It's an understatement to say that this Ordinance, no. 2023-1142 of December 6, 2023, announced since law no. 2023-171 of March 9, 2023, has been eagerly awaited by all those involved in corporate life, such has been the emphasis in recent months on its future impact on companies. It will be recalled that the CSRD (Corporate Sustainability Reporting Directive), dated December 14, 2022 and transposed by the present ordinance, was deemed applicable to financial years starting on January 1, 2024, at least for the largest companies. It was therefore important to provide them without delay with details of the new obligations to which they would be subject, even though the directive gave member states until July 6, 2024 to transpose it. France is the first country to complete this task, with most of the Ordinance's provisions due to come into force on January 1, 2025. The Ordinance has just been supplemented by Decree no. 2023-1394 of December 30, 2023 , which is essential for the full implementation of its provisions, especially as regards the detailed presentation of the information to be published.

As a reminder, the CSRD directive incorporates the establishment of sustainability as a new paradigm for European Union policies, and applies it to companies' information obligations. In other words, far from simply updating the so-called NFRD (Non Financial Reporting Directive) of October 22, 2014, which had for the first time imposed the publication of extra-financial information in the field of CSR, this new text considerably strengthens their scope by following the logic of "double materiality", while increasing their degree of detail and comparability.

The transposition Ordinance provides a number of clarifications concerning the scope of companies subject to reporting requirements (I), the nature of the obligations (II), the auditing of published information (III) and the penalties applicable in the event of failure to comply with these requirements (IV).

Companies concerned

The Ordinance logically extends the scope of the entities concerned by these disclosure obligations to all large companies, by virtue of the new Article L. 232-6-3 of the French Commercial Code, which provides for the inclusion of sustainability information in a specific section of the management report of these large companies, as called for by the CSRD Directive, for financial years commencing on or after January 1, 2025.

These companies will therefore be subject to CSRD reporting regardless of whether they are public interest entities, i.e., listed companies or companies active in the financial sector, which until now have been the only ones concerned by CSRD reporting, and which will naturally remain subject to the directive's obligations for financial years beginning on or after January 1, 2024. The latter will also include listed SMEs which were not covered by the previous texts, but which may decide not to apply Article L. 232-6-3 for reports relating to financial years opened before January 1, 2028, provided they can justify this.

It should be noted that the notion of "large company", and with it that of "micro, small and medium-sized company", is now included in article L. 230-1 of the French Commercial Code, and is naturally modelled on the definitions laid down at European level by the so-called "accounting" directive 2013/34, which are based on the criteria of balance sheet total, net sales and average number of employees during the financial year. These thresholds have just been set by the aforementioned decree of December 30, 2023, which merely aligns them with those traditionally used by the European legislator.  bearing in mind that at the same time the European Commission recently decided to revise such thresholds upwards to take account of the acceleration in inflation over the last two years. Under  this Commission Delegated Directive 2023/2775 dated October 17, 2023 large companies will  be those exceeding - for at least two of these three thresholds - 25 million euros in total assets (compared with 20 at present under new article D. 230-1 of the French Commercial Code), 50 million euros in sales (compared with 40 at present under the same article) and 250 employees. It is therefore deeply regrettable that the French authorities did not anticipate the transposition of this Delegated Directive in order to avoid, even if only for a few months, such an unfortunate discrepancy between the new European thresholds and those in France.

Finally, it is important to note that a similar approach has been adopted for the concepts of large, medium-sized and small groups, which are mentioned in the new article L. 230-2 of the French Commercial Code, and are ultimately subject to the same changes in thresholds as those described above, including the regrettable temporary discrepancy between European and French thresholds. As a result, and in line with the Directive, the Ordinance will apply to large groups - i.e., those exceeding the aforementioned thresholds on a consolidated basis under Delegated Directive (EU) 2023/2775 which the new article D. 230-2 of the French Commercial Code will have to align with - by requiring the publication of sustainability information as part of the consolidated management report of the parent company alone, while at the same time exempting subsidiaries falling within the scope of consolidation from any such publication, provided they are not listed, as stipulated in the new Article L. 233-28-4 of the French Commercial Code.

As expected, no corporate form as such escapes the application of the Ordinance, since the Directive merely made a distinction between large companies and public interest entities for the purposes of a more or less staggered entry into force of the obligations concerned. As a result, while they were previously exempt from the NFRD's extra-financial performance declaration (EFRD) - at the cost of a probable violation of the latter - SASs will now be subject to sustainability reporting requirements, provided they exceed the aforementioned thresholds as a large company or parent company of a large group.

Last but not least, the CSRD directive provided for the extension of its provisions to companies governed by the laws of non-EU countries. This point has been taken up by the Ordinance for companies with a branch in France and demonstrating a certain level of activity on French soil, it being specified that companies present in France through a subsidiary are already covered by the Ordinance as a large company or SME in the public interest.

Obligations concerned

As far as the disclosure requirements themselves are concerned, the Ordinance provides only minimal details, by referring to the provisions of the aforementioned decree of December 30, 2023to set out "the elements described by this information, the supporting statements and the methods of presentation". All it does is enshrine the controversial notion of "double materiality" in the French Commercial Code, stating that sustainability information "provides an understanding of 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". For the rest, beyond the regulatory clarifications offered by the decree , reference should be made to the European Sustainability Reporting Standards (ESRS), drawn up by the European Financial Reporting Advisory Group (EFRAG) on behalf of the Commission.

One specific point nevertheless attracts attention, concerning an option left open by the CSRD Directive, and which is retained by the Ordinance: as regards information "concerning imminent developments or matters under negotiation", this may well "be omitted in exceptional cases (...) where publication would seriously harm the commercial position" of the company or group.

Auditing disclosure obligations

In this area, the Ordinance's contributions are more noteworthy, which can be explained by the greater room for manoeuvre left to member states. Three in particular stand out.

Firstly, as allowed under the Directive, the Ordinance makes it possible to ask an independent third-party body to certify sustainability information, rather than the statutory auditor responsible for auditing the company's financial statements. Referred to in the directive as "independent assurance service providers", these ITOs will be legal entities holding accreditation issued by the French Accreditation Committee (COFRAC), and will in principle have to meet the same requirements as those required of statutory auditors, particularly in terms of ethics and independence. In practice, the first companies concerned by the publication of sustainability information will therefore have to choose their auditors at their next Annual General Meeting

Secondly, and correlatively, the Haut Conseil du Commissariat aux Comptes (H3C) is being transformed into the Haute Autorité de l'Audit (H2A), whose supervisory remit will logically cover the activities of ITOs, in addition to those of statutory auditors, so that it will no longer supervise a profession per se, but a field of activity; with an organization now more strictly divided between the college and a sanctions commission, along the lines of the well-known AMF model. In particular, it will be responsible for approving the training courses to be taken by statutory auditors and individuals who are partners, managers or employees of accredited OTIs, in order to be able to certify sustainability information.

Thirdly, the Ordinance retains another option opened up by the Directive, concerning the role of the company's internal committee in the supervision of sustainability information. In addition to the traditional audit committee, it is specified that this task may be entrusted to a specialized committee separate from this committee, but subject to the same composition rules.

Sanctions

On this point, the CSRD directive had remained rather evasive, merely requiring member states to provide for effective, proportionate and dissuasive sanctions. As a result, the Ordinance adopts a relatively minimalist approach in this area: the liability of directors is in no way increased in this respect, nor is there any specific provision for administrative financial penalties in the event of non-compliance with the obligations set out in the text, which can certainly be explained by the major role given to the audit of the information concerned.

Nonetheless, both the company and its directors will remain classically exposed to the risk of liability action under ordinary law in the event of the dissemination of misleading or erroneous information, or the failure to disseminate material information in this respect, as well as, in the case of listed companies, to proceedings initiated by the AMF for the same grievances, which may lead to the imposition of financial penalties.

Notwithstanding this observation, certain provisions of the ordinance are nonetheless noteworthy.

First of all, it allows any interested party to take advantage of the injunction procedure, subject to a fine, in order to obtain the production, communication or transmission of the required documents or information. While this would appear to be limited to the case of an outright failure to publish information, potential claimants are not restricted to the shareholders of a company subject to the law.

It then transposes the criminal liability of directors for failure to appoint a statutory auditor, where this is required by law, to failure to appoint the same auditor or an ITO responsible for certifying sustainability information, where this is similarly required. This transposition also concerns failure to convene the person concerned to any general meeting, noting that the penalty incurred in this respect remains set at 2 years' imprisonment and a fine of 30,000 euros. In the same vein, the offence of obstructing the work of these various auditors is also extended to the task of certifying sustainability information, with a penalty of 5 years' imprisonment and a fine of 75,000 euros for the same managers.

Lastly, it provides for the possible exclusion from public procurement procedures of companies subject to the obligation to publish sustainability information which fail to comply with this requirement, for the year preceding the year of publication of the invitation to tender. In reality, this is the extension of a measure already provided for companies subject to the duty of care imposed by Article L. 225-102-4 of the French Commercial Code and which fail to draw up a due diligence plan in line with legal requirements.