The CSRD Directive in France: Non-financial reporting, companies significantly reformed to meet the European Union's ecological ambitions

published on 27 June 2024 I reading time approx. 3 minutes

The European Corporate Sustainability Reporting Directive (the “CSRD Directive”) was adopt-ed by the Parliament and Council of the European Union on 14 December 2022 and became applicable from 1 January 2024.

It was transposed in France by Ordinance No. 2023-1142 of 6 December 2023 and Decree No. 2023-1394 of 30 December 2023.

The objectives of the Directive

The CSRD Directive is the cornerstone of the European Green Deal of 11 December 2019, a set of EU measures aimed at making its economy climate neutral and sustainable. The objective of the CSRD Directive is twofold:

A better harmonisation of companies' non-financial reporting obligations (i.e. reporting on the company's impact in terms of social, societal and environmental responsbility)
Improving the availability and quality of ESG (environmental, social and governance) information published by companies

The CSRD Directive considerably modifies the European regulations relating to such obligations already in place (namely: the Accounting Directive of 26 June 2013, the Transparency Directive of 6 June 2004, the Audit Directive and the Audit Regulation of 16 April 2014). In addition, it extends, clarifies and deepens the Non-financial Reporting Directive (NRD) that preceded it on 22 October 2014.

An expansion of the companies concerned by the reporting obligations

Firstly, the CSRD Directive significantly broadens the scope of companies concerned by the reporting obligations.

However, the CSRD Directive provides for a gradual implementation of its rules.

Under French law, the companies concerned by the reporting obligations are defined in Title II, Chapter X of the French Commercial Code. These companies and the entry into force is as follows:

From 1 January 2024, for all large European companies checking the following NFRD thresholds according to the preliminary chapter of the French Commercial Code:

500 employees
€40,000,000 in turnover or
€20,000,000 balance sheet total.

From 1 January 2025 for all other large European companies verifying in accordance with Articles L230-1 and D230-1 of the French Commercial Code, two of the following three thresholds:

250 employees
€40,000,000 in turnover
€20,000,000 balance sheet total

From 1st January 2026 for all EU and non-EU SMEs listed on a European regulated market (with the possibility to postpone until 2028), except micro-enterprises as defined in L230-1 and D230-1 of the French Commercial Code (i.e. companies not exceeding two of the following criteria: 10 employees, €350,000 balance sheet total, 700,000 € in turnover).

Non-European companies may be subject to such obligations by their European subsidiaries and branches if they have a turnover of more than €150,000,000 in the European Union (Articles D. 232-8-7 and L232-6-4 of the French Commercial Code).

However, such companies only need to provide information related to their socio-environmental impacts (and not information related to their risks and opportunities) The previously mentioned articles in accordance with the requirements of the Directive will only be applied from 1 January 2028.

A movement to strengthen and standardize reporting obligations

The CSRD directive is strengthening and standardizing reporting obligations. The publication of information by companies on their risks, opportunities, and material impacts in connection with social, environmental and governance issues must now comply with the rule of double materiality.

This means that companies must identify the relevant information to be provided in relation to both:

the impact of non-financial matters on their business and
the impact of their business on non-financial themes.

As part of this process, companies must take into account short, medium and long-term horizons.

If a company is not able to publish certain information relating to significant elements in connection with policies, actions and targets related to a sustainability issue or concerning elements from the “value chain”, it must identify this missing information and explain the reason for the non-publication.

The CSRD Directive provides for the creation of harmonized sustainability reporting standards, known as “ESRS” (European Sustainability Reporting Standards). In France, companies shall publish their information on the basis of these European standards, pursuant to Articles L. 232-6-3 of the French Commercial Code and R. 451-1, R. 451-2 and R. 518-30-3 of the Monetary and Financial Code, as of 1 January 2025.

The European Financial Reporting Advisory Group (EFRAG) has been tasked by the European Commission with the preparation of the ESRS. Several types of standards are thus planned, and will be adopted by delegated acts:

All-industry (universal) ESRS standards;
specific ESRS standards for SMEs listed on regulated markets;
sectoral ESRS standards;
and finally, ESRS standards specific to certain non-European companies

These standards are not referred to in the transposition texts themselves, but the regulatory authorities rely on them in their recommendations.

Better accessibility of reporting obligations

In order to standardize information and ensure better access to it, the CSRD Directive requires that sustainability reporting be published in a dedicated section of the management report.

The management report must also be published in a single European electronic format.

The CSRD Directive introduces a mandatory verification of information by an auditor or an independent third-party body (ITO) appointed as sustainability auditors. The initial requirement is a “moderate” level of assurance. A move to the “reasonable” level of assurance may be required starting in 2028. In addition, auditors will have to apply European assurance standards and the rules governing their missions are reinforced by the Directive and the Audit Regulation. This provision is found in Article L. 822-2 of the French Commercial Code.