France has set a high bar in terms of penalties for non-compliance with the EU Corporate Sustainability Reporting Directive (CSRD), with fines of up to €75,000 and jail time for corporate directors that fail to comply.
CSRD entered into force last year, but its rules officially apply from January 2024, with the first aligned sustainability reports expected to be submitted in early 2025. While the European text of the law provides all necessary details on what information needs to be disclosed by which companies, it leaves non-compliance penalties to individual member states.
Jail time and hefty fines for obstructing third-party assurance
France is the first country to transpose the directive into national law, and has therefore set the bar for what constitutes reasonable penalties. Sustainability directors have previously expressed concern about the number of data points expected in the report, and indeed, it is estimated that less than half of sustainability reports are currently CSRD-compliant.
But the French law focuses mostly on the requirement for CSRD reports to be externally assured by auditors in its penalty provisions.
It states that corporate directors could be forced to pay up to €75,000 and go to jail for up to five years if they do not present the information necessary for external auditors to certify their CSRD-aligned reports, or if they obstruct their work in any way.
On the other hand, they could face two years of jail time and up to €30,000 in fines for simply failing to get their CSRD report audited by a certified entity.
EU member states have until July 6, 2024 to transpose CSRD into national law, so it remains to be seen whether other countries will follow France’s lead in terms of penalties for non-compliance.
CSRD: A refresher
Almost 50,000 EU and non-EU companies are expected to report on their sustainability performance under the Corporate Sustainability Reporting Directive, which essentially replaces and expands the scope of the Non-Financial Reporting Directive (NFRD).
CSRD applies to all publicly listed companies in the EU, as well as those meeting two of the three following criteria:
- 250 or more employees
- €40 million or more turnover
- €20 million or more total assets
It requires them to present a double materiality assessment of their environmental and social as well as financial risks, within their own operations and their value chains. It is also the first legislation to include the disclosure of targets and forward-looking statements, as opposed to only historical data.
Companies will be expected to format these disclosures according to the European Sustainability Reporting Standards (ESRS).