The proposed standard is largely built on the existing European Sustainability Reporting Standards (ESRS), but it takes a notably different approach for non-EU businesses. Unlike the ESRS applicable to EU companies, the draft focuses exclusively on sustainability-related impacts. Requirements covering risks, opportunities, resilience and dependencies would be removed. Companies would primarily need to demonstrate how their operations, products and services affect people and the environment rather than provide the broader sustainability perspective expected from EU undertakings. For multinational businesses, this represents an important shift in sustainability reporting standards and could influence how sustainability information is collected, assessed and communicated across global operations.
One of the most debated elements of the exposure draft is EFRAG’s proposed “mixed approach.” Under this model, non-EU companies could report certain impacts either globally or based specifically on their activities and impacts connected to the EU. Companies could also apply different geographical scopes to different topics. For example, a business could report its microplastics-related impacts globally while limiting its reporting on air pollution to EU-related activities.
Different reporting scopes could create inconsistencies between EU companies and their international peers.
Applying different geographical boundaries across topics could make disclosures harder to understand.
Important human rights and environmental impacts could potentially be lost or diluted, creating a risk of greenwashing.
EFRAG’s Basis for Conclusions document notes that the mixed approach was included following an explicit request from the European Commission.
The proposal comes as the EU continues to simplify and narrow its sustainability reporting regime. Under the original CSRD framework, non-EU companies could fall within scope if they generated more than €150 million in revenue and had an EU subsidiary or branch generating more than €40 million. Following the EU’s Omnibus simplification process, the thresholds were substantially increased.
EFRAG has launched a 100-day public consultation on the exposure draft, running through October 31. Stakeholders worldwide are invited to provide feedback on the removal of risks and opportunities, the practicality of the mixed approach and interoperability with reporting frameworks based on the IFRS Sustainability Disclosure Standards. This consultation will be particularly relevant for multinational companies managing complex ESG performance data across multiple jurisdictions. How businesses establish reporting boundaries, maintain reliable data trails and demonstrate consistency could become increasingly important as the framework develops.
Cognitud helps businesses interpret evolving EU reporting requirements and translate regulatory expectations into practical sustainability strategies. From assessing reporting readiness and identifying material impacts to strengthening data processes and disclosure capabilities, Cognitud supports companies in building a structured response to changing ESG disclosure requirements. With the corporate sustainability reporting directive continuing to evolve, a proactive approach can help businesses stay prepared, improve transparency and make sustainability information more decision-useful.
Abhigyan Gupta
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