Having your say on ESRS-40a
The Exposure Draft stage is the opportunity for public comment before an EFRAG standard becomes final and is then handed to EU rulemakers to be considered, consulted upon and subsequently added to legislation and rules. Comments will be welcomed by EFRAG through to the end of October and finalisation of the standard is expected in 2027.
ESRS-40a trigger points
For many non-EU based issuers with operations in the EU, the first question will be whether they are in scope for the new requirement. The proposed trigger points for the standard to apply are:
- Net turnover within the EU in excess of €450m for two consecutive years, including
- Net turnover in excess of €200m generated within a single EU jurisdiction
Assessments will need to consider where currently reported figures stand and also whether anticipated future growth in net turnover will likely trigger the requirements.
The balance between complexity and simplicity within ESRS-40a
Whilst it's still early days, it seems likely that many of the considerations will be directed towards the remaining complexities.
EFRAG’s recently revised ESRS for EU-based reporters are certainly simpler than the original versions of the ESRS, and ESRS-40a is based on these simpler requirements. However, with such broad and technical subject matter, it’s inevitable that some complexity remains. For UK-based organisations anticipating the introduction of similar-but-different International Sustainability Reporting Standards, that complexity has the potential to be amplified.
Next steps on ESRS-40a
The draft contains over 180 pages of detailed requirements and guidance, so we expect that interested parties will need time to consider the proposed standard.
At Friend Studio we will be working through the detailed requirements and contributing to the debate about the Exposure Draft. If you would like to discuss this or the topic of future sustainability reporting more broadly, please reach out to us.