The French government is currently working on the transposition into French law of Directive 2014/95/EU, with respect to disclosure of nonfinancial and diversity information by certain large undertakings and groups.
For the past 15 years, a number of French companies have been subject to nonfinancial reporting obligations, first created by the 2001 New Economic Regulations Law and then reinforced by the 2010 Grenelle II law. These provisions are now consolidated into the French Code of Commerce. Transposing Directive 2014/95/EU requires making some adjustments to the existing texts to ensure compliance with the European rules.
A draft ordinance and a draft implementation decree have been submitted to public consultation. The ordinance proposes to consolidate the various existing nonfinancial reporting obligations into one article of the Code of Commerce (future article L. 225-102-1-1). The reform will also extend the nonfinancial reporting obligations to additional entities.
Based on the proposed reform, the social and environmental reporting obligations that already applied to certain large companies and all listed companies would become applicable to: (i) listed companies, credit institutions and financing companies, insurance companies, and social security bodies above €20 million total balance or €40 million net turnover; and (ii) other companies above €100 million total balance or €100 million net turnover and that have more than 500 employees.
It should be noted that small, listed companies under the above-mentioned threshold would no longer have to comply with these reporting requirements.
The reporting requirements, included in the concerned company's annual report, would include a nonfinancial performance statement presenting information on how the company takes into account the social, environmental, and societal consequences of its activity, as well as their impact on compliance with human rights and the fight against corruption.
Specifically regarding climate change issues, the proposed ordinance would mandate the inclusion of information on the consequences of the companies' activity and of the use of the goods and services it produces on climate change. The companies would also have to detail the financial risks related to the impacts of climate change, as well as the measures implemented to reduce those risks through a low-carbon strategy in all aspects of their activity.
The draft decree further provides that the information submitted on climate change should include the significant greenhouse gas emission sources generated by the company's activity, particularly by the use of the goods and services it produces as well as the adaptation to climate change consequences, including the reduction goals voluntarily set on a medium and long term to reduce greenhouse gas and the means devoted to this end.
No definition of what may qualify as a "disclosable climate change financial risk" is provided by the proposed regulations, which may create some difficulties for companies subject to mandatory reporting.
The new regime also provides that companies that do not implement a policy will have to explain why ("comply or explain"). Furthermore, the level of reporting should be determined based on the actual or potential impact of the activities of the company ("materiality principle").
If adopted in its present form, this new reporting regime will apply to the reports related to the financial year beginning from January 1, 2017. As a consequence, the concerned companies may have to retroactively gather information on the current year.
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