In early 2024, France made a bold move by introducing serious penalties, including potential jail time, for corporate directors who fail to comply with the country’s Corporate Sustainability Reporting Directive (CSRD). The new law can impose a fine of up to $81,400 and, in extreme cases, up to five years in prison. This significant change aims to hold corporate leaders accountable for sustainability and transparency practices.
What is the CSRD and Why Should You Care?
The Corporate Sustainability Reporting Directive (CSRD) was initially enacted by the European Union in January 2023 as part of the European Green Deal. The directive mandates that large companies disclose comprehensive reports detailing their environmental and social risks. These reports must be submitted to both the government and the public, highlighting the company’s commitment to sustainability and the mitigation of various global challenges.
Kristen Sullivan, an audit and assurance partner at Deloitte, notes that the CSRD will affect over 50,000 companies, including a significant number of non-EU entities. Companies will need to disclose over 80 different pieces of information and more than 1,100 data points in their official reports. The CSRD’s reach is global, impacting companies around the world, particularly those in the supply chains of EU-based businesses or those receiving investment from EU firms.
France is the first EU country to implement the CSRD into its national law and impose penalties for non-compliance. 2024 is considered the first year of data collection, with the first full reports due in 2025.
Who Will Be Affected by the CSRD?
While the CSRD primarily impacts large companies, U.S.-based companies are not exempt from these new requirements. French and EU regulators have set criteria that include:
- More than 250 employees;
- Annual turnover exceeding $43.5 million;
- Total assets of $21.7 million or more.
For companies based outside of the EU, they have a little more time to adjust. They must start preparing to report by 2025, with their first reports due in 2026.
How to Avoid Penalties and Jail Time
To avoid penalties under the new French law, companies must ensure they submit reports to an external auditor for certification, and that those reports are made available to the public. Failing to submit these reports, or obstructing the auditor’s ability to certify them, could result in severe consequences. Specifically, directors who fail to comply with this requirement face up to two years in jail. As Sullivan points out, not complying with auditing requirements could have serious enforcement implications for companies, both inside and outside the EU.
For companies looking to avoid penalties, the key is to start preparing now. Whether your company is based in the EU or abroad, it’s essential to ensure your reporting systems are in place and that you’re ready to submit certified sustainability reports as required by the CSRD.
How Aliant Can Help
At Aliant, we understand the complexities of the CSRD and the potential impact on companies, both in France and beyond. As the first EU member state to enforce penalties, France’s rigorous implementation of these requirements underscores the urgency for businesses to act now. Our team of experienced legal professionals can help guide you through the complexities of CSRD compliance, ensuring that your company’s sustainability efforts meet EU standards and are ready for external auditing.
We offer tailored legal advice for businesses facing these new regulations, helping to streamline your reporting processes and ensuring that all required data is gathered and presented correctly. Our expertise in European law and corporate governance makes us the ideal partner to help your company navigate these new waters, minimize risks, and avoid penalties.
Don’t wait until it’s too late—contact Aliant today to ensure your company is fully compliant with the CSRD and ready for the future of corporate sustainability.
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