Sylvie Gallage-Alwis and Gaëtan de Robillard contribute a chapter in The Legal 500: Environmental, Social and Governance Comparative Guide

By Sylvie Gallage-Alwis & Gaëtan de Robillard

In the second edition of The Legal 500: Environmental, Social and Governance Comparative Guide, Partner Sylvie Gallage-Alwis and Associate Gaëtan de Robillard have contributed a country-specific Q&A chapter examining the laws and regulations applicable in France.

Read Sylvie and Gaëtan’s full chapter, published in The Legal 500, here

Climate – the law governing operations that emit Greenhouse Gases (e.g. carbon trading) is addressed by Environment and Climate Change international guides, in respect of ESG: a. Is there any statutory duty to implement net zero business strategies; b. Is the use of carbon offsets to meet net zero or carbon neutral commitments regulated; c. Have there been any test cases brought against companies for undeliverable net zero strategies; d. Have there been any test cases brought against companies for their proportionate contribution to global levels of greenhouse gases (GHGs)?

Pursuant to Article L. 225-102-1 of the French Commercial Code, companies reaching certain thresholds must include a declaration of non-financial performance in their management report. This declaration must inter alia include information on the significant greenhouse gas emissions generated by the company’s activity, the reduction targets set for greenhouse gas emissions and the means implemented to achieve them (Article R. 225-105 of the French Commercial Code).

These provisions result from the implementation into French law of Directive 2014/95/EU as regards disclosure of non-financial and diversity information by certain large undertakings and groups (NFRD) by Ministerial Order No. 2017-1180 of 19 July 2017. NFRD was however replaced by the 2022/2464 Corporate Sustainability Reporting Directive (CSRD).

CSRD was transposed into French law by Ministerial Order No. 2023-1142 of 6 December 2023. A Decree No. 2023-1394 was also published on 30 December 2023, with the aim of specifying the information to be included in the management report. This information covers, in particular, the company’s time-bound sustainability objectives and the progress made to achieve them, including, where appropriate, greenhouse gas emission reduction targets for at least 2030 and 2050 (Article R. 232-8-4 of Ministerial Decree No. 2023-1394).

The 2020/852 Taxonomy Regulation of 18 June 2020, which is part of the goal of carbon neutrality by 2050 set out in the European Green Deal, naturally also applies in France.

Furthermore, companies with at least 500 employees are required to draw up a balance sheet of their greenhouse gas emissions (Articles L. 229-25 and R. 229-46 to R. 229-550-1 of the French Environmental Code).

Carbon offsetting in France is mainly regulated by EU Law, in particular by the EU Emissions Trading Scheme (“EU ETS”). The EU ETS was established under the Kyoto Protocol and is governed by Directives 2003/87/EC and 2004/101/EC, supplemented by Directives 2008/101/EC, 2009/29/EC and Regulation 1031/2010. As a result of these pieces of legislation, a carbon market has been created within the EU for a large number of activities listed in Article L. 229-15 of the French Environmental Code. Allowances are distributed partly free of charge and partly by auction.

To our knowledge, no test case has yet been brought against companies for undeliverable net zero strategies. There are, however, some pending cases brought before the French Courts on the ground of French Law No. 2017-399 of 27 March 2017 on the duty of vigilance. Since Signature Litigation is involved in one of these cases, it is unable to make any comment on them.

To date, there has been no case law nor action to hold French companies liable on the grounds of their proportional contribution to global levels of greenhouse gas emissions. This can be explained by the fact that claimants would eventually have to rely either on strict liability regime or on a tort liability regime, for which causation must be established, which would be rather difficult.

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