• Non-EU groups would report material impacts on people and the environment, rather than the full range of sustainability risks and opportunities.
• Revised thresholds could cut the number of companies in scope by about 88%, from roughly 10,000 to 1,200.
• A proposed reporting option could let companies limit many disclosures to EU-related impacts, raising comparability and greenwashing concerns.

Brussels opens consultation on final CSRD standard

EFRAG has released proposed sustainability reporting standards for large non-EU groups with significant business in the European Union.

The ESRS-40a Exposure Draft forms the final reporting component of the Corporate Sustainability Reporting Directive. It is now open for a 100-day public consultation, which closes on October 31, 2026. EFRAG aims to complete its technical advice in January 2027.

Reporting under the final standard would apply to financial years beginning on or after January 1, 2028. The proposed rules require covered groups to report material impacts on people and the environment. Disclosures would address governance, strategy, impact management, policies, actions, metrics and targets.

Unlike the ESRS framework for EU companies, the draft removes mandatory reporting on sustainability-related risks, opportunities, resilience and dependencies. That change narrows the standard to impact materiality.

The approach may reduce duplication for international groups already reporting under financial materiality frameworks. However, investors could receive less information on how environmental and social issues affect cash flow, financing costs and long-term enterprise value.

Higher thresholds sharply reduce the scope

The original CSRD framework captured non-EU companies with more than €150 million in EU revenue and a qualifying subsidiary or branch.

The EU’s Omnibus simplification process raised those thresholds. Under the revised scope, a non-EU parent must generate more than €450 million in EU turnover for two consecutive years. Its EU subsidiary or branch must also exceed €200 million in net turnover.

The exposure draft reflects those thresholds. It also requires the sustainability report to be accompanied by an assurance opinion.

EFRAG has estimated that the revisions could reduce the number of affected non-EU companies by about 88%. The estimated population would fall from approximately 10,000 groups to around 1,200.

For companies that remain covered, the reporting burden will still extend beyond European subsidiaries. The report would generally cover the ultimate non-EU parent and its consolidated group.

Mixed reporting scope raises comparability concerns

The most contested feature is a proposed “mixed approach” for non-climate impacts.

Companies could report globally or limit disclosures to impacts connected with products and services sold in the EU and activities conducted within the bloc. They could also apply different geographic scopes to different topics.

EFRAG’s example allows a company to report microplastics globally while limiting air pollution disclosures to EU-related impacts. The draft permits this only where a company can meaningfully identify and faithfully represent those EU impacts.

Several EFRAG members warned that the option could weaken comparability between EU companies and international peers. They also questioned whether companies can reliably separate European impacts from global value chains.

The accompanying conclusions document states: “Relevant information may be lost, with a consequential risk of greenwashing, in particular as regards human rights impacts and environmental impacts, the latter of which cannot be confined to a specific geography.”

EFRAG said the mixed approach was included following an explicit request from the European Commission.

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Global companies face new governance decisions

Chiara Del Prete, EFRAG Sustainability Reporting Technical Expert Group Chair, said: “This Exposure Draft is the last piece of the CSRD to come into effect. It brings transparency on the impacts of the largest international groups around the world when they have significant EU activities. It will support a level playing field for EU companies. We understand the challenges these groups face, particularly for topics other than climate, which are covered by mandatory reporting in only a few jurisdictions. For this reason, we plan an extensive dialogue with them through the field test, the public consultation, and several outreach events, including to facilitate seamless reporting for those that already report based on financial materiality.”

For boards and executives, the consultation raises immediate questions about reporting boundaries, data ownership and assurance readiness. Groups will need to decide whether EU-only disclosures are operationally credible or whether global reporting offers stronger consistency.

Kerstin Lopatta, EFRAG Sustainability Reporting Board Chair, said: “Getting this right requires input from those who will use and apply the standard, which is why this public consultation is open to all stakeholders worldwide. At stake are both a level playing field and genuine transparency in the EU Single Market.”

The Commission will hold a further consultation before adopting the standard through a delegated act. Its final design will shape how Europe balances regulatory simplification with comparable sustainability information across global markets.

Read EFRAG’s proposed sustainability reporting standards for large non-EU groups here.