DRSC comment letter on EFRAG’s ED ESRS-40a

On 30 October 2026, the DRSC submitted its comment letter on the Exposure Draft “ESRS for Certain Non-EU Undertakings in Accordance with Article 40a of the Accounting Directive” (ED ESRS-40a) to EFRAG. Prior to this, on 20 October 2026, the DRSC’s Sustainability Reporting Technical Committee (FA NB) had published its preliminary position on the ED ESRS-40a to inform the public discussion surrounding the ESRS for third-country undertakings (as previously reported).

In its comment letter, the FA NB reinforces its previously expressed concerns about the direction of EFRAG’s draft standards. In particular, the FA NB points out the insufficient practical purpose of the option to limit reporting to EU-related impacts under certain conditions as currently envisaged in the ED ESRS-40a (“mixed approach option”). In general, the disclosure requirements set out in EFRAG’s draft standards appear too complex to ensure global acceptance of the ESRS-40a and thereby promote high-quality sustainability reporting.

Instead, the FA NB proposes a “staggered approach,” under which third-country undertakings are initially required to report only in accordance with ESRS-40a 2, ESRS-40a E1, ESRS-40a S1, and ESRS-40a G1. Such a staggered approach would fully meet the underlying Level 1 requirements and represent both a conceptual and practical simplification for in-scope third-country undertakings. However, should a mixed approach option be retained in EFRAG’s technical advice to the European Commission, the FA NB advocates for a less complex and more practical approach limited to the impacts originating from third-country undertakings’ EU activities (“location-based component”).