France: ESG Comparative Guide

1 Legal and enforcement framework

1.1 What regulatory regimes and codes of practice primarily govern environmental, social and governance (ESG) regulation and implementation in your jurisdiction?

A large proportion of ESG regulation in France is based on EU law, including the following:

• The Non-Financial Reporting (EU) Directive 2014/95 (NFRD) – effective since 2018, and to be replaced by the Corporate Sustainability Reporting Directive (EU) Directive 2022/2464 (CSRD) as of 1 January 2024 – strengthened the role of sustainable development issues in the strategy, governance and risk management of companies.
• The Shareholder Rights (EU) Directive 2017/828 (SRD II), effective since 2017, reinforces corporate governance for EU listed companies as well as shareholders' rights, particularly regarding access to information.
• The Sustainable Finance Disclosure (EU) Regulation 2019/2088, effective since March 2021, improved the market transparency of sustainable investment products.
• The Taxonomy (EU) Regulation 2020/852, effective since July 2020, established an EU classification system to identify sustainable economic activities.

In addition, the following national laws apply:

• Law 2003-699 of 30 July 2003, relating to the prevention of technological and natural risks and the repair of damage;
• Law 2010-788 of 12 July 2010, known as the 'Grenelle 2 Law', on national commitment for the environment, identifying the French government's environmental objectives;
• Law 2011-103 of 27 January 2011, known as the 'Copé-Zimmermann Law', introducing new obligations on gender diversity in company boards;
• Law 2013-619 of 16 July 2013, containing various provisions to comply with EU law on sustainable development;
• Law 2016-1691 of 9 December 2016, known as the 'Sapin 2 Law', on transparency, the fight against corruption and modernisation of economic life;
• Ordinance 2017-1180 of 19 July 2017, implementing the NFRD Directive in France;
• Law 2017-399 of 27 March 2017, creating the 'duty of vigilance' by introducing a new duty of care for large companies and requiring them to establish and effectively implement a vigilance plan;
• Law 2018-771 of 5 September 2018 on the freedom to choose one's professional future;
• Law 2019-486 of 22 May 2019, known as the 'Pacte Law', on the growth and transformation of enterprises;
• Law 2021-1104 of 22 August 2021, known as the 'Climate and Resilience Law', on combating climate change and building resilience to its effects; and
• Law 2021-1774 of 24 December 2021, known as the 'Rixain Law', on economic and professional equality.

The ESG legal framework is completed by:

• Sections 5 and 8 of the Association Française des Entreprises Privées (AFEP)/Mouvement des Entreprises de France (MEDEF) Corporate Governance Code for listed companies; and
• the Financial Market Authority's (AMF) policies (eg, Recommendation 2020-03 on collective investments incorporating non-financial criteria).

Other codes are listed in question 1.2.

1.2 Is the ESG framework in your jurisdiction primarily based on hard (mandatory) law and regulation or soft (eg, 'comply or explain') codes of governance?

The ESG framework in France is based on a combination of hard law and regulation, as well as soft codes of governance. For example, the ESG laws listed in question 1.1 are hard law and will be enforced by the French authorities; while non-binding recommendations include the following:

• the AFEP/MEDEF Corporate Governance Code for listed companies;
• the Euronext ESG Reporting Guide;
• the France Invest Guide of Good Practices for Private Debt Financing Indexed to Sustainability Criteria and Other Recommendations;
• the Legal High Committee for Financial Markets of Paris' (HCJP) Report on Companies' Non-financial Transparency Mechanisms;
• the HCJP Report on 'Say on Climate' Climate Resolutions;
• the Bank of France and the French Prudential and Resolution Control Authority Report on Climate Action; and
• the French Association for Finance Management Transparency Code for Socially Responsible Investment Funds Opened to the Public.

1.3 Which bodies are responsible for implementing and enforcing the rules and codes that make up the ESG framework? What powers do they have?

The body which is responsible for implementing and enforcing ESG rules in France depends on the specific rule being enforced. There is significant reliance on the French courts and administrative authorities.

Only specific judicial courts designated by law have jurisdiction to adjudicate cases involving the duty of vigilance and ecological damages, with the power to:

• pronounce injunctive relief against a company to force it to comply with its duty of vigilance, including possible financial penalties;
• award damages against a company and/or its directors when the criteria establishing civil liability are met as a result of a failure to exercise due care. These awards may be published; and
• exclude a company from the process of entering into public contracts or public concessions.

The French civil courts can also impose sanctions based on other regulations, such as the following:

• An appointment to a board that violates the parity requirement can be declared void, as can resolutions taken by a board in violation of this obligation. However, a resolution cannot be invalidated for failure to manage a company while taking into consideration social and environmental issues, as required by the Pacte Law; and
• Remuneration payments to board members can be suspended if the board is not composed in accordance with the parity requirements.

The French criminal courts are competent for some matters – for example, to issue a fine when a company fails to establish its management report or its report on payments made to governments (Articles L242-8 and L225-102-3 of the Commercial Code).

Administrative authorities have been attributed sanctioning powers regarding certain ESG regulations, such as the following:

• The AMF has jurisdiction to control, and possibly sanction, the enforcement of listed companies' reporting obligations. The Enforcement Committee of the AMF is qualified to impose a large scope of sanctions such as fines or disqualification of board members.
• The French Agency for Ecological Transition has the power to impose fines for failure to publish greenhouse gas emissions reviews or energy audits.
• The French Anti-corruption Agency may issue a warning to its management and impose fines where a company does not respect its obligations under the Sapin 2 Law.
• The French labour administration can issue fines when a company does not comply with parity obligations in management bodies or in case of unpublished or insufficient gender parity indices.
• The French Competition Authority (FCA) and the General Directorate for Competition Policy, Consumer Affairs and Fraud Control (DGCCRF) are empowered to implement competition rules and policies pursuant to the Commercial Code and the Consumer Code. In their enforcement actions, both authorities increasingly take sustainability issues into account. These actions will particularly be aligned with the objectives set by:
• • the Climate and Resilience Law (see question 1.1) and other environmental laws at the national level; and
  • the Green Deal and the revised Block Exemptions Regulations at the EU level (see question 8.1).
• Sustainable development issues are now playing an increasingly important role in litigation and consultative antitrust cases. For example, the FCA has imposed a fine of €302.3 million on the three main manufacturers of PVC and linoleum flooring for having drafted and signed a charter prohibiting them from communicating on the individual environmental performance of their products (Decision 17-D-20 of 18 October 2017). These issues are also emerging in the analysis of new markets carried out in the context of merger control cases. As a reminder, the FCA may impose penalties of up to 10% of their annual turnover on infringing undertakings.

Further, the High Committee on Corporate Governance monitors the application of the AFEP-MEDEF Code.

1.4 What is the regulators' general approach to ESG and the enforcement of the ESG framework in your jurisdiction?

The ESG regulatory framework in France is very ambitious, covering almost all ESG aspects, and giving non-governmental organisations multiple grounds to act on. Some of these organisations are currently trying to compel large companies to respect the Duty of Vigilance Law by issuing a formal notice (mise en demeure), and by initiating actions before the Paris Judicial Court for a failure to respond or when the response is deemed insufficient.

Despite it being too soon to rule on the regulators' and the courts' general approach to ESG, French jurisdictions appear to be cautious when dealing with ESG obligations. The approach will be clarified in the coming years, with several decisions expected soon.

The AMF appears to be focusing on sustainable finance and ensuring that information delivered to investors is clear, exact and not misleading, to avoid any risk of greenwashing.

The FCA pays particular attention to anti-competitive practices aimed at damaging the environment or slowing the ecological transition. It clearly indicated, in its revised procedural notice on fines released in July 2021, that anti-competitive practices that have a negative impact on the environment may be more severely sanctioned.

As for the DGCCRF, it announced, in its 2021 activity report, that it will launch several investigations to verify companies' compliance with new laws protecting both the environment and consumers.

1.5 What private sector initiatives have been launched in your jurisdiction to complement the ESG framework?

In France, there are various private sector initiatives complementing the ESG framework, including:

• sectoral labels certifying corporate social responsibility approaches, such as AFNOR certifications;
• managers' variable remuneration taking into account ESG criteria;
• stakeholders' committees in companies to inform and consult stakeholders about the company's corporate social responsibility approach and to help in building and enforcing the company's vigilance plan; and
• the integration of ESG clauses and ethical charts into contracts between the company and its suppliers or subcontractors.

As seen in question 1.4, non-governmental organisations have also addressed ESG topics, either through acts of prevention and information or by acting against companies alleged to have breached their ESG obligations, especially in the environmental field.

2 Scope of application

2.1 Which entities are captured by the rules and codes that make up the principal elements of the ESG framework in your jurisdiction?

The entities captured by the various rules and codes depend on the relevant rule that includes ESG elements – for example:

• the EU Non-Financial Reporting Directive, as implemented in France by Order 2017-1180, introduced non-financial performance reporting obligations which apply to companies above certain thresholds – currently:
• • €100 million for the balance-sheet total;
  • €100 million for net turnover; and
  • 500 for the average number of permanent employees during the fiscal year concerned;
• the duty of vigilance applies to limited liability companies (sociétés anonyme) employing, within the entity or in their direct or indirect subsidiaries, at least 5,000 employees in France, or 10,000 employees worldwide, over two consecutive fiscal years; and
• the Copé-Zimmermann Law introducing gender quotas applies only to listed companies and unlisted companies which, for the last three financial years, employed at least 250 employees, and with revenues or total assets over €50 million.

Soft law such as the Association Française des Entreprises Privées (AFEP)/Mouvement des Entreprises de France Corporate Governance Code is addressed to listed companies only.

2.2 How are entities in your jurisdiction that are not subject to specific rules or codes implementing ESG?

Due to the growing focus on ESG-related issues in society, companies that are not subject to specific rules or codes are also becoming more sensitive to ESG issues. These companies may create ESG strategies according to the examples provided by regulation and soft law. This exercise may also be beneficial from a consumer perspective, as companies that do not consider ESG as part of their strategy are increasingly facing reputational risks.

Companies are recommended to continue monitoring the European Union's proposal for a Corporate Sustainability Due Diligence Directive, which would have a broad scope of application.

2.3 What are the principal ESG issues in your jurisdiction that are either part of the ESG framework or part of the implementation of ESG?

One of the main ESG issue in France stems from the redundancy of complex and sometimes overlapping ESG obligations, creating a delicate situation for companies. The diversity of the reporting obligations creates a complex framework, making it difficult to know which information must be provided.

As an illustration, the Sustainable Financial Disclosure Regulation (SFDR) introduced two categories for investment funds according to their level of sustainability ambition. The most ambitious (Article 9 of the SFDR) aims to include sustainable investment as an objective; whereas the category defined by Article 8 of the SFDR refers only to funds that promote environmental or social characteristics. Different studies have revealed that the concrete application of this classification is confusing.

The Financial Market Authority recently published guidelines raising awareness on the risks of greenwashing by undertaking so-called 'SPOT' reviews. This authority monitors the socially responsible investment systems put in place by asset management companies and the integration of ESG criteria.

The growing concern around the tracking of supply chains creates further difficulties for companies. Companies must implement a thorough due diligence programme covering all of their suppliers in order to prevent any human rights or environmental risks. This is a challenge for French companies, especially in consideration of the European Union's intention to adopt, in the coming years, a regulation on 'zero deforestation' supply chains.

Listed companies are increasingly coming under scrutiny by NGOs and institutional investors for their greenhouse gas reduction targets and their efforts to limit global warming to a level compatible with the objectives set by the Paris Agreement. The Say on Climate tool is becoming increasingly commonly utilised among listed companies, which presents both an opportunity to strengthen social dialogue and a challenge to set ambitious but tenable, measurable and verifiable targets.

Ultimately, the profusion of both binding and non-binding rules is creating confusion among companies. New legal frameworks that have not been enforced yet can create legal insecurity as one cannot foresee how they will be interpreted by the courts. As an example, the revised EU Block Exemption Regulations in the competition law field (see question 8.1) can create opportunities for companies to cooperate on new business ventures; but caution is required as the French Competition Authority president, Benoît CSuré, has warned about certain conceptual difficulties when assessing the compliance of such agreements with competition rules.

3 Disclosure and transparency

3.1 What primary disclosure obligations relating to ESG apply in your jurisdiction?

In France, the primary disclosure obligations relating to ESG are provided for by both EU regulations and national laws.

Reporting of companies, credit institutions and insurance companies: The current rules on sustainable reporting are set out in the EU Accounting Directive (2013/34/EU) as amended by the EU Non-Financial Directive (2014/95/EU) (NFRD).

In accordance with the NFRD, sustainable reporting obligations currently cover large undertakings which are public interest entities with more than 500 employees. This covers approximately 11,700 large companies and groups across the European Union, including listed companies, credit institutions, insurance companies and other companies designated by national authorities as public interest entities. Public interest entities must publish information related to the following ESG topics:

• environmental matters;
• social and employee matters;
• respect for human rights;
• anti-corruption and bribery; and
• diversity policies of the administrative, management and supervisory bodies.

There are 13 predominant provisions in French law on ESG reporting/disclosure (from national and European law sources):

• the provisions relating to the extra-financial content of the management report contained in Articles L225-100-1 and L22-10-35 of the French Commercial Code;
• the provisions relating to certain extra-financial elements of listed companies' corporate governance reporting (diversity policy and executive compensation policy) contained in Articles L22-10-9 to L22-10-11;
• the extra-financial performance statement contained in Articles L225-102-1 and L22-10-36, as detailed by Article R225-105 of the same code and supplemented by Article 8 of the EU Taxonomy Regulation (2020/852);
• the provisions of Law 2003-699 of 30 July 2003 relating to the prevention of technological and natural risks and the repair of damage, contained in particular in Article L225-102-2;
• the declaration of payments to governments required for companies engaged in extractive activities, contained in Article L225-102-3, I;
• the provisions of Law 2017-399 of 27 March 2017 on the duty of vigilance for parent companies and ordering companies contained in Articles L225-102-4 and L225-102-5;
• the provisions of Law 2011-103 of 27 January 2011 (Copé-Zimmermann Law) introducing new obligations on gender diversity in boards of large French companies, contained in Articles L225-18-1 and L225-69-1;
• the provisions of the Labour Code resulting from Law 2021-1774 of 24 December 2021 aimed at achieving parity within management bodies, and more specifically at accelerating economic and professional equality (Rixain Law), contained in Articles L1142-11 to L1142-13 of the Labour Code and Article L23-12-1 of the Commercial Code;
• the provisions of the Pacte Law (amending Articles 1833 and 1835 of the Civil Code and Articles L225-35 and L225-64 of the Commercial Code), which require company directors to manage the company in its best interests, taking into account the social and environmental challenges of its activity, and which allow companies to establish a raison d'être in their articles of association;
• Article L229-25 of the Environmental Code, resulting from Law 2010-788 of 12 July 2010 (Grenelle 2 Law), and last amended by Law 2019-1147 of 8 November 2019, on energy and the climate, on the greenhouse gas emissions balance and the transition plan;
• Article L233-1 of the Energy Code, resulting from Law 2013-619 of 16 July 2013, containing various provisions to comply with EU law on sustainable development and requiring the performance and publication of an energy audit;
• the provisions of Law 2016-1691 of 9 December 2016 on transparency, the fight against corruption and the modernisation of economic life (Sapin 2 Law) relating to whistleblowing mechanisms and the anti-corruption plan; and
• the provisions of Law 2018-771 of 5 September 2018 on the freedom to choose one's professional future imposing an obligation on certain companies to publish a gender equality index.

The reporting requirements were recently revised by the Corporate Sustainability Reporting Directive (2022/2464/EU) (CSRD), which entered into force on 5 January 2023. This opened a transitional period granting member states until 6 July 2024 to transpose the CSRD into national law. Its provisions will apply progressively between 2024 and 2028. The CSRD has not been implemented in France at as of the date of writing.

The CSRD creates the following key implications on sustainable reporting:

• Sustainable reporting obligations will extend to a wider range of undertakings, including small and medium-sized undertakings (excluding micro-enterprises) with securities listed on EU regulated markets (through adapted obligations);
• More detailed reporting requirements will be introduced, along with the obligation to report according to mandatory sustainability reporting standards;
• Small and medium-sized undertakings will have more limited obligations of sustainability reporting according to dedicated reporting standards;
• Audit requirements will be added for the information reported;
• Companies will be required to provide reported information in a mandatory electronic format which will be collected in a European access point for public corporate information; and
• Reported information must be sufficient for financial market participants to comply with their disclosure obligations under the Sustainable Financial Disclosure Regulation (2019/2088/EU) (SFDR) – see further below.

In addition, the CSRD amends the EU Transparency Directive (2004/109/EC):

• to ensure that undertakings whose securities are traded on a regulated market in the European Union, including third-country issuers, fall under the same sustainability reporting requirements; and
• to clarify the regulatory supervisory regime applicable to these undertakings.

The European Financial Reporting Advisory Group (is responsible for developing draft reporting standards that will detail the reporting requirements under the CSRD and should be adopted by way of delegated act by the European Commission. The first set of the drafts were submitted on 23 November 2022 to the European Commission.

Financial institutions disclosures: Certain major banks are subject to specific sustainability reporting under the Capital Requirement Regulation (2013/575/EU) (CRR) – that is, the Pillar 3 disclosures on ESG risks. This requires those institutions to disclose prudential information sustainability risks, including transition and material risks, to allow investors and stakeholders to compare the sustainability performance of institutions and of their financial activities. Final technical standards were published in January 2022 by the European Banking Authority specifying uniform formats and associated instructions for disclosure of the information. Institutions subject to Pillar 3 disclosures have to start disclosing the information from 2022, and the first disclosure will take place in 2023 for the disclosure reference date as of the end of December 2022.

Certain major investment firms are also subject to the obligation to disclose prudential information on ESG risks, similar to the information required under the CRR, under the Regulation on the Prudential Requirements of Investment Firms (2019/2033/EU). Disclosures are required since 26 December 2022 and shall be made once in the first year (ie, 2023) and biannually thereafter.

These regulations are directly applicable in France.

Financial products-related disclosures: The rules on sustainable financial reporting are provided in the SFDR. The objective of the SFDR is to channel private investment towards green financial products while preventing greenwashing. The SFDR entered into force on 10 March 2021 and is directly applicable in France.

Under the SFDR, financial market participants and financial advisers must disclose sustainability-related information with respect to financial products on their websites and in their pre-contractual documentation, depending on a classification of the financial products.

The SFDR distinguishes three main categories of financial products:

• 'Article 6' products, which may or may not incorporate ESG characteristics but do not promote them and do not pursue a sustainable investment objective;
• 'Article 8' products, which promote, among other things, social or environmental characteristics or a combination of these two characteristics; and
• 'Article 9' products, which are those that pursue a sustainable investment objective – that is, an investment in an economic activity that contributes to an environmental objective or to a social objective without causing material harm to any of those objectives.

The SFDR has been supplemented by regulatory technical standards (2022/1288/EC) (SFDR RTS) that further specify the content, methods and presentation of the information to be published with regard to the financial products referred to as Articles 8 and 9. The SFDR RTS entered into force on 1 January 2023.

3.2 What voluntary ESG disclosures are also commonly made in your jurisdiction?

ESG matters are already a top priority for the majority of French companies and this trend is increasing. Many companies are voluntarily communicating their ESG practices. This practice began with listed companies and is spreading among companies notwithstanding their size.

ESG factors are drawing the attention of customers, investors and shareholders, which expect ever more clearly defined lines of action on ESG matters.

To acknowledge these ESG matters, financial institutions and other companies have been voluntarily integrating ESG elements to their reports. These ESG factors are currently regulated by general principles and standards.

These standards can be found in numerous codes, directives, European regulations, national laws and international practices, such as:

• the Association Française des Entreprises Privées/ Mouvement des Entreprises de France Code;
• the France Invest Code;
• the UN Global Compact;
• the UN Principles for Responsible Banking;
• the Finance for Biodiversity Pledge;
• the UN Principles for Responsible Investment;
• the UN Principles for Sustainable Insurance and Climate Action100+; and
• ISO 26000.

These companies generally go beyond what is required from a legal standpoint by voluntarily disclosing non-financial information. This may include statements on their compliance and sustainability practices and presentations of actions taken to limit, for example, their greenhouse gas emissions.

These statements may take various forms, such as webpages and annual or institutional reports. Depending on the sector, voluntary ESG disclosures often include detailed disclosures on a range of ESG factors such as the following:

• Environment:
• • Sustainability;
  • Waste reduction;
  • Environmental impact;
  • Net-zero goals in line with the Paris Agreement;
  • Say on Climate; and
  • Air quality.
• Social:
• • Human rights, diversity and no discrimination, equal treatment of employees; and
  • Data privacy.
• Governance:
• • Corruption (Sapin II Law); and
  • Conflicts of interest.

There are also ESG disclosure policies that are based on French standards:

• The SRI label: This is an approach aimed at applying the principles of sustainable development to investment.
• The Greenfin label: Created by the Ministry of Ecological Transition and Territorial Cohesion, this label guarantees the green quality of investment funds and is aimed at financial players that act in the service of the common good through transparent and sustainable practices.
• The Transparency Code (EU): This code is the French version of the European Transparency Code, which was designed and approved by the French Association for Finance Management, the French Sustainable Investment Forum and the European Sustainable Investment Forum.

3.3 What role is played in this regard by (a) the board and (b) other corporate bodies and/or officers?

See question 4.2.

3.4 What best practices should be considered in relation to ESG reporting and disclosure?

ESG disclosures are subject to many risks – in particular, reputational risks based on greenwashing allegations or even litigation risks. Care should therefore be taken when preparing ESG disclosures, and all disclosures should be based on available data and measured against a conservative standard. It is always helpful if ESG disclosures are accompanied by third-party assessments or verifications, such as ESG ratings. However, in case of the use of ESG ratings, the basis of the ratings should be highlighted to make the public aware of the significant of the selected ratings. In addition, a strict monitoring of disclosures and their correctness should be implemented. Any kind of misinterpretations or omissions should be avoided.

4 Strategy and governance

4.1 How is ESG strategy typically designed and implemented in companies in your jurisdiction?

Duty of vigilance: The law creating the duty of vigilance requires companies to establish and effectively implement a vigilance plan if they employ in their own or in their direct or indirect subsidiaries, at the close of two consecutive financial years, at least:

• 5,000 employees in France; or
• 10,000 employees worldwide.

The plan must include "reasonable vigilance measures to prevent serious violations of human rights and fundamental freedoms, the health and safety of individuals and the environment".

Environmental management system: In addition, a large number of listed companies have set up an environmental management system (eg, Bouygues, L'Oréal, Michelin, Orange, Renault) and are evaluating and certifying their measures with independent organisations, such as ISO 14001 certification.

The Task Force on Climate Disclosure: In this context, some companies (eg, BNP Paribas, Engie, Bouygues and Orange) have aligned their practices with this task force. Some companies, such as Orange, have created follow-up committees on the Task Force on Climate Disclosure.

The principle of double materiality: Most companies apply the principle of double materiality in order to identify the risks to which they are exposed.

For example, Société Générale:

4.2 What role is played in this regard by (a) the board and (b) other corporate bodies and/or officers?

The majority of listed companies have, either under their chief executive officer (CEO) or within their board of directors, a body specifically created in connection with the implementation and reporting of ESG criteria.

The board or CEO's role is typically to select and appoint qualified and reliable individuals and assign to them the task of implementing a proper ESG compliance function. The selection of members is critical. The structure to be chosen should support an adequate decision-making process in light of the business judgement rule. Once the individuals are appointed, board members and/or CEOs have an ongoing responsibility to ensure that they properly fulfil the duties assigned to them. The board or CEO must also ensure that appointees are adequately equipped with financial and other resources to fulfil their responsibilities.

For example, in L'Oréal, there is a director of ethics, risks and compliance who reports directly to the CEO and whose:

EDF, for its part, has set up a corporate responsibility committee within its board of directors, which enables the board of directors to ensure that "ethical and compliance issues are taken into account in its work" (Universal Registration Document EDF 2021, page 183).

ESG committees must monitor the ongoing collection of ESG data and consider this in the reports. ESG officers and committees must also support the board in understanding the reporting and adjusting the ESG framework.

4.3 What mechanisms are typically utilised to monitor the implementation of ESG strategy in your jurisdiction?

Questionnaires to stakeholders: Several companies (eg, Bouygues, Carrefour, Hermès, Michelin and Veolia) send questionnaires to their stakeholders – particularly their suppliers – in order to conduct a self-assessment of their ESG policies.

This process "makes it possible to measure the maturity of suppliers in terms of CSR practices and to take it into account among the supplier selection criteria if it is relevant" (Michelin 2021 Universal Registration Document, page 165).

Similarly, Bouygues' 2021 Universal Registration Document mentions, on page 197, that "suppliers consulted in the context of calls for tender ... answer a CSR questionnaire".

Ratings by third-party companies: Several companies (eg, Michelin, Hermès and L'Oréal) have their suppliers assessed and rated by a third-party company, EcoVadis.

Since its creation, EcoVadis has become the largest recognised provider of corporate social responsibility (CSR) assessments in the world with more than 100,000 companies assessed. By participating in the EcoVadis assessment, companies confront their environmental and social policies with the expertise and recommendations of external auditors qualified in multi-sector risk analysis.

CSR clauses: Several companies (eg, Bouygues, Carrefour and Engie) also attach a so-called CSR clause to contracts concluded with their stakeholders, which aims to affirm the main commitments that suppliers and subcontractors wishing to work with the group must respect (eg, Engie's purchasing charter:
https://www.engie.com/sites/default/files/assets/documents/202201/CharteAchats_ENGIE_2021-007_FR.pdf).

4.4 What role is played in this regard by (a) the board and (b) other corporate bodies and/or officers?

See question 4.2.

4.5 How is executive compensation typically aligned with ESG strategy in your jurisdiction?

A large number of listed companies have defined remuneration policies for corporate officers that take into account, for the variable part of the annual remuneration, non-financial criteria related to ESG requirements (with a particular focus on climate issues).

For example, BNP Paribas provides that:

4.6 What best practices should be considered in relation to the design and implementation of ESG strategy?

The following steps are to be distinguished:

• Undertake a material risk assessment;
• Establish a guideline;
• Determine the actual objectives and outcomes to be achieved;
• Conduct a gap analysis;
• Develop a roadmap and framework; and
• Publish progress reports.

Undertake a material risk assessment: This assessment is essential, as it will accurately determine the material risks faced by the company. The assessment will be conducted on the basis of each company's 'specific' risks. Numerous ESG standards and guidelines are to be taken into account in order to be able to grasp the different ESG risks as much as possible. This assessment will facilitate the dissemination of information to all stakeholders and will allow for future objectives and standards to be set and respected.

An order of priority will be established according to:

• the company's activity;
• the products it sells;
• its impact on the environment; and
• its governance.

The material risk assessment should:

• provide a good understanding of each ESG topic in order to better understand them;
• highlight the specific points specific to the company (ie, on which it should focus its efforts);
• create a roadmap for the dissemination of annual reports; and
• specify the method for defining the different priorities and tools to be able to meet its requirements.

For example, in the Schneider Group's vigilance plan (awarded the A2 Consulting and FIR's Best Vigilance Plan for 2020), five major categories of risk were identified:

• human rights;
• the environment;
• ethical business conduct;
• security of supply; and
• cybersecurity.

Schneider's material assessment identified three types of risks that may occur at specific sites. In addition, risks are assessed on the following scale:

This evaluation combines the probability of occurrence of a given risk with the degree of severity of the consequences of that risk.

Establishing guidelines: This second step is linked to the first one. The establishment of guidelines will afford an overview of the current situation of the company and allow an evaluation of the degree of integration of the ESG strategy within the organisation in a global way.

As much information as possible should be gathered from the company's ESG stakeholders in order to form an initial overview of the current state of the company's ESG policy.

One tool is essential to establish these guidelines: the due diligence risk matrix. A detailed analysis of the risks is summarised in a matrix which provides an overview of the risks linked to the company on its ecosystem and its environment before taking into consideration the impact of mitigation measures.

Determining the actual objectives and results to be achieved: This determination of strategic objectives and the results to be achieved involves setting up sessions with the players who have an impact on the ESG policy, such as:

• the human rights officer;
• the chief officer of compliance;
• the corporate sustainability officer; and
• stakeholder committees.

The goal is to bring as many stakeholders as possible into the loop in order to best address the issues.

For example, in Schneider's vigilance plan, a value chain is highlighted. This chain makes it possible to understand the entire production chain, from the source of raw materials to the final consumer, and to have a clear overview of the chain.

Gap analysis: This crucial step allows for the comparison and rationalisation of different gaps between the current state and the objectives to be achieved.

The gap analysis may highlight the need to:

• collect additional data;
• set up internal structures or processes such as the creation of a sustainability council within the company; and/or
• identify the levers and tasks to be carried out in order to eliminate the different gaps.

Implementation of the plan and performance indicators: In order for the implementation of ESG standards and criteria to be effective, this dimension must be integrated directly into the heart of practices and processes.

Examples of effective implementation of ESG practices and processes include:

• identification of a clear and achievable set of outcomes;
• systematic use of centralised management systems or other data software to easily track key performance metrics;
• establishment of daily communications and updates to key stakeholders so that data is updated in real time to assess targets and compare best practices;
• adjustment to changing conditions; and
• communication to employees.

Progress report: The progress report can highlight both positive and negative developments. This will make it possible to adjust the various existing gaps, as in the case of the gap analysis, in order to correct the situation.

This report should be communicated to stakeholders, employees and external parties. This communication will be carried out in particular by means of digitalised reports, both internally and externally.

For example, adding information to the company's website will show those interested in ESG investments the commitment and initiatives the company has taken. Over time, the various reports can be compiled to create an annual report to track progress and future events.

5 Financing

5.1 What is the general approach of lenders towards ESG in your jurisdiction? What internal and external information regarding a prospective borrower will they typically consider in this regard?

In France, lenders and investors have shown significant interest in ESG financing. Many investors now seek to redirect at least part of their investments towards ESG-focused products in order both to meet the demand of their customers and to control their reputational risks. New issuances of ESG bonds are often oversubscribed and prices paid by subscribers are also commonly higher than ordinary bonds – a phenomenon referred to as 'greenium' (ie, a green premium that investors are ready to pay to acquire green securities).

There is a growing trend for lenders and investors to develop ESG strategies with the aim of decarbonising their portfolios. Those strategies are based on:

• the progressive exclusion of gas and coal;
• the definition of a strategy for net-zero emissions, notably thanks to carbon-offsetting mechanisms; and
• the setting of a decarbonisation trajectory with a view to limiting the rise of the global temperature to 1.5° C by 2050.

In this regard, French financial actors have made significant ESG commitments:

• There has been an increase of public announcements in favour of the climate, through individual and collective commitments related to measures such as:
• • greenhouse gas emission reduction targets or alignment with the Paris Agreement;
  • exit strategies from fossil fuels; and
  • green financing and investments in green activities.
• Many institutions have long-term commitments (eg, 2030 to 2040 for the phase-out of coal financing; 2050 for the portfolio carbon neutrality objective). For example, BNP Paribas announced in early 2023 a reduction of 80% of its loans for oil extraction and production.
• Collective commitments, through national or international initiatives, play an important role in the mobilisation of the actors on the market.

In order for financial actors interested in ESG financing to meet their own commitments, they will expect borrowers to provide specific ESG bond documentation in line with the principles of the International Capital Markets Association (ICMA) and subject to third-party external review.

5.2 Are bonds/loans that are marketed as green bonds/loans, social bonds/loans, sustainability bonds/loans or similar a feature of the markets in your jurisdiction?

Yes, green bonds, social bonds and sustainability bonds are key features of the French market. The market also recognises linked bonds which are financial instruments by which the issuer undertakes to reach an environmental or social target that is not directly related to the use of the fundraising (eg, a target for reducing emissions of greenhouse gases). Issuers on the French market include both governmental and corporate entities.

For instance, Euronext Paris has been particularly active in the marketing of ESG bonds. Notably:

• all ESG bonds listed on Euronext Paris can be found in a single platform dedicated to ESG, where green bounds account for the majority of ESG bonds; and
• it has also developed the 1.5° bonds – a 'gold standard' for ESG bonds, designed for companies with the most ambitious climate targets, aligned with the aim to limit the global temperature increase to 1.5°C. To be included in this category, issuers of ESG bonds must have committed to science-based climate targets for a 1.5° pathway, validated by the Science Based Targets initiative.

Moreover, French credit institutions have developed an offer for ESG loans. For example, the Crédit Industriel et Commercial group offers ESG loans subject to a prior ESG evaluation of the company, which seek to finance:

• social measures (eg, working conditions, training plan, equipment and materials);
• energy-saving actions (eg, acquisition of less energy-intensive products); and
• environmental solutions (eg, for reducing greenhouse gas emissions).

5.3 What key developments have taken place in the structuring of these instruments in your jurisdiction?

The structuring of these instruments in France is notably influenced by developments at the international and EU levels.

Issuers of bonds widely rely on the Green Principles, the Social Principles and the Sustainability Bond Guidelines enacted and regularly updated by the ICMA for their emissions of ESG bonds. These guidelines contribute to the integrity of the ESG bond market by specifying the terms and conditions for issuing these bonds. The guidelines are based on four key principles:

• describing how the funds will be used, with a clear identification of the ESG benefits of the project (eg, expansion of renewable energies, energy efficiency, pollution prevention, sustainable management of natural resources);
• introducing investors to the methodology used to define eligible expenses and eligibility criteria;
• assuring that the amount raised is allocated to eligible projects through a formalised internal process; and
• preparing, keeping and making available to investors information on the use of the proceeds, and updating this each year until the funds are fully allocated.

Comparable developments on the loan markets are pushed forward by the Loan Market Association, which aims to create a high-level framework through the Green Loan Principles, the Social Loan Principles and the Sustainability Linked Loan Principles.

At the EU level, the European Commission has proposed the harmonisation of green bonds standards. Its proposal, currently undergoing interinstitutional negotiations, provides that:

• issuers will only be able to rely on the EU green bond standard if their emissions are used to finance activities in accordance with the European taxonomy;
• transparency and reporting processes will need to be implemented, pursuant to the approach by the use of the funds; and
• external opinions will be required from external auditors registered within the European Securities and Market Authority under conditions of independence, skills and preventions of conflicts of interest.

Finally, as regards green loans, the European Commission asked the European Banking Authority for advice in November 2022 related to the establishment of an EU definition of green loans and disclosure requirements. This advice is expected to be delivered by the end of 2023.

5.4 What best practices should be considered in relation to ESG in the financing context?

Given the technical nature of certain ESG commitments, particularly those related to carbon neutrality of financial institutions, it is essential that financial actors build a strategy to reduce the risk of being accused of greenwashing. This implies making significant efforts in terms of management of climate commitments, such as:

• strengthening governance through better inclusion of environmental policies in the compensation of directors;
• expanding the scope of internal audits to environmental policies;
• improving transparency in the calculation of exposure to fossil fuels and indicators of alignment of portfolio on a greenhouse gas emissions trajectory towards net zero; and
• publishing intermediate documents to assess the fulfilment of commitments made.

6 ESG activism

6.1 What role do institutional investors and other activist shareholders play in shaping ESG in your jurisdiction?

In recent years, alongside shareholder activism, a type of behaviour described as 'climate activism' on the part of associations and non-governmental organisations has emerged and has recently been relayed by institutional investors. The duty of vigilance created in 2017 provides a favourable breeding ground for the claims of these plaintiffs. Several legal actions have been brought in recent years against listed companies to encourage them to adopt demanding trajectories in terms of, among other things:

• reducing greenhouse gas emissions;
• exiting certain industries deemed too polluting; or
• managing certain components they use, such as plastics.

Some actions, which are rarer, concern human rights and aim to improve the way companies take them into account.

Non-financial rating agencies are playing an increasingly important role in assessing the risky behaviour of certain companies.

These activist campaigns encourage companies to scrupulously respect their obligations and, in order to do so, to set up a dedicated organisation allowing them greater agility in defining and implementing indicators to meet objectives that are difficult to quantify and measure.

In this context, the recommendations issued by the Financial Market Authority and the Association Française des Entreprises Privées/Mouvement des Entreprises de France Corporate Governance Code for listed companies, for example, are becoming essential standards.

The entry into force of the proposed European Corporate Sustainability Due Diligence Directive should contribute to the growth of this phenomenon in France, as in the rest of the European Union – especially since the thresholds required by this text are much lower than those provided for by the French duty of vigilance.

6.2 How do activist shareholders typically seek to exert influence on corporations in your jurisdiction in relation to ESG?

Activist shareholders have a number of legal tools at their disposal to assist them in exerting their influence and implementing their action plans.

Three-month formal notice (mise en demeure): In accordance with the duty of vigilance, any interested person may:

• give formal notice to companies that are subject to this duty to comply with the obligations arising from it; and
• after a delay of three months, if no response or an unsatisfactory response is received, take legal action against the company to obtain injunction relief, if necessary under financial penalty, to comply with its obligations or to compensate for the damage arising from its failure to comply.

Between 2019 and 2023, some 20 formal notices were sent to French companies on the basis of the duty of vigilance (BNP Paribas, TotalEnergies, Auchan Carrefour, Casino Guichard-Perrachon, Danone, Lactalis, Picard, Nestlé, McDonald's, XPO Logistics, Suez, La Poste, Yves Rocher, Telepoerformance), and eight actions are pending before the courts.

Via this mechanism, non-governmental organisations (NGOs) seek to bring about a change in the companies' strategies.

NGOs generally ask for either the elaboration of a vigilance plan, as required under the duty of vigilance, or the modification of an existing vigilance plan which they consider as insufficient. However, NGOs – whose demands are often publicly relayed by the media – also rely on reputational pressures to force companies to take actions exceeding their legal requirements.

For example, as discussed in question 6.4, BNP Paribas affirmed in its response to a formal noticed received from NGOs on the basis of the duty of vigilance law that: "[W]e are convinced that our due diligence plan not only meets the legal requirements, but even goes beyond them on each of the aspects that your letter mentions."

Written questions submitted prior to the annual general meeting: Pursuant to Article L225-108 al 3 of the Commercial Code, any shareholder may, prior to any shareholders' meeting, ask written questions to which the board of directors or the management board is obliged to respond during the meeting or on the website of the company.

The inclusion of resolutions: An activist shareholder may also, pursuant to Articles L225-105 and R225-71 of the Commercial Code, request the inclusion of points or resolutions on the agenda of the next meeting of the company if:

• it alone or together with other shareholders represents at least 5% of the company's capital; or
• its share capital exceeds €750,000, a lower fraction of its capital resulting from a calculation by capital tranches.

The 'Say on Climate': The 'Say on Climate' is a resolution put on the agenda of the general meetings of listed companies. These resolutions make it possible to guide the company's climate policy each year through the shareholders' vote, and to engage in a dialogue on environmental issues. Although this is a tool that promotes corporate social responsibility and the application of ESG criteria within companies, 'Say on Climate' resolutions are merely consultative and the opinions given are therefore not binding. In 2021, some 15 companies across Europe – including giants such as Vinci and Total – filed 'Say on Climate' resolutions, thereby strengthening discussions between investors, NGOs and companies.

The High Legal Committee of the Paris Financial Centre (HCJP) published a report on 15 December 2022 in which it noted that the possibility for shareholders to vote at an ordinary general meeting on the company's climate strategy by means of a consultative vote does not violate any legal rule, and in particular does not violate the principle of the hierarchy of corporate bodies.

Public campaigns: Activist shareholders do not hesitate to make their grievances public and the means they use against the companies they target can pressure them to adopt standards that sometimes go far beyond what the law requires.

6.3 Which areas of ESG are shareholders currently focused on?

In recent years, activism has been observed in relation to environmental issues such as:

• the use of plastics;
• the financing of fossil fuels; and
• the use of suppliers implicated in deforestation.

On social aspects, interest has been placed on:

• the forced relocation of native communities;
• modern-day slavery; and
• corruption and use of bribery in warzones.

Since 2021, activists have been focusing more on ESG issues in their campaigns. Indeed, activists are increasing their demands in this area and promoting better ESG practices or using ESG aspects as a tactical element. Moreover, with the increasing ESG-related obligations on companies, activists are increasingly using ESG issues as a basis for challenging company strategy and launching new campaigns (public or private).

6.4 Have there been any high-profile instances of ESG activism in recent years?

Towards the end of 2022, a notable uptick in ESG activism took place. Examples include BNP Paribas, Casino, Guichard-Perrachon, Danone and Total, which are being sued by associations and NGOs that accuse them of not respecting their obligations under the Duty of Vigilance Law.

In addition, oil company Perenco has sued by two NGOs for the compensation of an alleged ecological harm caused by drilling in the Democratic Republic of Congo. The NGOs based their claims on the 2016 Biodiversity Law, which introduced a regime for compensation for ecological damage.

6.5 Is ESG activism increasing or decreasing in your jurisdiction? How and why?

In addition to the general uptick in ESG activism which is being observed in many countries around the globe, France, in particular, is seeing more and more activity in this area.

France has had its own Duty of Vigilance Law in force since 2017 and the introduction of the proposed EU Corporate Sustainability Due Diligence Directive will further reinforce this legislative framework.

In addition, the Corporate Sustainability Reporting Directive provides a new basis for potential investor claims. This directive clarifies how companies should categorise their products (eg, Article 8, Article 9) for those that promote environmental or social features.

This new directive provides more detailed reporting requirements and ensures that large companies and listed small and medium-sized enterprises are required to report on sustainability matters such as environmental rights, social rights, human rights and governance factors (see question 8.1)

Finally, within France, for an NGO or other association to have standing to bring a claim, it is necessary only to show that the claim is adequately connected to the corporate purpose of said organisation, as defined in its bylaws.

7 Other stakeholders and rights holders

7.1 What role do stakeholders or rights holders (eg, employees, pensioners, creditors, customers, suppliers, and Indigenous communities) play in shaping ESG in your jurisdiction? What influence can they exert on a company?

The creation of a stakeholder committee is an interesting way to establish a dialogue with the ecosystem and to find common ground between the different actors interested in the company's development. More and more companies are choosing to create this type of committee, such as FDJ, SNCF, Véolia, Michelin, Carrefour, AXA and Nexity.

A company's stakeholders are all individuals or legal entities with an interest in the company's activities – either because:

• they contribute to its value creation;
• they benefit from it; or
• they have to assume the risks or consequences.

Three main types of stakeholders can be distinguished:

• stakeholders internal to the company (eg, management, employees);
• external stakeholders close to the company (eg, customers, suppliers, distributors, shareholders, regulators, unions, partners, associations supported by the company); and
• other external stakeholders further away or members of civil society (eg, public authorities, local communities, non-governmental organisations (NGOs), journalists, economists).

Additionally, as noted in question 6.5, it is relatively easy for an NGO or an association in France to show standing to bring claims before the French courts.

8 Trends and predictions

8.1 How would you describe the current ESG landscape and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?

In France, the ESG landscape is ever increasing. As France is a major player in ESG matters, many norms and standards are already being taken into account.

Faced with the growing desire to consider ESG criteria, many proposals are emerging from different actors to make the implementation of ESG within companies more effective. Adopting an ESG point of view while assessing companies' compliance with existing rules is becoming the norm in a number of fields. While ESG in the financial and corporate sector has flourished in recent years, it is now increasingly influencing the vision of other regulators, such as the competition authorities.

Financial and corporate law field:

'Say on Climate' (see question 6.2): The Say on Climate initiative works with companies to establish robust net-zero transition plans with shareholder feedback in an annual advisory note. Although France is aligning itself with the practice of the Say on Climate, a report from the Legal High Committee for Financial Markets of Paris (HCJP) notes that there is no official framework for this practice. It has recommended that the Association Française des Entreprises Privées/ Mouvement des Entreprises de France or France Invest develop a framework for Say on Climate practice.

In concrete terms, the HCJP proposes to modify Paragraph 2 of Article L225-105 of the Commercial Code to allow shareholders of a public limited company to challenge more effectively a refusal of the board of directors to include resolutions on the agenda, adding: "In the event of a challenge to the refusal to register these items or draft resolutions, the competent commercial court shall rule in accordance with the accelerated procedure on the merits and without any possible appeal."

The purpose of this amendment is to offer efficient and rapid tools to shareholders wishing to propose internal resolutions favouring, for example, the environment. It is recommended that the accelerated procedure on the merits be used to deal with such disputes (provided for in Article 839 of the Code of Civil Procedure).

Further, the Sustainable Investment Forum (FIR) – a multi-stakeholder association created in 2001 whose corporate purpose is to promote and develop responsible investment and best practices – recommends the clarification of the prerogatives of companies and the rights of shareholders in order to define clear boundaries between what is within the competence of the board of directors and what is not.

In a pragmatic way, the main purpose of the recommendations is to simplify the procedure for filing external resolutions.

The FIR recommends, for instance:

• giving a coalition of 100 shareholders the possibility to file a resolution of an environmental and social nature, as well as updating Article R225-71 of the Commercial Code by dividing the required capital threshold by two;
• extending the period during which it is authorised to file a resolution; and
• dematerialising the process of filing resolutions.

If a company refuses to include the external resolution on the agenda of its general meeting, the FIR recommends explicitly entrusting the arbitration of admissibility to the Financial Market Authority, as its intervention would be quicker and more efficient.

In conclusion, Say on Climate practice appears to be becoming democratised and automated within companies. The two reports of the HCJP and the FIR confirm this trend and the possibility of legislative change in this area.

Corporate Sustainability Reporting Directive (CSRD): The CSRD is about to be adopted by the European Commission. This directive will replace the old Non-Financial Reporting Directive (NFRD), which was structurally lacking in terms of ESG criteria.

The CSRD aims to ensure that companies publicly disclose adequate information about the risks, opportunities and impacts of their activities on people and the environment.

This new directive will provide more detailed reporting requirements and ensure that large companies and listed small and medium-sized enterprises (SMEs) are required to report on sustainability matters such as environmental rights, social rights, human rights and governance factors.

The CSRD will apply to large companies and all companies listed on regulated markets, except listed micro undertakings, which are also responsible for assessing the information applicable to their subsidiaries. It will also apply to listed SMEs which, while taking into account their specific characteristics:

• have a balance sheet of €20 million;
• have a turnover of €40 million; or
• have at least 250 employees.

The directive will be implemented in three stages:

• From 1 January 2024, it will apply to all companies already subject to the NFRD;
• From 1 January 2025, it will apply to large companies that are not currently subject to the NFRD; and
• From 1 January 2026, it will apply to listed SMEs, small non-complex credit institutions and captive insurance companies.

Regarding the Sustainable Financial Disclosure Regulation, the European Commission has launched a comprehensive evaluation of this regulation on sustainability reporting in the financial services sector. The last year has seen a great deal of legal discourse on the interpretation of this regulation regarding the declassification of Article 9 funds into Article 8 funds.

Furthermore, the French financial sector will have to fully apply the regime of Article 29 of the Energy Climate Law, which requires reporting on climate and biodiversity, as well as a description of the action plan adopted.

Finally, the French Ministry of Finance will review the SRI label (see question 3.2) in 2023. The current SRI standard is being debated because activists have noted that SRI investments do not always meet ESG criteria (some funds contain stocks of companies involved in sectors such as fossil fuels and arms).

This revision will take into account, for example:

• the use of the 'carbon trajectory', which will become an indicator that funds will have to display in the future;
• the addition of environmental criteria such as exclusion criteria for non-conventional fossil fuels and coal;
• the creation of mandatory indicators to measure the real impact of portfolios on ESG issues; and
• the submission of a concrete action plan by candidates for the label on how they will reduce their greenhouse gas emissions.

The competition law field:

The EU Block Exemption Regulations and Guidelines: Sustainability issues will be taken into account in the revised Block Exemption Regulations and Guidelines. These regulations aim at interpreting Article 101(3) of the Treaty on the Functioning of the European Union, specifying the conditions under which an exemption from the application of competition rules can be granted. These regulations are of immediate effect in French law and the national authorities are bound to enforce them:

• In June 2022, following the adoption of its revised Vertical Block Exemption Regulation, the European Commission published the associated guidelines, in which it indicates that it takes sustainable development into account while assessing the compliance of a vertical agreement with the exemption criteria (Paragraphs 8, 114 and 316).
• Additionally, the commission is revising its Horizontal Block Exemption Regulations and Guidelines. The draft guidelines, submitted to public consultation in March 2022, include a new chapter on the assessment of horizontal agreements pursuing sustainability objectives (Chapter 9). Particular attention is given to agreements that set sustainability standards, as these are expected to be the most common form of cooperation for pursing sustainability objectives.

In line with the adoption of these new rules, one could expect in the near future the development of cooperation agreements between private undertakings. Such agreements could, for example, include:

• the launch of particularly innovative and sustainable products, requiring massive upfront investments; or
• the implementation of high environmental standards within an industry, going beyond what is required by the legal binding framework.

If, despite the self-assessment framework provided by EU rules, companies are not confident that their planned ESG-related cooperation agreement complies with competition rules, they can request a guidance letter from the commission. In order to be processed by the commission:

• this request must deal with novel or unresolved questions; and
• the commission should have an interest in providing guidance.

The informal guidance rules were recently revised and the current framework is set out in the Commission Notice released on 3 October 2022.

French competition law trends regarding sustainability issues: At the national level, the French Competition Authority (FCA) has repeatedly expressed its commitment to sustainable development and considers this objective as one of its priorities. Since 2019, the FCA has reinforced its skills and workforce on sustainable development with the creation of an internal dedicated network; a special adviser to the general rapporteur acting as head of this network was appointed in September 2022.

In its Roadmap for 2023-2024, the FCA has outlined its approach: it will focus on sanctioning the most harmful behaviours in this area, as well as supporting companies wishing to set up the cooperation necessary to make the ecological transition a success. In line with the expected Horizontal Guidelines of the European Commission, the FCA may also consider publishing its own guidance on this matter, and it has already invited companies and professional organisations to engage in informal dialogue with it on their projects.

Competitive aspects of the transition will be explored; and the FCA will not hesitate to use its capacity to conduct self-investigations and self-referral in advisory matters.

Thus, even more antitrust and merger cases related to sustainable development are expected to arise, and we will perhaps see the creation of a specific antitrust unit within the FCA to handle these issues.

9 Tips and traps

9.1 What are your top tips for effective ESG implementation in your jurisdiction and what potential sticking points would you highlight?

Implementing an ESG strategy within a company should not be a mere formality. The best tips and tricks lie in the organisation of the company's structure.

An individual company can implement a precise and effective ESG strategy by appointing or establishing:

• a corporate sustainability officer with responsibility for general oversight of ESG-related activities;
• a human rights officer with responsibility for implementing obligations under the duty of vigilance or similar legal requirements;
• a chief compliance officer;
• specific guidelines according to the company's main activity;
• a vigilance matrix; and
• stakeholder committees.

Regarding this last point, the Notat-Senard Report of 9 March 2018 recommended that large companies set up stakeholder committees at the initiative of their managers. To ensure that they can meet the needs of their stakeholders, a number of French companies – including L'Oréal, FDJ, SNCF, Véolia, Michelin and Carrefour – have set up a stakeholder committee within their company.

The core missions of these committees are attached to the 'raison d'être' of the company (the Pacte Law of 22 May 2019 amending Article 1835 of the Civil Code). For example:

• Carrefour calls on a panel of stakeholders to map and prioritise the issues related to its raison d'être;
• EDF's stakeholders aim to provide input on the group's strategic orientations, particularly in terms of corporate responsibility; and
• other companies, such as La Française des Jeux (FDJ), have linked the committee's mission directly to the company's activities. In a press release, FDJ stated that "the linkage of stakeholders will make it possible to develop an entertaining, honest and responsible gaming offer".

The composition of the committee is left to the discretion of management. The average is seven to 15 members, but some can have up to 40 members (Carrefour, Nexity).

The members of the committee are:

• personalities representing civil society;
• members representing associations;
• institutions;
• academics;
• environmental specialists;
• scientists;
• economists; and
• philosophers.

In the case of EDF, the typical operation of a stakeholder committee included three sessions in 2021 that focused on:

• EDF's raison d'être and its link with the CAP 2030 strategy for integrated corporate social responsibility;
• the development of renewable energies;
• the 2050 energy mix scenarios and the risks; and
• increased communication of reports and decisions taken by the committee.

Moreover, the Institut Français des Administrateurs' Legal Committee makes six recommendations to boards of directors to facilitate and optimise the establishment, composition, operation and monitoring of stakeholder committees when they are set up:

• Initiate and develop the stakeholder committee process by highlighting its benefits;

• Ensure that the representativeness of stakeholders within the committee is not questionable in order to guarantee the fairness of the dialogue;
• Ensure that the stakeholder committee is independent to guarantee the freedom of speech of its members;
• Ensure that the stakeholder committee has sufficient resources and material for effective dialogue;
• Establish a constructive dialogue with the stakeholder committee at the board level; and
• Annually verify the effectiveness of the dialogue, the implementation of the opinions/recommendations of the stakeholder committee and corporate social responsibility performance via the ESG criteria;

At the level of an industry, it may be interesting for several companies to pool their workforces, know-how and research capacities to set up structured agreements pursuing sustainable objectives within the meaning of Chapter 9 of the future Horizontal Block Exemption Guidelines. Given the potential risks of such a venture (see question 2.3), we strongly encourage them to seek for advice from competition law specialists.

In conclusion, for the implementation of an ESG strategy within a company to be effective, companies must put in place mechanisms and processes that allow the different departments, structures and even individuals that make up the company to communicate and exchange information on ESG issues. As the legal framework for such a strategy is new, complex and constantly expanding and evolving, advice from specialised experts is of great value.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.