EU Advisors Attack "Mixed Approach" in Non-EU Reporting Standard

Two of the European Union's most influential sustainable finance bodies have called on EFRAG to scrap a reporting option that would let large non-EU companies disclose less impact information than their EU counterparts. The EU Platform on Sustainable Finance (PSF) and Eurosif filed the statements in response to EFRAG's consultation on ESRS-40a, the draft sustainability reporting standard for non-EU undertakings caught by the Corporate Sustainability Reporting Directive.

The contested proposal is the "mixed approach," introduced in the exposure draft released in July 2026. It would allow non-EU companies to report on their impacts — other than climate impacts — either on a global basis or limited to "EU-related impacts," covering only products or services sold in the EU and activities within the bloc.

Reporting under ESRS-40a is currently scheduled to begin in 2029, covering the 2028 financial year. The standard flows from the CSRD, which has applied since the beginning of 2024 and extends reporting obligations to large non-EU companies operating in the EU.

What does the mixed approach change?

The draft also narrows the scope of reporting itself. Where the ESRS applied to EU companies covers impacts, opportunities and risks, ESRS-40a focuses requirements exclusively on impacts.

EFRAG's own members flagged the problems before the consultation opened. The Basis for Conclusions published with the draft records concerns that the mixed approach would not support a level playing field between EU companies and international peers, that different scopes for different topics would impair understandability, and that separating EU-related impacts may not prove feasible.

One concern carried particular weight: "Relevant information may be lost, with a consequential risk of greenwashing, in particular as regards human rights impacts and environmental impacts, the latter of which cannot be confined to a specific geography."

EFRAG stated that it included the mixed approach at the explicit request of the European Commission.

What do the PSF and Eurosif say?

The PSF, the expert group mandated by the European Commission to advise on sustainable finance policy, warned that the mixed approach "would weaken comparability, create an uneven playing field for transparency between EU and non-EU companies and reduce the usefulness and reliability of sustainability information."

It added that the option could increase complexity and reporting costs, obscure severe environmental and human rights impacts occurring outside the EU, and create significant usability challenges for investors.

Eurosif, the European sustainable and responsible investment association, raised parallel objections:

• Incomplete and potentially misleading information
• Additional costs for investors filling information gaps
• Less consistent reporting, creating usability challenges
• An uneven playing field between EU and non-EU companies

Where does the EU Taxonomy fit?

Both groups also objected to the exclusion of EU Taxonomy-related disclosures from ESRS-40a. Financial market participants rely on corporate taxonomy data to meet their own disclosure obligations, and its absence would leave a gap in that chain.

The PSF and Eurosif each recommended allowing non-EU companies to report taxonomy-related information on a voluntary basis.

What happens next?

The consultation responses now sit with EFRAG, which must finalize the standard before non-EU companies begin reporting in 2029 on the 2028 financial year. Whether the Commission — which requested the mixed approach — overrides the objections of its own advisory platform will shape how much of the global footprint of multinationals remains visible to EU investors.