infrastructure decision.

Choosing the global approach requires building sustainability data collection across the entire group. Choosing the mixed approach requires the ability to separate EU-related impacts from global ones - which is operationally complex for many organisations and may not be feasible for all sustainability topics.

Making this decision late in the process means rebuilding your reporting scope mid-implementation. The time to think about it is now, not in 2027.

Key Timelines

The timeline may feel comfortable. It is not.

Reporting on FY2028 means data collection systems need to be operational from the first day of FY2028. For companies with complex international operations, building the data infrastructure, confirming reporting scope, and establishing impact materiality assessment processes takes 12 to 18 months at minimum.

Companies that begin preparing in 2027 will be scrambling. Companies that begin now will be ready. (You can track the official EFRAG consultation for standard updates).

How ecoPRISM Can Help

At ecoPRISM, we work with non-EU companies navigating CSRD applicability and readiness across Europe, India, and North America.

For companies in scope under ESRS-40a, we support:

• Scoping assessment - confirming whether your organisation meets the revised Omnibus thresholds and which entities are in scope.
• Reporting scope decision - evaluating the global versus mixed approach in the context of your operations, data availability, and strategic priorities.
• Impact materiality assessment - identifying and prioritising material impacts on people and the environment across your value chain.
• Data infrastructure readiness - building the data collection, governance, and documentation systems needed to produce audit-ready ESRS-40a disclosures.

If you are unsure whether ESRS-40a applies to your organisation or where to start, we are happy to help. Feel free to reach out.

Conclusion

ESRS-40a is the last piece of CSRD to take shape. It is narrower than the full ESRS in some ways - no financial materiality, no risks and opportunities. But it still requires non-EU companies with significant EU operations to disclose their impacts on people and the environment in a structured, verifiable way.

The consultation is open until October 31, 2026. The final standard is expected in January 2027. Reporting begins in 2029.

The companies that will navigate this well are not the ones that wait for the final standard before doing anything. They are the ones using the consultation period to confirm their scope, make their reporting scope decision, and start building the data infrastructure that ESRS-40a will require.

Frequently Asked Questions