The CSRD regulation (Corporate Sustainability Reporting Directive) aims to harmonise corporate sustainability reporting and improve the availability and quality of published data. It replaces the previous directive no. 2014/95 (the NFRD). It requires companies to publish more detailed information on their environmental, social and human rights impacts, based on common criteria aligned with the European Union's climate objectives, and to be audited by an independent third party. Within this framework, a number of standards will be created, known as ESRS standards, which will gradually be adopted. A first set was published in July 2023.

The scope of this obligation has been extended to all large companies, whether listed or not, as well as to non-European companies that carry out a significant amount of business in the European Union, and is intended to apply progressively according to predefined thresholds.

The order was presented to the Council of Ministers on December 6^th 2023 and published in the Official Journal the following day. Its publication is accompanied by a report to the President of the Republic on the ordinance, which sets out in detail the content of the amendments to the French Commercial Code.

This measure has been supplemented by a Decree no. 2023-1394, which specifies:

- the thresholds applicable to the definitions of the different sizes of companies and groups of companies (C. com., art. D. 230-1 and D. 230-2),

- the type of sustainability information that must be prepared and published by the various companies concerned (C. com., art. R. 232-8-3 to R. 232-8-8 and R. 232-25 and R. 232-26), and

- the rules applicable to issuers' annual financial reports (C. com., art. R. 451-1 and R. 451-2).

It also completes the amendments to the French Commercial Code relating to statutory auditors in order to adapt them to the task of certifying sustainability information (C. com., art. R. 820-& et seq.).

France is the first Member State to transpose the CSRD.

Obligation to publish sustainability information (art. 1 to 10)

This new obligation to publish sustainability information replaces the extra-financial performance declaration (DPEF) resulting from the NFRD and takes its place within the management report (art. 8, which amends C. com., L. 232-1). The information to be disclosed is more extensive and must be reliable, comparable and accessible in order to comply with the principle of "double materiality", i.e. it must represent both the company's impact on environmental, social and corporate governance issues, known as "sustainability issues", and the impact of these issues on the development of the company's business, results and situation.

The report to the French President also states that this obligation "responds to the growing need for extra-financial data expressed by financial institutions, which use it in their investment decisions, risk management policies and shareholder engagement activities, as well as by many other stakeholders, including customers, social partners, public authorities and non-governmental organisations".

Under the terms of the directive, the obligation to publish sustainability reporting is intended to apply progressively according to certain thresholds, subject to the details that may be provided in the forthcoming decree:

• From January 1^st 2024 (reports published in 2025) for large companies required to publish non-financial information in accordance with the NFRD;
• From January 1^st 2025 (reports published in 2026) for all other large companies meeting at least two of the following three criteria:
  • 250 employees
  • €40 million turnover
  • €20 million balance sheet
• From January 1^st 2026 (reports published in 2027) for SMEs listed on the European regulated market (except micro-enterprises)
• Until January 1^st 2028 (reports published in 2029) for non-EU companies with a European turnover of more than €150 million and a subsidiary or branch based in the EU.

Certification of sustainability information (art. 11 to 19)

The directive also stipulates that published sustainability information must be audited by a statutory auditor, who may be different from the auditor certifying the accounts, or by an independent third-party organisation.

These new measures require the introduction of a set of new provisions applicable to the publication of non-financial information and to the regulated profession of statutory auditor (art. 11 et seq.).

General change to ESG obligations

Meanwhile transposing the provisions of the directive, and in accordance with the enabling article, the ordinance proceeds, in the words of the report to the President of the Republic, to "harmonise and to proceed to consistency adjustments to the framework of ESG obligations, particularly within the Commercial Code" by means of three series of measures:

• Simplification and clarification of other ESG reporting systems
• The creation of common definitions of the different sizes of companies and groups, with the aim of rationalising the approach to thresholds within Book II of the Commercial Code (art. 7);
• The unification of injunction procedures in order to guarantee the effectiveness of these different measures (art. 10, which amends C. com., L. 238-1).

Subject to the deferred entry into force or the adjustments provided for in articles 33 to 42, the Order comes into force on 1 January 2024 (art. 32).

Next steps

If you would like to discuss these updates and their impact on your business in more detail, please do not hesitate to contact a member of our ESG team in Paris.

Authored by Xavier Doumen, Christelle Coslin, Vincent Fidelle, Pierre-Marie-Boya and Louis-Nicolas Ricard