Earlier this month, I blogged on early drafts of the new ESRS for non-European Companies (now known as the ESRS-40a). Last week, EFRAG published the ESRS-40a exposure drafts as part of a consultation that will run until the end of October 2026. This version of the document contains significant changes and limits the information required in ESRS-40a reporting to strictly material impacts. Jones Day writes about this change in a recent memo:
“The Exposure Draft proposes a number of significant changes. Firms will now only have to report on material impacts. Reporting will no longer be required on sustainability-related risks, opportunities, resilience and dependencies (even if material). This change alone, assuming it makes it to the final version, would significantly reduce the work firms will need to do to prepare for CSRD Article 40a reporting.”
This is a fascinating choice by EFRAG. Many believed that EFRAG would limit reporting to financially material information. This would have been welcome news for companies disclosing such information under ISSB’s IFRS S1 and S2 frameworks. However, EFRAG chose to focus on the impact side of their “double materiality” equation, limiting reporting to material impacts alone. The ESRS-40a exposure drafts make clear that companies should only disclose financial information as it relates to impacts. By focusing on impacts, EFRAG is lightening the load for multinationals subject to ESRS-40a reporting. However, global investors will likely find the information less useful than other stakeholder groups such as regulators and advocacy organizations.
The exposure drafts also set out a nuanced scheme controlling when disclosures must be made at the global level vs. the EU level. Readers can learn more about that in today’s next blog.
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