The CSRD For Non-EU Firms Is Narrower – But It Isn’t Going Away

EFRAG recently announced that it is restarting development of the Non-EU European Sustainability Reporting Standards (N-ESRS), providing the first indication of what affected firms should expect. What are some of the key takeaways?

The number of in-scope firms is dramatically reduced from initial estimates

The Sustainability Omnibus package significantly reduced the number of organizations subject to the N-ESRS: from more than 10,000 to approximately 1,200. EFRAG estimates that the most impacted countries will be the US (350-450 firms), the UK (150-200 firms), Switzerland (100-150 firms) and Japan (100-150 firms). The subject firms are primarily large, multinational organizations with significant European operations. As such, although the revised N-ESRS scope encompasses far fewer businesses, those remaining are expected to be among the largest multinational groups with significant economic ties to the EU.

While EFRAG has not yet established a list of in-scope firms, many are likely already subject to other sustainability disclosure requirements, meaning they will need to manage multiple reporting frameworks rather than starting from scratch.

The framework remains familiar, but the focus has shifted

There are many similarities between the ESRS requirements (for organizations based in the EU) and the N-ESRS frameworks. Both will cover 12 standards and span upstream and downstream value chain requirements. Unlike the ESRS, the N-ESRS will focus primarily on impact materiality rather than double materiality; financial materiality is not expected to be a key pillar of the N-ESRS.

This may actually create more confusion for organizations reporting across multiple jurisdictions or that need to disclose financial materiality to investors. For example, the UK and Japan intend to adopt the global ISSB standards, which require firms to evaluate financial materiality. EFRAG is still determining whether sustainability impacts should be disclosed on a global basis or be limited to EU-related impacts. This decision will significantly affect the amount of information multinational organizations must collect and report. If EFRAG ultimately diverges from ISSB, it risks creating a more fragmented reporting landscape and increasing compliance burdens for multinational firms – the opposite of what the Omnibus intended to achieve.

The timing doesn’t change

EFRAG expects its draft standards to enter public consultation in July 2026, with N-ESRS adoption expected in mid-2027 and first reports due in 2029 for FY 2028. This is similar to what was expected pre-Omnibus.

What should corporate sustainability leaders do now?

Despite some uncertainties, EFRAG’s latest guidance indicates the general direction of travel for N-ESRS reporters. While we wait to see how the final regulations play out, there are several steps that sustainability leaders at firms that may be in scope should take:

1. Align sustainability, legal and finance teams to determine reporting boundaries, materiality approaches and ownership of disclosures.
2. Ensure governance structures and data collection processes are established now to meet future N-ESRS requirements, as well as to respond to supplier and customer sustainability requests.
3. Continue investing in ways to improve sustainability data collection – such as with sustainability reporting software – as reliable data will remain essential for not just regulatory reporting, but also for investor engagement and value chain requests.

For more information about how to prepare for sustainability regulations in Europe, please see Verdantix Strategic Focus: An ESG & Sustainability Regulatory Update for Europe.