CSRD Transposition: New Obligations for French Companies
France is the first country in the European Union to transpose the Corporate Sustainability Reporting Directive (CSRD). This transposition, carried out by ordinance and accompanied by its implementing decree, sheds some light on the subject.
1. Understanding the legislative approach
First of all, it is important to clarify how the CSRD has been transposed into French law:
Ordinance no. 2023-1142 of December 6, 2023 (on the publication and certification of sustainability information and the environmental, social and corporate governance obligations of commercial companies) is THE main text transposing the European Directive into French law.
It is accompanied by application decrees and orders, in particular Decree no. 2023-1394 of December 30, 2023, implementing Order no. 2023-1142 of December 6, 2023 , specifying the long-awaited workforce, balance sheet and sales thresholds.
2. What is the scope of companies concerned, and from when?
SASs previously excluded from the scope of the Extra-Financial Performance Declaration (EFPD) are now covered by the CSRD.
With regard to thresholds, the CSRD mentions that companies meeting 2 of the 3 following thresholds, revised upwards at the beginning of November to take account of inflation (>250 employees, >25 million euros balance sheet – compared with 20 million euros initially, >50 million euros sales – compared with 40 million euros initially, will be concerned from 2024 onwards.).
However, in its decree implementing the ordinance, the legislator chose to retain the previous thresholds for companies and introduce new thresholds for groups: 48 M€ sales and 24 M€ balance sheet.
It should be noted that the ordinance introduces the notion of “particularly useful for financial institutions, which is defined as “the aggregate result of interest and similar income, income from securities, commissions received, profit from financial operations and other operating income “(Article 20).
3. Implementation schedule
The CSRD will gradually replace the Extra-Financial Performance Declaration (DPEF), according to the deadlines below:
4. The fundamentals of double materiality assessment and sustainability reporting
- Objective: Identify significant impacts, risks and opportunities (IROs) related to sustainability issues covered by ESRS.
- How: Evaluate whether a sustainability issue is material from the point of view of impacts, or its financial effects on the company, or both.
- Next: Once a sustainability issue has been identified as material, refer to the reporting obligations listed in the respective thematic ESRS to identify the information to be published. If a topic is not identified as material, the company must indicate this in its sustainability report. If a topic is material but not covered by the ESRS, the company must provide additional entity-specific information.
Application
General case (European Directive)
French cases
Entreprises
Groups
| Application | General case (European Directive) | French cases | |
|---|---|---|---|
Entreprises | Groups | ||
January 1, 2024 (publication in 2025) |
Large European and non-European companies meeting the NFRD thresholds
– over 500 employees and
– over €50m sales and/or €25m balance sheet (1) |
Large companies and groups with an average of more than 500 employees during the financial year and meeting the following thresholds (more than €50m sales and/or €25m balance sheet):
a) Listed companies
b) Credit institutions
c) State-controlled companies | |
January 1, 2025 (publication in 2026) |
Other large European and non-European companies:
1. All other European companies that meet at least two of the following criteria: >250 employees / >50M€ sales / >25M€ balance sheet total
2. All non-EU companies listed on an EU regulated market that meet two of the three above-mentioned criteria. |
Large companies exceeding 2 of the 3 following criteria: 250 employees / €40m sales / €20m balance sheet |
Large groups exceeding 2 of the 3 following criteria: 250 employees / €48m sales / €24m balance sheet |
January 1, 2026 (publication in 2027, possible deferral to 2029) |
SMEs listed on a European regulated market
All EU and non-EU SMEs listed on a European regulated market, except microenterprises(2) |
1. Small and medium-sized companies listed on a regulated market
2. Small, non-complex credit institutions
3. Captive insurance and reinsurance companies |
N/A |
January 1, 2028 (publication in 2029) |
Large non-European companies with European sales in excess of €150 million via a subsidiary or branch located within the European Union. |
Large non-European companies, i.e., not headquartered in an EU member state or another state party to the European Economic Area agreement, with a branch in France, and whose net sales exceed:
– €40m by the branch at the end of the financial year
– €150m generated in the European Economic Area at the end of the last two consecutive financial years. | |
(1) To reflect inflation, on October 17 the European Commission adopted a directive updating the thresholds of the Accounting Directive, on which the CSRD bases its definition of “large” companies.
(2) Microentreprise: company not exceeding two of the following criteria: 10 employees, €450K balance sheet total, €900K sales.
It should be noted that the following legal forms will not be affected until 2025:
- Mutual insurance group companies (mentioned in article L. 322-1-3 of the French Insurance Code),
- Unions mutualistes de groupe (mentioned in article L. 111-4-2 of the French Mutual Code),
- Sociétés de groupe assurantiel de protection sociale (mentioned in article L. 931-2-2 of the French Social Security Code),
- Agricultural cooperatives and their unions (mentioned in article L. 521-1 of the French Rural and Maritime Fishing Code).
5. Determining the size of companies and groups
The implementing decree also specifies the thresholds for determining company sizes:
(1) Group: A group comprises a company and the undertakings it controls, within the meaning of Article L. 233-16 II or III.
(2) Number of employees:
- Pursuant to Article L. 130-1 of the French Social Security Code: the annual number of employees corresponds to the average number of people employed during each month of the previous calendar year. An increase in the number of employees is taken into account when the threshold has been reached or exceeded for five consecutive calendar years.
- By way of derogation from these procedures, it is assessed on the basis of the last accounting period when this does not correspond to the previous calendar year.
(3) Balance sheet: The balance sheet total is equal to the sum of the net amounts of assets, liabilities and shareholders’ equity.
(4) Sales: Net sales are sales of products and services related to ordinary activities, less sales rebates, value-added tax and similar taxes.
Unless otherwise stipulated, these thresholds are deemed to have been exceeded on the closing date of two consecutive financial years , based on the most recently closed annual financial statements. This represents a change from the current regulations relating to DPEF, which stipulate that the thresholds are exceeded for a single financial year.
6. What are the obligations for the companies concerned?
The content of the obligations is the same as that specified in the Directive and the associated ESRS: publication of a sustainability report containing the results of the double materiality analysis, and information on the strategy, actions and environmental, social and governance (ESG) indicators resulting from the double materiality exercise.
See our article on double materiality.
Sustainability information must be prepared within the same timeframe as the management report, i.e. within 4 months of the end of the financial year, and included in a separate section of the management report.
They will have to comply with the XBRL format, for which we are awaiting publication of the dedicated European standard, scheduled for 2025.
This means that the first sustainability reports drawn up in 2025 (covering 2024) will be exempt from this obligation.
It should be noted that the Ordinance includes the possibility of omission: “information concerning imminent developments or business under negotiation may be omitted in exceptional cases when, in the duly reasoned opinion of the Board, the Management Board or the Managing Director, its publication would seriously harm the company’s commercial position, provided that such omission does not hinder a fair and balanced understanding of the development of the company’s business, its results, its situation and the impact of its activities”.(Article 8 of Ordinance no. 2023-1142 of December 6, 2023)
7. Role of the CSE
Finally, Article 26 of the Ordinance introduces the obligation for companies required to draw up a sustainability report to consult the CSE during the three annual consultations on (i) the relevant sustainability information, and (ii) the means of obtaining and verifying it.
The annual consultations provided for by the French Labor Code (art. L 2312-17) concern (1) the company’s strategic orientations, (2) the company’s economic and financial situation, and (3) the company’s social policy, working conditions and employment.
It will be interesting to observe :
- how companies manage to fulfil this obligation given the short time available to collect information on potentially 1,200 data points, analyse them, and present them to the CSE while allowing them the legal deadline of 1 month to submit their opinion;
- how to educate CSE members so that they fully grasp this new subject.
8. What are the penalties for companies?
Penalties include failure to appoint an OTI/CAC, failure to convene shareholders’ meetings or obstructing the auditors’ audits or controls:
- Failure to appoint an ITO/CAC or to convene a shareholders’ meeting: 2 years’ imprisonment and 30,000 euros fine for directors.
- Obstructing the auditors in carrying out verifications or controls, including refusal to communicate documents useful for the performance of their mission: 5 years’ imprisonment and a fine of 75,000 euros for senior managers.
On the other hand, a company that fails to meet its obligations to publish sustainability information, or to draw up a due diligence plan, may be excluded from the procurement procedure or concession contract.
This applies to public procurement contracts and concession contracts for which a consultation is launched or an advertising notice is sent for publication on or after January1, 2026.
Sources
- Order no. 2023-1142 of December 6, 2023 on the publication and certification of sustainability information and the environmental, social and corporate governance obligations of commercial companies (link: https: //www.legifrance.gouv.fr/jorf/id/JORFTEXT000048519395 )
- Decree no. 2023-1394 of December 30, 2023 implementing Ordinance no. 2023-1142 of December 6, 2023 on the publication and certification of sustainability information and the environmental, social and corporate governance obligations of commercial companies (Link: https: //www.legifrance.gouv.fr/jorf/id/JORFTEXT000048735301 )
