Corporate Social Responsibility (CSR)

Nowadays, corporate social responsibility (CSR) has become essential due to the omnipresence of environmental and societal challenges. Sustainable and responsible corporate governance has evolved from a simple voluntary approach to a legal requirement.

How to Become the Company of Tomorrow Thanks to CSR?

What Does Corporate Social Responsibility Mean?

The European Commission defines 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”. More broadly, the definition of CSR aims at the responsibility of companies for their impacts on society.

The definition of CSR oscillates between two aspects, the social dimension and the societal dimension.

The first reveals the company’s responsibility “towards its internal workforce and more broadly its labor force” towards its employees, suppliers, and subcontractors. CSR enables the respect of fundamental rights by the company. This can include “equality, gender balance, diversity,” social ethics…

The second refers to the company’s responsibility towards the defense of the “collective good”. This includes the fight against corruption or the protection of the planet and its resources. The latter encompasses a multitude of behaviors such as environmental risk prevention, promotion of biodiversity, or the promotion of recycling.

What Are the Challenges of Corporate Social Responsibility?

CSR is nourished by the guiding and traditional principles of sustainable development: environment, social, and economic.

The accountability of companies has a real beneficial impact on consumers. Indeed, CSR improves the transparency of companies in social and environmental matters. As a result, the public has more confidence in companies due to the respect of these values. Nearly 63% of consumers prefer to purchase goods or services from a company sensitive to CSR values (Accenture study).

Moreover, a responsible and committed company attracts more candidates and future collaborators, which in turn sparks the interest of new clients. The promotion of CSR is a brand image now relayed on social networks.

Consequently, the values promoted by the company have a real influence on its community. Consumers and clients of companies become active stakeholders in CSR.

CSR is accessible to all companies, regardless of their size, status, or sector of activity. However, it becomes mandatory for certain companies .

The National Obligations of Corporate Social Responsibility

Reporting

Since 2001, listed companies must publish an annual report detailing the actions, results, and relevant information on the company’s social, societal, and environmental strategy, called CSR reporting or non-financial reporting (Article 116 of the law on new economic regulations known as NRE).

This reporting includes three themes:

• Social (employment, working conditions, health, training…);
• Societal (subcontracting and suppliers, human rights, ethics…);
• Environmental (waste management, promotion of biodiversity…).

Since 2017, CSR reporting has been extended to unlisted companies with 500 employees and a total balance sheet or turnover exceeding 100 million euros (Ordinance No. 2017-1180 of July 19, 2017, on the publication of non-financial information by certain large companies and certain groups of companies – Article L. 225-102-1 of the Commercial Code). This ordinance transposes Directive 2014/95/EU of the European Parliament and of the Council of October 22, 2014.

Lastly, the PACTE law of May 22, 2019, came to reinforce CSR:Any company must have a lawful purpose and be formed in the common interest of the shareholders. The company is managed in its social interest, by taking into account the social and environmental issues of its activity (Article 1833 of the Civil Code).

Additionally, it amended Article 1835 of the Civil Code to recognize the possibility for companies to include a purpose in their statutes.

The Content and Access of Reporting

This reporting must:

• Identify risks related to the activity with a description of applied policies and due diligence procedures implemented to prevent, identify, and mitigate the occurrence of risks;

• Contain the results of these policies including key performance indicators and, when no risk management policy is present, the reasons justifying this (Decree No. 2017-1265 of August 9, 2017, issued for the application of the aforementioned ordinance).

This reporting must be freely accessible on the company’s website within eight months from the end of the fiscal year and for a period of five years (R.225-105-1 of the Commercial Code).

The Duty of Vigilance

To this end, a duty of vigilance was implemented in 2017 (Law No. 2017-399 of March 27, 2017, relating to the duty of vigilance of parent companies and ordering companies). The duty of vigilance refers to the obligation for all ordering companies to prevent social, environmental, and governance risks related to their operations.

It includes “reasonable vigilance measures to identify risks and prevent serious violations of human rights and fundamental freedoms, health and safety of persons, and the environment, resulting from the activities of the company and those of the companies it controls within the meaning of Article L.233-16 of the Commercial Code, directly or indirectly, as well as the activities of subcontractors or suppliers with whom an established commercial relationship is maintained, when these activities are related to this relationship” (Article L. 225-102-4-I of the Commercial Code). Therefore, these companies must publish the vigilance plan including the CSR reporting.

To help navigate this, the Prime Minister has established, since 2013, the CSR Platform, a national platform for global actions on corporate social responsibility. It is a stakeholder consultation body that issues recommendations.

International Recommendations: Voluntary Standards

At the international level, there are also legal texts relating to corporate CSR. Since the 1970s, corporate accountability has become a major concern for international actors, ranging from the International Labour Organization (ILO) Tripartite Declaration to the UN Sustainable Development Goals, and including Agenda 21.

What is the ISO 26000 Standard?

The ISO 26000 standard defines the scope of CSR around 7 core subjects:

• Organizational governance;
• Human rights;
• Labor practices;
• The environment;
• Fair operating practices;
• Consumer issues;
• Community involvement and development.

These are guidelines resulting from an international consensus; it is not an obligation for companies.

What are the Certifications for Corporate Social Responsibility?

Today, there is no official label covering all CSR themes and all business sectors. However, the RSE Lucie label is the first non-sector-specific and independent French CSR label incorporating the values of ISO 26000. This certification helps identify and support new CSR actors to take action.

What are the sanctions?

Lack of transparency, coherence, and commitment of the company in CSR actions are likely to have a negative effect on its brand image and, moreover, to have legal consequences.

Greenwashing is a deceptive practice: the company communicates about its ecological approach while in reality, it implements little or no action in this direction. Therefore, greenwashing can be considered as misleading advertising, punishable by a two-year imprisonment and a fine of 300,000 euros (Article 132-2 of the Consumer Code).

Corporate reporting is verified by a third-party organization. This verification takes the form of an opinion sent to shareholders. In case of failure to comply with legal obligations, any interested party may initiate a summary proceeding to request the president of the court to order the communication of the reporting, under penalty if necessary (Article L. 225-102-1 of the Commercial Code).

In case of failure to comply with the duty of vigilance, a civil liability action may be brought before the trial judge, in which case the company in question may be ordered to pay damages. Thus, the company’s liability will be engaged if it has not taken reasonable measures to prevent the risks of serious violations of human, social, and environmental rights.

According to the extra-financial rating agency Vigeo, out of 2,500 globally listed companies, nearly 20% of them have been subject to legal proceedings at a total cost of more than 95 billion euros.

Consequently, non-compliance with legal obligations regarding CSR can be costly, both in terms of damages and in terms of damage to a brand’s reputation!

Reform: Towards a Principle of Corporate Civil Liability?

On February 23, 2021, Deputy Philippe Latombe submitted a bill to the National Assembly aimed at establishing civil liability for companies regardless of their size, status, or sector of activity. As a result, they will have to adopt a preventive approach by anticipating breaches of legal obligations and CSR values. Failing this, these companies could be held liable before the competent court of the country where the damage or its triggering event occurred.

To conclude

According to the 2019 Comparison of CSR Performance of French Companies with OECD Countries and BRICS, France ranks third in the global ranking. This is a significant evolution for France as 70% of its SMEs/ETIs and 75% of large companies now have a CSR management system that is “adapted” or even “exemplary”. CSR has become the preferred tool for the ecological governance of tomorrow’s companies.

Finally, various studies have shown that CSR has played a beneficial role in helping make companies more resistant and resilient in the face of the current health and economic context.