When the European Commission tackled the subject in the early 2000s, through a green paper aiming to establish a European framework for corporate responsibility, it defined corporate social responsibility (CSR) as ‘a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis.’

Over time, the Commission evolved its definition to embrace a broader perspective: ‘corporate responsibility towards the effects they have on society.’ Yet, a constant element remained in this conception of CSR: its voluntary dimension.

In its communication of October 25, 2011, concerning ‘a new EU strategy for 2011-2014’ on CSR, the Commission emphasized: ‘It is important that CSR should be led by enterprises themselves.’

Indeed, CSR is typically presented as an initiative of an individual who, aware of the social and environmental stakes of their company, decides to act beyond legal obligations to mitigate negative effects.

The term ‘responsibility’ at the core of CSR is somewhat misleading for a lawyer. CSR corresponds to ‘Corporate Social Responsibility’ in English, where ‘responsibility’ is used in the sense of ‘responsibility’ in French. However, in French, the term has a broader lexical field, and its primary meaning is not the same.

The English equivalent of ‘responsibility’ is ‘liability,’ which refers to the principle where a person is accountable for their actions and those of persons and things under their care and must face the consequences, usually by providing restitution.

The term ‘responsibility’ does not have a direct French equivalent. Its meaning is recognized in French, but no single noun corresponds to it. It’s largely understood in the context of ‘a responsible person,’ which refers to someone thoughtful and serious, who weighs pros and cons.

Thus, CSR’s responsibility is less legal than ethical. The key element of CSR is the social and environmental consciousness of corporate leaders. It guides their behavior. Regardless of any legal obligations, a socially responsible business leader acts after considering the implications, both positive and negative, of their activities on stakeholders and the environment.

However, in recent years, many standards have emerged in this field. The movement began in France in the early 2000s with the NRE law, followed by the Grenelle II law, the Duty of Vigilance law, the ordinance of 2017 on non-financial performance declarations, and the PACTE law, to name the main texts.

The European Union followed with the 2014 non-financial information directive and has recently accelerated the pace with various texts forming the Green Deal, particularly the SFDR and taxonomy regulations, and the directive on corporate sustainability reporting (CSRD) and the proposed directive on due diligence.

Faced with this expanding regulation, one wonders whether this movement is temporary or will continue, risking regulatory overreach. The answer is hardly in doubt: the construction of this regulatory framework is just beginning, at the very foundation stage, one might say.

CSR is no longer merely a mechanism for corporate self-regulation today. The legislature has intervened, creating norms in this area. Nevertheless, CSR has not entirely lost its voluntary character. While it is fading at the initiative stage, it remains somewhat in terms of content, but this is likely to diminish progressively.

With uncharacteristic restraint, the legislator currently only gradually imposes a CSR obligation on all enterprises (1)¹. However, it does not specify the content because it is currently unable to do so, given the novelty of the subject. But by requiring enterprises to develop practice in this area, it sets the stage for future legislative sedimentation (2).

CSR Obligation for All

The first text to create a genuine CSR obligation is Law No. 2017-399 of March 27, 2017, relating to the duty of vigilance of parent companies and ordering companies. Unlike previous measures, which only required concerned companies to report on their potential actions in this area, Article L. 225-102-4 of the Commercial Code, stemming from this law, obligates companies to act responsibly in social and environmental matters. They must develop a plan containing reasonable vigilance measures to identify risks and prevent serious violations of human rights and fundamental freedoms, the health and safety of individuals, and the environment, resulting from the activities of the company, its subsidiaries, as well as its subcontractors and suppliers.

However, this duty of vigilance has a fairly limited scope, as it concerns fewer than 200 companies in France. It is expected to be expanded with the ongoing European reform, which could significantly lower the thresholds for its application.

But it is especially the PACTE law in France that constitutes the foundation of a CSR obligation for all, through the addition it made to Article 1833 of the Civil Code of a second paragraph stating: “The company is managed in its social interest while taking into consideration the social and environmental issues of its activity.”

What should be understood when the text requires the company to consider the social and environmental issues of its activities? The impact analysis of the bill underlying this provision (p. 544) states that it is for every leader to “question these issues.” It is “an imperative step in the conducted reflection.” Thus, it is an obligation of reflection that is imposed.

More precisely, as indicated by the Council of State in its opinion on the bill, “the consideration of social and environmental issues aims to encourage companies to examine, in fulfilling the statutory purpose, the social and environmental impact of their activity and, where applicable, to balance this with the other interests they are responsible for” (No. 102).

Thus, there is no obligation for the company to avoid harming the social and environmental interests implicated by its activities, only to act by measuring the consequences of its actions. In other words, the text imposes prudence and diligence on the company…

One cannot deny the normative contribution of this text because, by expressly requiring the consideration of these issues, it goes beyond what already results from Article 1241 of the Civil Code. But it intervenes less in behavior than in the decision-making process.

As indicated by the impact study, it aims to make the governing bodies “the actors of a management policy considering these social and environmental issues of their company’s activity.”²

Concretely, these bodies must identify the social and environmental issues of the company’s activities, as well as the positive and negative consequences of the latter on the former, and determine a management policy based on this. Its leaders must then comply with this policy, justifying any deviation if necessary, which could particularly be due to the social interest.

Article 1833, para. 2 thus imposes, if not explicitly, at least implicitly, obligations similar to those provided by Article L. 225-102-4 of the Commercial Code, and thus creates a CSR obligation for all companies.

Legislative Sedimentation

While the legislator has thus created a CSR obligation for all companies, it has not determined its content. Article 1833, para. 2 of the Civil Code provides no indication in this regard. As for Article L. 225-102-4 of the Commercial Code, it is hardly more explicit, as it merely requires the development of a plan outlining the broad categories of measures without specifying their exact content. Admittedly, it provides that a decree may supplement the vigilance measures it enumerates and thus provide more details. However, this decree has not yet been adopted, and it will likely take some time before it is.

Both the regulatory authority and the legislator face a difficulty that can currently be considered insurmountable: the impossibility, given the recent and fragmented nature of practice in this area, of precisely grasping, beyond a few general methodological considerations, what the CSR obligation consists of, that is to say, according to the terminology of the 2017 law, what reasonable vigilance measures might be to identify risks and prevent serious harm to human rights and fundamental freedoms, the health and safety of individuals, as well as the environment, resulting from the activities of the company, its subsidiaries, as well as its subcontractors and suppliers.

This is why the legislator has chosen to leave companies free to determine them. The author of the bill on the duty of vigilance, Dominique Potier, affirmed this in his report during the first reading: “While the law and its implementing decree delimit the ambitions of the vigilance plan, the determination of vigilance measures is left to the discretion of the subject company.”

However, it is more than likely that this freedom will only last for a time, or at least be gradually reduced.

The demand from stakeholders in this regard is particularly strong, as evidenced by the lawsuits filed based on the duty of vigilance. Moreover, as Dominique Potier pointed out during the discussion of the bill in a public session on March 30, 2015, some companies themselves want the system to be more precise for reasons of legal certainty.

In any case, the legislator has put in place a mechanism that inevitably leads to the development of regulations. By requiring companies to give substance to vigilance measures, it encourages the development of practices that will form the basis of future legislation.

The regulation of “say on pay,” built on the practice synthesized by the Afep-Medef code, is a good example of this scheme. The legislation on ESG reporting is also particularly significant: initially leaving companies free to determine the method and indicators, it will now define them based on the work of EFRAG, informed by the experience of experts within its working groups.

A similar process is likely to develop in the field of CSR, especially as the legislator has provided for the involvement of new actors who will necessarily contribute.

Indeed, Article L. 225-102-4 of the Commercial Code subjects the development and implementation of the plan to judicial review, which should play a major role in the system. The first lawsuits based on the duty of vigilance have already been filed and seem to herald the development of rich litigation.

In fact, in the absence of legislative or regulatory indications concerning the requirements governing the development of the plan, its content, its implementation, and the monitoring thereof, as well as the power available to the judge in the exercise of his control, it is necessarily up to jurisprudence to specify how these requirements and this power should be concretely translated.

It could notably do so, as suggested by the summary judge of the Paris court in a decision of February 28, 2023, by giving substance to the still vague concept of “reasonableness” of vigilance measures. However, it cannot fill the gaps in the law regarding the content of these measures with general and abstract provisions without stepping out of its function.

This role should soon be entrusted to an independent administrative authority. Indeed, in line with a scheme that is becoming more widespread, and already encountered notably in the prevention of corruption or the protection of personal data, the draft European directive provides for such an authority to assist companies in implementing the system and to monitor the proper execution of their obligations.

The establishment of this authority will inevitably lead to the development of a complete body of rules in this area. Indeed, even if it does not have real normative power, this authority will develop a number of recommendations which, without being mandatory, will have an indirect binding effect, notably as they serve as a guide for carrying out checks.

Moreover, these recommendations could be included in regulatory texts, and will certainly be at least partially, given the current system’s significant imbalance between its “monumental objectives,” as expressed by the summary judge of the Paris judicial court in the aforementioned decision, and the modesty of the provisions indicating how companies should achieve them.

Thus, the way is open for the development of significant regulations, the extent of which will need to be closely monitored to ensure that modesty does not turn into excess.

References

1. Etude d’impact, projet de loi relatif à la croissance et à la transformation des entreprises, 20 juin 2018, p. 544 ↩︎
2. Rapport n° 2628 préc., p. 67 ↩︎

Pierre Berlioz

Specialising in sustainability law, compliance and corporate property law, both domestic and international, as well as the legal professions. His areas of expertise are CSR, duty of care, prevention of corruption, corporate asset law, in particular issues relating to intangible property and business secrecy, contract law, private international law and international litigation, as well as the regulation of the legal professions. He is also the author of a number of articles and case law notes on these topics and was involved in drafting the Sapin 2, duty of care, biodiversity, 21st century justice, digital republic and business secrecy laws, as well as work on the CSRD. He is currently based at Université Paris Cité, where he heads the master’s degree in Justice, Trial and Procedure. Lastly, he is Chief of Staff to the President of the Compagnie Nationale des Commissaires aux Comptes, having previously been Director of the Bar Training School of the Paris Court of Appeal and adviser to the Minister of Justice, with responsibility for economic law, the law of obligations and the professions.