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Our response to EFRAG's ESRS-40a consultation
Nemetan responded to EFRAG's public consultation on the Exposure Draft of the European Sustainability Reporting Standards for certain non-EU undertakings, known as ESRS-40a. The response was submitted on 19 September 2026 and EFRAG has published it in the official consultation responses as Response ID 558.
What EFRAG asked about
EFRAG consulted between 23 July and 31 October 2026 on how companies based outside the European Union should report when they have substantial activity inside it. Article 40a of the Accounting Directive covers impacts on people and the environment, so the draft standard drops risks, opportunities, resilience and dependencies, which the full ESRS require.
That makes positive impacts the only upside left in the standard. Two paragraphs decide how much attention they get, and both are addressed in our response.
The response as submitted
The first point is about where companies are told to look. The draft tells them where to find negative impacts and says much less about where to find positive ones, which is the same gap that Sustainability Opportunity Discovery addresses on the opportunity side.
The second is about voluntary reporting. Removing risks and opportunities from the standard also removed the sentence asking for balance between them, so nothing now applies when a company reports them anyway.
1. Fair presentation and positive impacts. QC7 keeps the sentence "Both negative and positive material impacts from an impact materiality perspective shall receive equal attention." Paragraph 64 says the outcome of due diligence "informs the assessment of its material negative impacts". Paragraph 53 explains how positive impacts are assessed, and AR 23(b) asks the undertaking to identify them, but no paragraph names an input for finding them. So the materiality assessment gets a list of negative impacts from due diligence, and for positive impacts it gets whatever the people in the room think of. In my work on opportunities I have called the missing step Sustainability Opportunity Discovery: a systematic search for candidates, done before and separately from the materiality assessment, that leaves a record of what was searched. Positive impacts have the same gap. I suggest an application requirement to paragraph 53 naming usual sources for identifying positive impacts, such as products and services that reduce other parties' negative impacts (paragraph 56), customer and market information, and research and development, and a line in I-1 paragraph 29(a) asking how the undertaking searched for them.
2. Voluntary reporting of risks and opportunities (AR 20). With the QC7 wording on risks and opportunities removed, nothing asks for balance when an undertaking chooses to report them. In my exploratory study, thirty undertakings reporting voluntarily under VSME disclosed 88 risks against 30 opportunities (2.93 to 1), and nearly three-quarters disclosed no opportunity at all. Forty ESRS reporters, who were required to give both equal attention, disclosed 455 against 196 (2.32 to 1). The samples are small. I suggest AR 20 states that where risks and opportunities are reported, QC7 applies to them.
Declaration of interest: I run Nemetan, a consultancy that works on Sustainability Opportunity Discovery.
The figures come from the Opportunity Gap research, which counts what companies disclosed rather than what they identified.
Where to find it
- EFRAG, ESRS-40a ED public consultation responses. Nemetan appears in the list of survey responses, Response ID 558.
- Kelly, M. (2026). The Opportunity Gap: Risk and Opportunity Asymmetry in European Sustainability Disclosure under ESRS and VSME (Version 1.0). Nemetan. doi.org/10.5281/zenodo.22124385
- Kelly, M. (2026). Sustainability Opportunity Discovery: Definition, Scope and Method Requirements (Version 1.0). Nemetan. doi.org/10.5281/zenodo.22125068