Work on the N-ESRS Accelerates – Exposure Drafts Coming in July

At its meeting this week, the EFRAG Sustainability Reporting Board discussed the N-ESRS. These are the reporting standards for non-EU entities reporting under the Corporate Sustainability Reporting Directive. EFRAG published drafts of the N-ESRS in late 2024 and early 2025, before Omnibus I put a pause on that work. Now that Omnibus I is complete and the European Commission is close to finalizing simplified European Sustainability Reporting Standards for EU company reporting, work on the N-ESRS is accelerating. We discuss that work in this post.

Substantially Fewer Subject Companies

Omnibus I substantially scales back the number of N-ESRS reporters. For non-EU/third-country undertakings, the annual EU turnover threshold has increased 3X to €450 million and the EU subsidiary/branch turnover threshold has increased 5X to €200 million. 

EFRAG estimates that this will result in a decrease in the N-ESRS reporter population of almost 90%, from 10,000 to 1,200 companies. 

As expected, the largest number of reporters come from the United States (350-450 companies), with large reporting populations also from the United Kingdom (150-200), Switzerland and Japan (100-150 each).

Overall Approach and Timing Will Stay the Same

The N-ESRS framework will continue to use the ESRS as its starting point.

Like the ESRS, the N-ESRS will consist of 12 standards that parallel the ESRS. These will include two general cross-cutting standards, five environmental standards, four social standards and one governance standard. EFRAG has indicated the N-ESRS will follow the ESRS’ approach to fair presentation, users of information, value chain and transitional reliefs.

Consistent with the CSRD and earlier N-ESRS drafts, the focus will continue to be on impacts, rather than the double materiality approach required by the ESRS. However, EFRAG has noted that financial information will be required when needed to provide contextual information to understand impacts.

The Omnibus I simplification did not push back N-ESRS reporting. Reporting continues to be required starting with fiscal 2028, with the first reports due in 2029.

Reporting Options

EFRAG is contemplating three reporting approaches for global businesses based outside the European Union:

• Option 1 – Global Approach: Impacts reported at the global level for all topics.
• Option 2 – Mixed Approach: Climate impacts reported globally; other topics may be limited to EU-related impacts, on the condition that impacts are managed accordingly (e.g., separate segments or products). EU-related impacts would be required to include both: (1) customer-based impacts (from products/services sold or provided in the EU market) and (2) location-based impacts (activities conducted within the EU).
• Option 3 – Full ESRS (Voluntary): The non-EU parent voluntarily applies the full ESRS; EU subsidiaries in scope under Article 19a or 29a of the CSRD may rely on the subsidiary exemption.

In its upcoming consultation, EFRAG will seek stakeholder input on the mixed approach.

In our experience, most subject US-based multinationals are thus far planning to do full ESRS/voluntary reporting. We expect most of these companies will ultimately stay the course, but they will want to re-validate that approach in light of EFRAG’s contemplated mixed approach option.

IFRS Interoperability

In its upcoming consultation, EFRAG plans to focus on practical solutions for companies already reporting under IFRS S1/S2 to avoid double reporting. 

EFRAG specifically noted that incorporation by reference to IFRS reporting is an option.

Next Steps in the N-ESRS Process 

EFRAG has been developing N-ESRS exposure drafts since February. EFRAG’s 2026 work program is further discussed in this Ropes & Gray post.

Draft N-ESRS are expected to be released in mid-July. A 100-day consultation period will follow. Among other things, EFRAG will be soliciting input on (1) standards content, (2) internationalization of EU laws, (3) its proposed mixed approach (described above) and (4) interoperability with the IFRS standards.

In parallel, to inform its advice, EFRAG also will be conducting a 70-day field test in which participating companies will simulate the preparation of selected disclosures. 

In addition, last month, EFRAG issued a tender for a cost-benefit analysis of the N-ESRS. This is a procedural requirement under EFRAG's due process and the cost-benefit analysis is expected to be delivered alongside EFRAG’s final advice to the European Commission.

After taking the consultation and other feedback into account, EFRAG plans to deliver its technical advice to the European Commission in January 2027. This will be followed by an additional Commission consultation period (expected to be one month).

It is then expected that the Commission will adopt N-ESRS by delegated act in mid-2027.

N-ESRS reporting begins with fiscal 2028, with the first reports to be due in 2029. However, as earlier discussed, the expectation is that most US reporters will report at the full ESRS/voluntary level a year earlier, beginning with fiscal 2027, when their EU undertaking reporting is required.

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