On 14 December 2022, Directive (EU) 2022/2464, known as the CSRD or Corporate Sustainability Reporting Directive, was published in the Official Journal of the European Union.[1] It introduced an obligation for certain companies to disclose sustainability information based on harmonized European standards, the European Sustainability Reporting Standards or ESRS, such as the first cross-sector standard adopted by the European Commission on 31 July 2023.[2]

This evolution comes at a time when companies are taking on more responsibility and CSR initiatives, which were initially voluntary, are becoming more standardized, mandatory and are steadily expanding. This is the case, for example, of the duty of diligence: (i) a first ruling was issued by the Paris judicial court on 5 December 2023[3] and (ii) the European directive is in the process of being adopted following an agreement between the Parliament and the Council on 14 December 2023.[4]

The CSRD replaces Directive 2014/95/EU of 22 October 2014 on disclosure of non-financial and diversity information by certain large companies and groups, known as the NRDF or Non-Financial Reporting Directive,[5] which led to the introduction in France of the extra-financial performance declaration (déclaration de performance extra-financière or DPEF) in the Commercial Code.[6]

In particular, this declaration requires listed French companies with balance sheet total of over 20 million euros or sales of over 4 million euros and more than 500 employees, as well as unlisted French companies with sales or balance sheet total of over 100 million euros and more than 500 employees, to include in their management report (rapport de gestion) information on how they take into account the social and environmental consequences of their activities.[7]

Pursuant to the law dated 9 March 2023 empowering the Government to adopt an order within a period of 9 months from the promulgation of the said law, i.e. until 9 December 2023, to transpose the CSRD,[8] and while the European Union had given Member States until 6 July 2024 to do so,[9] France adopted order n°2023-1142 on 6 December 2023 (hereinafter “the order”), thus becoming the first Member State to transpose the CSRD.

Order n°2023-1142 on the publication and audit of sustainability information and on the environmental, social and corporate governance obligations of commercial companies, amends a number of provisions of the French Commercial Code in order to replace the DPEF with new sustainability reporting obligations (I) and to introduce a new audit system for these obligations (II).

I. Many French companies will have to comply with new reporting obligations in the near future, particularly regarding sustainability

A. CSR reporting obligations are harmonized within the French Commercial Code  

As provided for in the abovementioned law of 9 March 2023,[10] and particularly to improve clarity,[11] the Government has not only transposed the CSRD, but has also introduced common definitions of the different company and group sizes (small, medium and large companies or groups),[12] unified the injunction procedure for the various reporting obligations,[13] and harmonized these obligations within the French Commercial Code.

                1. General reporting in the management report and corporate governance report

The order amended articles L232-1 and L22-10-35 of the French Commercial Code regarding the management report, in order to specify its content. These new articles, which come into force on 1 January 2025, reproduce some of the information that the management report must contain under the former article L232-1, and also list some new information.[14]

Among these information are, for example, key performance indicators of a financial and non-financial nature, including information on environmental and personnel issues. It should be noted, however, that non-financial key performance indicators will not have to be included in the management report when a company is subject to or exempt from the new sustainability reporting obligation (cf. I.B).[15]

In addition, the order also amended article L22-10-10 of the French Commercial Code regarding the corporate governance report. The new version of this article, which come into force on 1 January 2025, clarifies the corporate governance report’s content and provides that it may refer to sustainability information (cf. I.B) when justifying the diversity policy of board members.[16]

                2. Reporting on Seveso facility management

The order introduces a new article L232-1-1 in the French Commercial Code, effective from 1 January 2025, requiring companies operating at least one Seveso “high-threshold” facility[17] to include in their management report information on (i) their policy for preventing the risk of technological incidents, (ii) their ability to cover their civil liability with regard to property and individuals arising from the operation of such facilities, and (iii) their resources for managing compensation for victims in the event of a technological accident involving their liability.[18]

                3. Reporting on payments made to States or territories for extractive or primary forest exploitation activities

The order creates an article L232-6-2 in the French Commercial Code, effective from 1 January 2025, under which certain companies in the financial sector and large companies operating in the extractive and primary forest exploitation sectors will be required to disclose annually a report on payments made to the authorities of each of the States or territories in which they operate, subject to a fine of 3.750 euros and, for legal entities, the display or distribution of the sentencing decision.[19]

It should be noted, however, that not all payments will have to be disclosed in this report, but only those which, individually or as part of a group of payments, exceed 100.000 euros and have been paid under certain obligations to certain authorities, both of which are listed in the new article L232-6-2 of the French Commercial Code.[20]

This new article provides that the report will have to be approved by the company’s board of directors, management board or managing director, be registered with the clerk of the commercial court in order to be appended to the commercial register and be published on the company’s website in a free, readable and publicly accessible form.[21]

B. A sustainability reporting obligation is introduced in the French Commercial Code

The main innovation of the order is the introduction of articles L232-6-3 and L232-6-4 and the amendment of article L22-10-36 of the French Commercial Code, which provide for an obligation to disclose sustainability information for large companies (for financial years beginning as of 1 January 2024), small and medium listed companies (for financial years beginning as of 1 January 2026 or, subject to justification, 1 January 2028) as well as for certain companies established outside the European Union or the European Economic Area which have a branch in France meeting criteria yet to be defined by decree (for financial years as of 1 January 2028)[22].[23]

The information to be published under this new obligations, as well as the disclosure procedure, have yet to be defined by decree, but the order already specifies that “sustainability information” is to be understood as that which “makes it possible to understand the impact of the company’s activity on sustainability issues, as well as the way in which these issues influence the development of its business, results and situation”, it being specified that “sustainability issues include environmental, social and corporate governance issues”.[24]

The order provides for an exception to the disclosure of this type of information when it concerns imminent developments or business under negotiation and that, in the motivated opinion of the director, it is likely to cause serious harm to the company’s commercial position. It adds, however, that this exception will only apply if it does not prevent a fair and balanced understanding of the development of the company’s business, results, situation and impact of its activities.[25]

It is specified that, for large companies, this information will be included in the management report and that, for French branches of foreign companies, it will be included in a report drawn up by the branch’s legal representative or the person with authority to bind it.[26]

In addition, the order creates mirror obligations to general reporting within the management report (cf. I.A.1), to reporting on payments made to States or territories for extractive or primary forest exploitation activities (cf. I.A.3) and to sustainability reporting (cf. I.B) for groups of companies, within a section entitled “Accounting documents and consolidated sustainability information”.[27]

In order to further encourage companies and groups of companies to comply with their obligation to disclose information on sustainability, the order amended articles L2141-7-1 and L3123-7-1 of the French Public Procurement Code to exclude from procedures for awarding public contracts or concessions those that have not complied with their obligation in the year prior to the year of publication of the invitation to tender, the concession notice or the start of the consultation process.[28] The order provides that this new rule will only apply to public contracts and concessions for which a consultation is launched or an advertising notice is sent for publication as of 1 January 2026.[29]

II. Audit of sustainability reporting will be open to a wider range of auditors, under the supervision of the Haute autorité de l’audit

A. Statutory auditors and accredited independent third-party bodies are authorized to audit sustainability information

The DPEF system requires that a statutory auditor (commissaire aux comptes) certify the presence of the DPEF in the management report, rather than its content, and that, only for companies with balance sheet total or sales of more than 100 million euros and more than 500 employees, an independent third-party body (organisme tiers indépendant or OTI) check and issue an opinion on the compliance and accuracy of the information provided.[30]

The order takes this a step further, providing that sustainability information disclosed by large companies and listed small and medium companies will be audited by a statutory auditor or an independent third-party body, and that information disclosed by foreign companies with a branch in France will be subject to a report by one or more persons or one or more firms authorized under the law applicable to the company, a statutory auditor or an independent third-party body, expressing their opinion on the compliance of the information provided.[31]

The order choses the option offered by the CSRD to allow independent assurance service providers to audit sustainability information[32] and the Government justified this choice by the need to maintain an open audit market, stimulating diversification of the offer and improving the quality of the service as well as enriching skills.[33]

As a result, the rules governing the profession of statutory auditors have been amended to reflect this new mission of auditing sustainability information,[34] and new rules have been introduced for “sustainability information auditors” working as employees, partners, shareholders, directors or members of a management, administrative or supervisory body within an independent third-party body, defined as a legal entity accredited by the comité français d’accrédidation (COFRAC) and registered on the list maintained by the Haute Autorité de l’Audit.[35]

These new rules are based on the principle of identical rules, which means that rules applicable to sustainability information auditors are the same as those applicable to statutory auditors, with only limited exceptions.[36] In this respect, the order even provides for independent third-party bodies and sustainability information auditors to be bound by the same code of ethics as statutory auditors when carrying out their task of auditing sustainability information.[37]

The choice of such a rules structure is explained by the need to ensure fair competition between statutory auditors and sustainability information auditors, to enable them to work together, to offer stakeholders the certainty of the same requirements for each of them, and to enable a homogeneous presentation of their reports.[38]

Provided they meet the required conditions, lawyers will be allowed to be accredited by COFRAC as sustainability information auditors. This is the result of negotiations conducted by the Conseil national des barreaux (CNB), which, as early as July 2023, had requested that lawyers be designated as independent assurance service providers able to audit sustainability information.[39]

B. Statutory auditors and sustainability information auditors working for independent third-party bodies operate under the supervision of the Haute autorité de l’audit

The order revises the rules governing the Haut conseil du commissariat aux comptes (H3C), which currently supervises the activity of statutory auditors, to extend its missions to the supervision of sustainability information auditors. It renames it the Haute autorité de l’audit (H2A) and creates a new section in the French Commercial Code entitled “De la Haute autorité de l’audit”, including articles L820-1 to L820-24, effective from 1 January 2024.[40]

These new rules provide that the Haute autorité de l’audit is an independent public authority composed of a sanctions commission and a college including, among others, two persons qualified in the audit of sustainability information,[41] and to which two standardization commissions are attached. One, composed of a statutory auditor, a sustainability information auditor and a person qualified in sustainability matters, is responsible for drafting standards relating to ethics (déontologie), internal quality control and the performance of sustainability information audit missions, while the other is responsible for the same tasks, but relating to the other missions performed by statutory auditors.[42]

In addition, these new rules provide that the Haute autorité de l’audit’s main tasks are to register statutory auditors and sustainability information auditors, to keep the list of registrants, to monitor statutory auditors, independent third-parties bodies and sustainability information auditors as well as to impose penalties.[43]

Regarding its monitoring role, it should be noted that the Haute Autorité de l’Audit‘s audits may be carried out with the assistance of the Autorité des Marchés Financiers (AMF) and the Autorité de Contrôle Prudentiel et de Résolution (ACPR),[44] and that the auditors and any other persons involved in these audits have various rights, including, for example, the right to obtain documents and information, or to carry out on-site inspections.[45]

Pending the adoption of the decree implementing this order, which is expected shortly and will notably define the information to be published in terms of sustainability, this order therefore reinforces the extra-financial reporting obligations of companies and, more broadly, their obligations in terms of corporate social responsibility (CSR).