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France will jail corporate directors who fail to adhere to new CSRD requirements

No get-out-of-jail-free-card will save companies that don't comply with this new French law.

A fence with barbed wire against the background of a colorful sky and a flagpole with the flag of France

Source: Shutterstock/Millenius

In early 2024, France introduced the potential of jail time for any corporate director who fails to comply with the country’s Corporate Sustainability Reporting Directive (CSRD). Specifically, the penalty includes a fine of up to $81,400 and jail time of up to five years. 

Here’s what you need to know about the CSRD requirements and penalties.

CSRD: What is it?

The Corporate Sustainability Reporting Directive (CSRD) was first introduced into law by the European Union in January 2023 as a part of the European Green Deal. It requires large companies to disclose regular reports of their social and environmental risks to both the government and the public at large. 

"CSRD is expected to impact over 50,000 companies, [including] a significant number of non-EU organizations," said Kristen Sullivan, audit & assurance partner at Deloitte. Sullivan estimated that companies must submit more than 80 disclosures and 1,100 data points in their official reports. 

The reach of the directive is extensive, according to Sullivan, impacting companies around the world not technically connected to the EU’s CSRD laws. "Think about the value chain partners [and] entities who receive funding [or] investment capital from entities in the EU who will be subject to the disclosure," said Sullivan, explaining the inevitable domino effect that will affect each company’s supply chain.

France is the first EU member state to incorporate the directive into its national law and introduce penalties associated with a failure to comply. 2024 marks the first year of data collection, with the first reports due in 2025.

Will U.S. companies be affected by CSRD requirements?

Some U.S. companies will be affected by the CSRD regulations within the EU, including France. Criteria for affected companies include:

  • More than 250 employees;
  • A turnover greater than $43.5 million;
  • $21.7 million or more in total assets.

Companies based outside of the EU have an extra year to comply with CSRD requirements, with data from 2025 due in 2026, according to Sullivan. 

How to avoid penalties

To avoid penalties, the French law (French) makes it clear: Do not impede the external auditor’s ability to certify the CSRD report. Additionally, directors of a company that fail to submit reports to an external auditor at all face up to two years of jail time.

"Avoiding [external auditing] or not complying with that requirement would have enforcement implications," agreed Sullivan. 

Instead, said Sullivan, start preparing to report for CSRD now, whether your company is based in the EU or abroad. 

All EU members are required to nationalize the CSRD law by July.

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