EU CSRD: status of reporting standards for non-EU companies (NESRS)

Under the EU Corporate Sustainability Reporting Directive (CSRD) non-EU companies with a net turnover of more than EUR 150 million in the EU and having either (i) a large or listed subsidiary in the EU or (ii) a branch with a net turnover of more than EUR 40 million in the EU, will be required to prepare a non-financial report at the group level of that non-EU company, as of 2029. The CSRD mandates the European Commission to adopt the reporting standards for this purpose, usually referred to as ESRS for Non-EU Groups or NESRS, by 30 June 2026. The European Financial Reporting Advisory Group (EFRAG) is tasked by the Commission with developing sustainability reporting standards under the CSRDS, including ESRS for Non-EU Groups. 

Status and next steps

The EGRAG Sustainability Reporting Technical Expert Group (TEG) approved the sector agnostic NESRS Exposure Drafts on 21 November 2024 (see the final draft documents discussed here). The NESRS Exposure Drafts were prepared by amending the ESRS to comply with the specific requirements for non-EU groups reporting. 

The EFRAG Sustainability Reporting Board (SRB) will consider the drafts during its meetings in December 2024. Public consultation on the exposure drafts is planned to start in Q1 2025 and will run for 120 days. EFRAG must deliver the draft NESRS to the Commission by the end of 2025.  

EFRAG assumes that sector standards will also be applicable to NESRS. The timetable for these documents is not yet specified. 

Main changes to the ESRS

• Article 40a of the CSRD does not require that non-EU companies report on sustainability-related risks, opportunities and/or dependencies. All related datapoints were therefore removed in NESRS. This means that NESRS requires reporting on sustainability-related impacts only and not on financial materiality. 
• NESRS does not provide the possibility to incorporate information by reference to other documents, such as other sections of the management report, the financial statements, the corporate governance statement etc. However, the TEG noted in the Cover Note to the meeting of 21 November 2024 that the option to incorporate by reference, especially with respect to those territories that have implemented IFRS S2, will be examined during the public consultation.
• Appendix C to ESRS 1 lists phased-in disclosure requirements or datapoints that may be omitted or that are not applicable in the first year(s) of preparation of the sustainability statement. In the case of NESRS 1, these transitional provisions will only apply where the undertaking surpasses the qualifying criteria of Article 40a of the Accounting Directive (as amended by the CSRD) for reporting periods commencing on or after 1 January 2029. 
• Datapoints related to the EU Taxonomy, which is not applicable for non-EU groups, were deleted. 

Other points of interest

• The Commission and the EFRAF SRB suggested including in the NESRS Exposure Drafts an option for non-EU groups to report on sustainability matter impacts (except potentially for impacts related to climate change) in the EU only, i.e. impacts connected with goods and services to EU customers. However, the TEG decided not to include this option in the drafts nor to put it for public consultation. The reasoning of the TEG members for this varied from legal constraints, in particularly the potential contradiction with the CSRD; practical concerns, such as assurability; to principles-based concerns, such as the necessity to create a level playing field for EU companies and the need for a comprehensive approach to sustainability issues. The SRB, however, may still decide that this option is included in the drafts or at least submitted for public consultation. 
• It should be noted that EFRAG has reiterated that it is possible for non-EU entities to voluntarily report for its group using the ESRS rather than the NESRS. This would have the benefit of allowing EU undertakings (or undertakings with relevant debt/equity listings in the EU) to rely on the parents’ sustainability report under the subsidiary exemption rather than produce their own reports.

For more information on the CSRD and ESRS, see our CSRD Demystified materials.