ESG Trending Topics - France

King & Spalding

French businesses continue to navigate the requirements of the French PACTE Act (“loi relative à la croissance et la transformation des entreprises”) passed in 2019. This legislation added a paragraph to article 1833 of the French Civil Code providing that a company is to be managed according to its “corporate interest” and by taking into account the social and environmental issues related to its activity. It also modified article 1835 of the Civil Code in order to enable companies to set out in their statutes their “raison d’être” based on ESG and other principles they adopt and for which they intend to allocate resources while carrying out their activity. French listed companies are also required to publish an equity ratio each year in the corporate governance report, which indicates the gap between executive pay and the average and median salary of employees.

In the wake of the landmark ruling on February 3, 2021 by the Administrative Court of Paris holding that the French state can be held liable for France’s failure to meet its greenhouse gas emissions reduction targets, the French National Assembly is debating a “Climate and Resilience” legislation aimed at addressing climate change. At its inception in 2019, the bill incorporated a selection of emissions-reduction proposals offered by a “citizens’ climate assembly” of 150 French citizens selected at random. These emissions-reduction proposals will help to reach the objective set out by the 2015 legislation on the energy transition for green growth (“loi relative à la transition énergétique pour la croissance verte”) of reducing greenhouse gas emissions levels of 1990 by 40% by 2030. They cover various areas, such as transportation, renewable energy, urban planning or agriculture. The bill presented by the government in February 2021 has been met with criticism from the majority of the citizens’ climate assembly members and the “Haut Conseil pour le Climat” (High Council of Climate1) for being insufficiently aggressive in hitting emissions targets. As of March 30, 2021, over 7000 amendments to the legislation had been proposed. All eyes will be watching the French National Assembly to see if the bill is approved early in May 2021, before being considered by the French Senate.2

1 It is an independent administrative body that provides advice to the Government on climate change policies and measures.

2 Gillian Tett, et al., “French Citizens Demand More from Climate Change Bill”, Financial Times (March 31, 2021); Paul Meyers, “French MPs start debating climate change bill in National Assembly”, (March 30, 2021).

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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