CSRD and Non-EU Parents: When Must the French Subsidiary of a UK Group Report?
A French subsidiary of a UK group has to publish a group-level sustainability report under Article 40a of the Accounting Directive only if the UK group's net turnover in the EU exceeded EUR 450 million in each of the last two consecutive financial years, and the French subsidiary's own net turnover exceeded EUR 200 million in the preceding financial year. These figures come from Omnibus I, and Article 40a applies to financial years starting on or after 1 January 2028. Independently, the subsidiary reports on itself if, from FY2027, it exceeds EUR 450 million of turnover and 1,000 employees.
Why the UK parent counts as a "third-country undertaking"
Article 40a addresses subsidiaries established in a Member State "whose ultimate parent undertaking is governed by the law of a third country", and branches of such undertakings. Any group ultimately headed outside the EU falls within that wording, including one headed in the UK. This article covers the EU rules only. The sources in the CSRD & ESRS knowledge base do not deal with UK reporting requirements, so nothing here should be read as a statement on UK law.
Article 40a step by step
- Measure EU turnover at group level. Take the UK group's net turnover generated in the Union, at group level (or individual level if there is no group). It must exceed EUR 450,000,000 in each of the last two consecutive financial years. One strong year is not enough.
- Identify the qualifying subsidiary. An EU subsidiary qualifies if, on its balance sheet dates, its net turnover exceeded EUR 200,000,000 in the preceding financial year.
- Fall back to a branch if needed. If no subsidiary qualifies, an EU branch with net turnover above EUR 200 million in the preceding financial year carries the obligation.
- Check the start date. The CSRD applies its point (14), which inserted Article 40a, to financial years starting on or after 1 January 2028.
- Check the derogation. If the UK parent is a financial holding undertaking whose subsidiaries' business models and operations are independent of one another, the subsidiaries and branches may decide not to publish.
Illustration with hypothetical figures
Over two consecutive years, a UK engineering group books EU turnover of EUR 610m and EUR 455m: both exceed EUR 450m. Its French subsidiary had EUR 260m of turnover and its German subsidiary EUR 150m in the preceding year. Only the French entity passes the EUR 200m subsidiary test, so it would publish the group-level report. Had EU turnover dipped to EUR 449m in either year, Article 40a would not be triggered.
Omnibus I raised the bar substantially. Its recital 26 notes that the previous group threshold was EUR 150 million of EU turnover and the branch threshold EUR 40 million. Member States may require the subsidiary or branch to send them the group's turnover figures for their territory and for the EU.
What goes into the report
The report is drawn up at the level of the UK ultimate parent's group. It covers a defined subset of Article 29a(2):
Content required by Article 40a(1)
| Article 29a(2) point | Subject |
|---|---|
| (a)(iii) | Plans for compatibility with the transition to a sustainable economy and limiting warming to 1.5°C, and exposure to coal, oil and gas where relevant |
| (a)(iv)-(v) | How strategy accounts for stakeholders' interests and impacts; how strategy has been implemented |
| (b) | Time-bound targets, including GHG targets where appropriate, and progress |
| (c)-(e) | Role and expertise of governance bodies; policies; sustainability-linked incentive schemes |
| (f) | Due diligence, principal adverse impacts and actions taken |
| (h) | Related indicators, where appropriate |
The list is narrower than a full CSRD report. Points (a)(i) and (a)(ii) of Article 29a(2), on the resilience of the business model and sustainability-related opportunities, are not on it. Nor is point (g), on the principal sustainability risks to the group and how they are managed. The Article 40a report therefore centres on the group's transition plans, targets, governance, policies, due diligence and adverse impacts, rather than on risks to the group itself.
On standards, Article 40b asked the Commission to adopt dedicated third-country standards by 30 June 2026. The base does not confirm whether that has happened. Article 40a(2) also allows ESRS, or a framework recognised as equivalent by an implementing act on equivalence.
Assurance, publication and who signs off
- Information from the parent: if data are missing, the subsidiary must request them. If the parent does not supply them, it still publishes what it has, with a statement that the third-country undertaking did not make the information available.
- Assurance opinion: given by a person or firm authorised under the national law of the third-country undertaking or of a Member State. If none is provided, the subsidiary must publish a statement saying so.
- Deadline: within 12 months of the balance sheet date, through the business register. Where the register does not offer free access, the report goes on the subsidiary's website in at least one official EU language, free of charge.
- Responsibility: the subsidiary's board members are collectively responsible for drawing up and publishing the report, to the best of their knowledge and ability (Article 40c).
- ESAP: from 10 January 2028, the report and assurance opinion are also submitted to the European single access point collection body.
Alongside Article 40a: the subsidiary's own CSRD scope
If the French subsidiary, or a French sub-holding on a consolidated basis, exceeds EUR 450 million of turnover and 1,000 employees for financial years from 1 January 2027, Articles 19a and 29a apply to it directly. It may be exempted if it is included in the UK parent's consolidated sustainability reporting, prepared under ESRS or in a manner found equivalent by an implementing act. In that case, its management report must name the parent, link to the consolidated report and the assurance opinion, and state the exemption. The Taxonomy Article 8 disclosures for the EU activities must appear either there or in the parent's report (Articles 19a(9) and 29a(8)).
A note for UK groups listed on an EU regulated market
Where a UK company's securities are admitted to trading on an EU regulated market, the Audit Directive requires Member States to register third-country auditors and audit entities that issue sustainability assurance reports for it. Assurance reports from unregistered third-country auditors have no legal effect in that Member State. For financial years starting from 1 January 2025 to 31 December 2030, a transitional regime applies. Registration follows once the auditor supplies listed information, such as the sustainability knowledge of the signing auditor, the assurance standards and independence requirements applied, and the quality control system (Audit Directive, Article 45(5b)).
Mistakes to avoid
- Testing worldwide or UK turnover instead of EU turnover.
- Looking at one year rather than two consecutive years.
- Assuming the subsidiary can skip publication because the parent will not cooperate. It must still publish, with a statement.
- Planning a first Article 40a report for FY2027. The provision applies from financial years starting on or after 1 January 2028.
Put your structure to the base, for example: "A company based in Brazil has a subsidiary established in France. When does that French subsidiary have to publish a sustainability report on behalf of its Brazilian parent?" The same logic applies to a UK parent. Answers cite the consolidated Accounting Directive and the Audit Directive.
Run your group structure past the source texts
Ask the CSRD & ESRS base about Article 40a thresholds, report content, third-country assurance and exemptions, with citations to EUR-Lex.
Based on EU texts indexed on 5 October 2026. Not legal advice; national transposition of Omnibus I, due by 19 March 2027, determines how these rules apply in each Member State.
Frequently asked questions
Does Article 40a apply to UK parent companies?
Article 40a applies to EU subsidiaries and branches whose ultimate parent is governed by the law of a third country. A UK-headed group falls within that description. The base does not address UK law itself.
Which turnover counts for the EUR 450 million test?
Net turnover generated in the Union by the third-country undertaking at group level (or individual level if there is no group), which must exceed EUR 450 million in each of the last two consecutive financial years.
From which financial year does Article 40a apply?
The CSRD applies the provisions inserting Article 40a to financial years starting on or after 1 January 2028.
Who can give the assurance opinion on an Article 40a report?
One or more persons or firms authorised to give an opinion on the assurance of sustainability reporting under the national law of the third-country undertaking or of a Member State.
Can a French subsidiary avoid reporting on itself if the UK parent reports?
Yes, if the parent's consolidated sustainability reporting follows ESRS or a framework found equivalent by implementing act, and the conditions of Article 19a(9) or 29a(8) are met, including publication of the parent's report and assurance opinion and the Taxonomy disclosures for EU activities.
Is there an exception for investment holding groups?
Yes. Where the third-country undertaking is a financial holding undertaking whose subsidiaries' business models and operations are independent of one another, Member States must allow the EU subsidiaries and branches to decide not to publish the Article 40a report.
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