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      Highlights

      – What’s the issue?

      – What’s the impact?

      – What’s next?

      – Actions for management

      From 2028, non-EU companies and groups with significant operations in the EU will need to provide impact information for the entire global group in their sustainability reporting. An estimated 1,2001 companies could be impacted.

      The proposed requirements, which are set out in the so-called European Sustainability Reporting Standards for certain
      non-EU companies (ESRS-40a2), are open for comment until 31 October 2026.

      Jan A Muller
      Jan A. Müller

      Partner

      KPMG in Germany

      These proposals will be of particular interest to global groups with significant operations in the EU. A key consideration is how the proposals could work alongside existing sustainability reporting frameworks. The most effective outcome would satisfy the market need for transparency, avoid duplication and enable companies to report once to meet multiple stakeholder needs.

      Jan A. Müller

      Partner, Audit

      KPMG in Germany

      What’s the issue?

      The CSRD3 requires certain non-EU companies to publish a sustainability report covering their group-wide impacts. This applies when the group generates more than EUR 450m net turnover in the EU and has either a subsidiary or branch in the EU with a net turnover of at least EUR 200m. 

      The proposals set out the detailed reporting requirements for disclosing material impacts on people and the environment. EFRAG (the EU’s advisory group on corporate reporting) has asked stakeholders to comment on: 

      • how the proposed requirements differ from full ESRS;
      • the extent of information a company would be required to report and its choice of approach (global vs mixed);
      • the references to specific EU laws and regulations; and
      • the use of cross-referencing and interoperability with other sustainability reporting frameworks.

      Simultaneously, EFRAG has selected certain companies to field test the feasibility and relevance of the proposals.

      What’s the impact? 

      Under the CSRD, non-EU companies can choose to:

      • prepare a consolidated sustainability statement voluntarily under full ESRS, which would exempt EU subsidiaries of the group from producing their own sustainability statements; 
      • prepare a sustainability report under ESRS-40a covering the group’s impacts – the EU subsidiaries (or subgroups) would also prepare their own sustainability statement; or
      • apply a framework that will be considered equivalent to full ESRS.

      The table below compares the reporting options available to non-EU companies. Differences can significantly affect reporting processes, particularly for materiality assessments, data collection and reporting responsibility.

       

       Reporting under full ESRSReporting under proposed ESRS-40a
      Reporting boundaryThe EU parent company and all its subsidiariesThe ultimate non-EU parent’s global perspective
      Materiality basisDouble materiality, covering impacts, risks and opportunitiesImpact materiality only, covering impacts on people and the environment
      Extent of reportingAll material information about relevant topicsAll material information about relevant topics. Option to limit reporting on topics other than climate to EU-related impacts only (mixed approach)
      Reporting formatSustainability statement forms part of the management reportSustainability report to be published and made available
      Value chainUpstream and downstream
      Transitional provisionsPhase-in reliefs for first-time reporters

      What’s next?

      Companies need to assess the impact on their reporting strategy, including the challenge of navigating multiple reporting regimes in different jurisdictions.

      Under the CSRD, the requirements in ESRS-40a will apply for the financial periods beginning on or after 1 January 2028, with first reports due in 2029. The timeline below outlines the key milestones.

      ESRS-40a timeline diagram

      Actions for management

      • Understand the proposals and how they could affect your company.
      • Have your say by commenting on the proposals before 31 October 2026.
      • Determine your CSRD reporting strategy if your company operates across multiple jurisdictions, considering where reporting obligations arise and the exemptions available under the CSRD. 
      • Speak to your KPMG contact for further information on the proposals and visit Sustainability reporting in the EU to keep up to date with the latest news and discussion.

      1 EFRAG’s Sustainability Reporting Board public meeting held on 3 June 2026.

      2 ESRS-40a refers to Article 40a of the Accounting Directive introduced by the CSRD. It establishes the sustainability reporting requirement for non-EU companies.

      3 EU Corporate Sustainability Reporting Directive.

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