France has faith in the law to make a difference to corporate practice, and a raft of new legislation will soon be put to the test

France has faith in the law to make a difference to corporate practice, and a raft of new legislation will soon be put to the testFrench companies expect clear state guidance on many issues, including corporate responsibility. Nigel Roome, professor of governance, corporate responsibility and sustainable development at Vlerick School of Management in Belgium, says France “has always been a state where government is influential. Its actions matter because they demand responses, but they also symbolise that an issue is important for French society.”

Equality is a primary concern. French companies must, for example, negotiate with trade unions about gender balance, and in firms with more than 20 employees at least 6% of the workforce should be people with disabilities.

In late 2010, legislation was adopted requiring about 2,000 large corporations to increase the number of women in higher management positions. Within six years, 40% of their boardroom positions should be held by women, compared with about 11% at present. With this law, France follows the examples of Norway and Spain. The Norwegian law, passed in 2003, has contributed to women taking up about 45% of boardroom positions in the country’s 500 largest companies.

A basis for corporate responsibility in France was put in place in 2001 with the enactment of the New Economic Regulation (NER). This wide-ranging law dealt with issues such as competition and labour relations, but it also had a significant ethical dimension, obliging public companies to include environmental and social information in their annual reports, and requiring more transparency in corporate governance.

Anne Catherine Husson-Traore, chief executive of Novethic, a French corporate responsibility research centre, says the NER was a big step for France. “It is very difficult for French people, despite the fact that they are liberal, to accept that a company has to decide what to do without regulation,” she says.

The NER rules have been followed up by the Grenelle process (see box). Implementation, however, can be lacking. Natacha Seguin of Groupe Alpha, a sustainability consultancy, says: “The law has the merit of making companies think about CSR and report about it. They have technical tools for reporting, but they don’t often discuss with their stakeholders about their reports. The next step would be speaking and reporting about bad practices as well.”

The government also reports on, and monitors, itself. In 2008 the French prime minister François Fillon sent a “circular for an exemplary state” to all ministers, setting out green procurement objectives for 20 different types of public purchase. Ministers must submit annual reports on progress towards the objectives. Better performing ministries are rewarded by being given additional spending power, while the laggards can be penalised through budget restrictions.

International focus

France has pushed at European level for an extension of mandatory reporting. Under the French presidency of the council of the European Union in the second half of 2008, France asked the European commission to propose a directive on mandatory reporting. However, this drive was ultimately unsuccessful.

Some commentators believe that the French way of corporate responsibility – standards of behaviour mandated from the top down, with an emphasis on reporting – does not get heard in European or broader discussions because of an inward-looking tendency, which can even extend to language.

Céline Louche of Vlerick Management School says that in the academic world there are French publications that are not accessible on international databases. “The French language is a big problem. Many [French academics] are not used to writing in English … The openness to [ideas from] outside France is not yet there.”

Her view is supported by Novethic’s Anne Catherine Husson-Traore, who says: “It is really difficult for French actors to participate in the international debate. Very often French people want to have their own guidelines, and their own labels. I think that is not a good thing. Maybe it is also because of the language.”

The French government does try to make its case on corporate responsibility internationally through Michel Doucin, who holds the unique position of ambassador for bioethics and corporate social responsibility, based at the ministry of foreign and European affairs. He is, says Jan Noterdaeme, adviser to CSR Europe, “always on the road, both inside and outside of Europe. In his own country he plays the role of intermediary in initiatives with international dimensions.”

Around the table: the Grenelle

When Nicolas Sarkozy succeeded Jacques Chirac as president of France in 2007, one of his first acts was to start a wide-ranging policy debate on sustainability. The process became known as the Grenelle environment programme, taking its name from a round of consultations on labour relations in the 1960s, held in Rue de Grenelle in Paris.

The Grenelle’s aim was to define a five-year green development plan for France. The process involves five “colleges”: the state, local authorities, business federations, trade unions and campaign groups.

The Grenelle has resulted in numerous laws, covering everything from targets for organic farming to environmental taxes, urban planning and allocation of funds to environmental technology research. It provides incentives to reward sustainable behaviour by individuals or companies, and penalties, in the form of higher taxes, for bad behaviour. The Grenelle has also framed the French debate on corporate responsibility. It has updated the parameters within which companies must act.

Many sectors have been affected by specific legislation, such as a tightening of building energy standards for the construction sector, or the levying of environmental taxes on trucks.

In addition, much attention has been paid to company reporting. In July 2010, it was agreed that companies would have to report on the presence of nanomaterials in their products, and on their greenhouse gas emissions. Industrial plants are also obliged to provide data on the pollutants they emit, while banks and other investment institutions are required to describe in their annual reports how their investments have furthered sustainable development.

The reporting requirements apply to subsidiaries as well as parent companies. Because of the length of the legislative processes in France – and the many arguments that the Grenelle provoked – many laws are only now coming onto the statute books.

The Grenelle also led to a tightening of environmental liability laws. In the case of environmental damage caused by a company, parent companies can no longer hide behind their subsidiaries, but can in principle be pursued for compensation to the highest level of parent company.

Professor Nigel Roome, of Vlerick Management School in Belgium, says the Grenelle is a demonstration of “the emergence in the early part of this millennium of corporate responsibility with a sustainable development dimension”. It is an example of “the kind of multi-stakeholder processes that became familiar in the period after the [Rio] Earth Summit”.

However, the discussions within the Grenelle on reporting have been stuck because of a dispute over the size threshold above which companies should be required to report. French legislators initially said that all firms and public institutions with 500 or more employees would be subject to the requirements.

However, employers’ organisations and the ministry of finance want to restrict the obligation to only the largest companies, with 5,000 or more employees. Whatever is decided, lawsuits are likely during 2011 as different groups attempt to clarify the impact of the new regulations.

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