ESRS 40a Exposure Draft: Is It Time for Ukrainian Companies to Start Reporting?

ESRS 40a Exposure Draft: Is It Time for Ukrainian Companies to Start Reporting?
The European Union has taken another step towards completing its sustainability reporting framework. On 23 July 2026, the European Financial Reporting Advisory Group (EFRAG) published an Exposure Draft of a new standard, European Sustainability Reporting Standards for Certain Non-EU Undertakings, abbreviated as ESRS 40a.

The document is open for a 100-day public consultation period, which runs until 31 October 2026. Following the consultation, EFRAG will submit its technical advice to the European Commission in January 2027, while the Commission plans to adopt the delegated act around mid-2027.

The primary source materials are available directly from the official sources. The Exposure Draft, together with the Basis for Conclusions, a marked-up version comparing it with the revised ESRS, and an online questionnaire, is available on EFRAG website.
    

What is the exposure draft and who does it apply to?

For Ukrainian readers, the key point to understand is that, although ESRS 40a is often perceived as a “standard for non-EU countries”, it was not specifically developed for Ukraine. The standard has been developed in accordance with Article 40a of the Accounting Directive and is intended to apply to large non-EU groups with a significant presence in the EU market. According to EFRAG estimates, around 1,200 groups are expected to fall within its scope, primarily those headquartered in the United States and the United Kingdom. For Ukraine, the standard is relevant only indirectly, namely where a Ukrainian company forms part of a non-EU group that falls within its scope. This is an important distinction to bear in mind, both when advising clients and when discussing the new requirements internally.

The logic behind the standard is straightforward in principle, but far-reaching in its implications. While the full ESRS require European companies to apply double materiality, considering both the impact of their activities on people and the environment and the financial effects of sustainability matters on the business itself, ESRS 40a deliberately narrows the focus to impact materiality only. Non-EU groups are required to disclose how their activities affect people and the environment but are no longer required to report on sustainability-related risks, opportunities, resilience or dependencies.

How ESRS 40a differs from the current ESRS

Parameter
Full ESRS (EU companies)
ESRS 40a (non-EU groups)
Materiality approach
Double materiality: impact + financial
Impact materiality only
Risks and opportunities
Required
Not required
Resilience and dependencies
Required
Not required
Climate-related risks and scenario analysis
Required
Excluded (impact disclosures remain required)
Reporting boundary
Global
Global or a “mixed approach” (global for climate; potentially EU-only for other matters)
“Value chain cap”
Yes
No
EU Taxonomy
Applicable
Not applicable (except for EU-listed entities)
Transitional reliefs
Standard
Year 1: no comparative information required; Years 1–2: E4, S2, S3 and S4 may be omitted; Years 1–3: reliefs for value chain and substance-related disclosures
Status
Adopted on 3 July 2026
Exposure Draft; consultation open until 31 October 2026



   

The key difference is that financial materiality no longer applies. ESRS 40a focuses exclusively on a company’s impacts on people and the environment. Companies must still disclose those impacts, including where they may give rise to risks or opportunities, and the fair presentation principle continues to apply. Another important feature is the “mixed approach”, introduced at the European Commission’s specific request. EFRAG itself has raised concerns in the Basis for Conclusions about whether this approach is sufficiently clear.

What the Omnibus changed: key reliefs to consider

ESRS 40a cannot be considered in isolation from the Omnibus package, as the latter fundamentally changed the thresholds for companies falling within the scope of the CSRD. Directive (EU) 2026/470 entered into force on 18–19 March 2026 and significantly raised the thresholds. Previously, companies were subject to the CSRD if they met two of three criteria: 250 employees, EUR 40–50 million in turnover and EUR 20–25 million in total assets. Under the revised rules, a company falls within scope only if it meets both conditions: more than 1,000 employees and net turnover exceeding EUR 450 million. Listed SMEs have been removed from the scope altogether. The impact is significant: around 80% of companies previously subject to the CSRD are expected to fall outside its scope.

The thresholds applicable to non-EU groups, which are relevant for ESRS 40a, have also been adjusted accordingly. EU net turnover must exceed EUR 450 million in each of the two consecutive preceding financial years, while the threshold for an EU subsidiary has increased to EUR 200 million, up from EUR 40 million. For the value chain, the Omnibus introduced a “value chain cap”: companies in scope of the CSRD may not require undertakings in their value chain with no more than 1,000 employees to provide sustainability information beyond that specified in the voluntary sustainability reporting standard.

Which Ukrainian companies may be subject to ESRS requirements?

Against this backdrop, it is important to be clear that there is currently no direct legal requirement for Ukrainian companies to report under the ESRS. Draft Law No. 13425, which was intended to introduce sustainability reporting requirements into the Law of Ukraine “On Accounting and Financial Reporting in Ukraine”, was submitted by the Cabinet of Ministers of Ukraine on 26 June 2025 but was removed from consideration on 17 July 2025 and did not become law. As a result, Ukrainian companies are more likely to become subject to ESRS requirements through EU legislation or market-driven requirements than through national law.

In practical terms, four scenarios can be identified. The first is where a Ukrainian company is incorporated in the EU or forms part of a group with an EU parent company and exceeds the thresholds of more than 1,000 employees and net turnover of more than EUR 450 million. In this case, it reports directly under the full ESRS. The second is where a company forms part of a non-EU group whose EU turnover exceeds EUR 450 million and whose EU subsidiary exceeds the EUR 200 million threshold. This is where ESRS 40a applies, with the first reporting covering the 2028 financial year and published in 2029. The third is Ukraine’s future national reporting regime under the Government Strategy (CMU Order No. 1015-r dated 18 October 2024), which envisaged a phased introduction of reporting requirements for large undertakings and parent undertakings of large groups from 2028 to 2030 but has not yet entered into force. The fourth is indirect: even where a company does not meet the relevant thresholds, it may receive requests for ESG data from European business partners, banks or donors (EBRD, IFC) as part of their supply chain or financing arrangements.

The scale of the impact is illustrated by estimates from the Green Transition Office: under the pre-crisis CSRD criteria, around 2,966–3,000 Ukrainian companies would have fallen within scope, whereas under the revised Omnibus thresholds, this number could decrease to approximately 330–334. These figures should be viewed as expert estimates rather than requirements under current legislation.

Four scenarios for Ukrainian companies

Scenario
Who is in scope
Key criteria
When and how to report
Regulator / reporting recipien
1. Directly subject to the CSRD as an EU company
Ukrainian company incorporated in the EU, or part of a group with an EU parent company 
More than 1,000 employees and net turnover exceeding EUR 50 million (both criteria)
Under the full ESRS, as a section of the management report, in electronic format; publication via ESAP
National regulator of the relevant EU Member State; coordination by ESMA
2. Through ESRS 40a as part of a non-EU group
Ukrainian company that is part of a non-EU group with significant operations in the EU
EU turnover of the group exceeding EUR 450 million for two consecutive years and EU subsidiary turnover
FY2028, with the first reports published in 2029; under ESRS 40a (impact materiality only) or the full ESRS
EU CSRD framework; ESRS 40a is currently an Exposure Draft (consultation open until 31 October 2026)
3. Ukrainian national reporting regime
Large undertakings and parent undertakings of large groups
Planned: more than 500 employees from 2028; other large undertakings from 2029; listed SMEs from 2030 (not currently in force)
Under the ESRS, as a separate section of the management report, together with the financial statements
Ministry of Finance of Ukraine; for capital markets, the NSSMC; for banks, the NBU
4. Indirectly through the supply chain
Companies of any size with links to the European market
Business relationships with EU partners, reliance on EU funding, or participation in the value chain of companies subject to the CSRD; the “value chain cap” applies to value chain undertakings with fewer than 1,000 employees
At the request of business partners or banks; the scope of information is limited by the voluntary standard (VSME)
No regulatory requirement; driven by market and contractual demands 


  

Why now is the time to start

The temptation to put off preparations is understandable: ESRS 40a is still at the Exposure Draft stage, the Ukrainian draft law has been withdrawn, and the first reports for non-EU groups are not due until 2029. But the apparent distance of these deadlines can be deceptive. Reporting for the 2028 financial year means having data collection systems up and running from day one. For companies with complex operations, putting the necessary information infrastructure in place, defining reporting boundaries and establishing robust materiality assessment processes can take at least 12–18 months. Companies that wait until 2027 risk having to prepare under considerable time pressure. Those that use the current consultation period to get started will be much better prepared when the new requirements take effect.

Moreover, market demand for ESG data is developing faster than the regulatory framework. European traders, retailers and banks are already requesting such information, regardless of whether Ukrainian legislation is in place. For Ukrainian companies, the most practical approach is therefore to look beyond the formal question of whether they fall within the reporting thresholds and focus on building the capabilities needed to collect reliable sustainability data, respond to information requests from business partners, maintain effective internal controls and ensure the traceability of reported information. Sustainability reporting in Ukraine is inevitably moving from voluntary practice towards a regulated framework. Companies that start preparing now will be better positioned than those that wait until the reporting deadline approaches.

Looking for support with sustainability or ESG reporting? Contact BDO in Ukraine. Our team can help you prepare for evolving reporting requirements, strengthen your data collection processes and build a robust approach to sustainability reporting.

Key Findings:

  • ESRS 40a is not a standard specifically designed for Ukraine. It is intended for large non-EU groups with a significant presence in the EU market. For Ukrainian companies, it is primarily relevant where they form part of such a group.
  • Unlike the full ESRS, ESRS 40a is based solely on impact materiality, focusing on a company’s impacts on people and the environment, without requiring disclosure of sustainability-related financial risks and opportunities.
  • The Omnibus package significantly narrowed the scope of the CSRD by raising the applicable thresholds. As a result, the number of Ukrainian companies potentially affected by future reporting requirements has decreased substantially.
  • Although Ukrainian companies are not currently subject to a direct requirement to report under the ESRS, businesses should start preparing now. Demand for ESG data from European business partners, investors and banks is growing faster than the regulatory framework itself.

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