Before you tell the board CSRD doesn’t apply to you, read the standard EFRAG just wrote for you

You run sustainability, or group reporting, or legal, for a company headquartered outside the EU. For two years you’ve watched the CSRD circus from a safe distance. Your EU subsidiaries file their own reports. The parent is American, or British, or Swiss, or Japanese — so the parent is out of scope. That’s the line you’ve given the board, and until last week it was true.

On 23 July 2026, EFRAG quietly published the one document that changes that line: the ESRS-40a Exposure Draft — a sustainability reporting standard written specifically for large non-EU parent groups. It comes with a 100-day consultation window that closes on 31 October, and a first reporting date of financial year 2028.

Here’s the part most people will miss until it’s too late to matter: there’s a single choice buried in this draft that will decide whether your future reporting burden is heavy or merely annoying. You have exactly 100 days to weigh in before it’s locked. Let’s walk through who’s actually caught, what the standard demands, and the one thing you should do before the window shuts.

What ESRS-40a actually is

ESRS-40a is the last major piece of the CSRD architecture. It's been called N-ESRS or ESRS-TC in earlier EFRAG papers — it was renamed in June 2026 after the article of the Accounting Directive that created it. Article 40a is the provision that lets the EU require sustainability reporting from non-EU companies that do significant business in the single market, at the group level, regardless of where the parent sits.

So this is not the reporting your EU subsidiary already does. This is a separate, consolidated report about your global group, filed because your group is big enough in Europe to matter. EFRAG has now handed the European Commission its draft, and opened it to the world for comment.

The three things that make it different from ESRS

• It is impacts-only. ESRS-40a deliberately strips out risks, opportunities, resilience and dependencies. It asks how your group affects people and the environment — not how sustainability affects your business. That makes it closer in spirit to GRI than to the financial-materiality lens you may know from IFRS S1 and S2.
• It is built on the slimmed-down ESRS. The draft is aligned to the Revised ESRS that the Commission adopted on 3 July 2026 — the version cut to roughly 300 datapoints. EFRAG even publishes a markup showing exactly what it deleted and added versus that revised text.
• It offers a scoping choice no EU company gets. More on that below, because it’s the whole game.

Are you actually in scope? Run the two tests

Don’t guess. The thresholds are specific, and after the Omnibus I simplification package they’re higher than the original CSRD numbers — which is why some groups that braced for this in 2023 will now fall out, and others will be surprised to fall in.

Test one: the EU turnover test

Your group generates more than EUR 450 million in net turnover inside the EU in each of the last two consecutive financial years. One good year doesn’t catch you. Two in a row does.

Test two: the EU footprint test

You also have at least one of the following:

• an EU branch that generated more than EUR 200 million in turnover; or
• an EU subsidiary that meets the EU size thresholds and sits under your group.

Meet both tests and you’re in. EFRAG estimates this captures somewhere around 1,200 groups worldwide — a large share of them American, followed by UK, Swiss and Asian parents. If that’s you, the timeline below is now yours to manage.

What happens

• 23 July 2026: Exposure Draft published; 100-day consultation opens
• 31 October 2026: Consultation closes (18:00 CET, online submissions only)
• January 2027: EFRAG delivers its technical advice to the European Commission
• After that: Commission runs its own consultation, then adopts the delegated act
• FY starting on/after 1 Jan 2028: First mandatory reporting under ESRS-40a

The choice that decides your workload: global impacts or EU-only

This is the part worth your afternoon. The draft asks in-scope groups to report on their global impacts — the whole footprint, everywhere you operate. But at the Commission’s request, EFRAG has bolted on an option: the so-called mixed approach, which would let you limit your reporting to EU-related impacts only.

Under a global reading, a US manufacturer would report on the labour conditions and emissions of its operations in Asia, the Americas and everywhere else. Under the EU-only reading, it would report on the slice of its impacts connected to its European activity. The difference in data-collection effort, systems and cost between those two worlds is enormous.

Why this is still genuinely up for grabs

Before launching the consultation, EFRAG’s supervisory board chair, Kerstin Lopatta, sent the Commission a letter. The board approved the draft for consultation — but put on record that it has reservations about the mixed approach, and made clear the option is there because the Commission asked for it, not because the board is convinced. EFRAG published the letter deliberately, in the name of transparency.

When the standard-setter itself flags a design choice as contested, that is your invitation. This is not a done deal you’re being informed about. It’s a live question you can still shape. The EFRAG questionnaire asks directly whether the global/EU-only approach is workable and whether it produces relevant information. Your answer, backed by your own data, counts.

The other questions EFRAG is really asking

The consultation isn’t a yes/no. EFRAG has flagged four areas where it wants evidence, not opinions. If you’re going to respond, respond to these:

• Drafting approach — do you agree with how EFRAG removed risks, opportunities, resilience and dependencies to leave an impacts-only standard?
• References to EU law — how will you apply concepts and terms rooted in EU legislation to the parts of your group that sit entirely outside the EU?
• The mixed approach — is global-versus-EU-only workable, and does it give users information they can actually use?
• Interoperability — how can ESRS-40a sit cleanly alongside the ISSB-based standards you may already report under in your home jurisdiction?

That last one matters more every month. The ISSB baseline now spans 40-plus jurisdictions, and many of the parents in scope for ESRS-40a will soon report under IFRS S1 and S2 at home. An impacts-only EU standard and an investor-focused global one are asking different questions of the same company. If you don’t want to run two parallel data machines, now is when you say so.

What to do in the next 100 days

You don’t need a project team yet. You need a decision and a draft response. Here’s the short version.

1. Confirm scope. Run both threshold tests against your last two years of EU turnover and your EU branch and subsidiary structure. Get a clear yes or no on the record for the board.
2. Model both approaches. Sketch what global-impact reporting would cost you versus EU-only. You need this to answer EFRAG credibly — and you’ll want it internally regardless of how the rule lands.
3. Read the markup. EFRAG published a version of the draft marked up against the Revised ESRS of 3 July. It shows exactly what was cut. Fifteen minutes there tells you more than any summary.
4. Submit before 31 October. Only online submissions through EFRAG’s questionnaire count, and only if you press Submit. A saved draft is not a response.

The companies that thought they were out of scope have spent two years not preparing. That was a reasonable bet — right up until 23 July. The rulebook now exists, it has your name on it, and for the next 100 days it’s still a draft you can push on. After that, it’s just a deadline.

How we can help

We help non-EU groups run the scoping test, model the global-versus-EU-only decision, and build a consultation response that reflects your real operating reality — then turn that into an FY2028 readiness plan. If you’re not sure which side of the EUR 450 million line you sit on, that’s the first conversation to have. Contact us at https://www.viroway.com/