Focus on the non-financial performance statement (NFPS)

A revised draft directive is expected in the first quarter of 2021.

In the meantime, this article focuses on the legal framework currently applicable in France.

1. Background

The NFRD has introduced, for large, listed companies, the obligation to publish a NFPS.

The NFRD was transposed into French law by Order no. 2017-1180 of July 19, 2017, which amended Article L. 225-102-1 of the French Commercial Code.

The European Commission published non-binding guidelines in June 2017, with a supplement relating to climate reporting published in June 2019.

2. Scope of the NFPS

Article L. 225-102-1 paragraph I of the French Commercial Code states that “a non-financial performance statement is included in the management report [...] when the total balance sheet or revenues and the number of employees exceed thresholds set by decree of the Conseil d’Etat”.

Paragraph II specifies that “the companies mentioned in paragraph I that prepare consolidated financial statements in accordance with Article L. 233-16 are required to publish a consolidated non-financial performance statement when the total balance sheet or turnover and the number of employees of all the companies included in the scope of consolidation exceed the thresholds mentioned in paragraph I”.

The French Commercial Code thus sets out the thresholds applicable to French companies (which differ from those set out in the NFRD, which applies to large companies that are public-interest entities - i.e., listed companies - with an average number of employees over the fiscal year of more than 500 people):

- for listed companies (Articles L. 22-10-36 and R. 22-10-29 of the French Commercial Code):

• total balance sheet in excess of EUR 20 million or net revenues in excess of EUR 40 million; and
• on average more than 500 permanent employees employed during the financial year.

- for unlisted companies (Article R. 225-104 of the French Commercial Code):

• total balance sheet in excess of EUR 100 million or net revenues in excess of EUR 100 million; and
• average number of permanent employees employed during the fiscal year greater than 500 people.

3. Content of the NFPS

Paragraph III of Article L. 225-102-1 of the French Commercial Code provides that “to the extent necessary for understanding the situation of the company, the development of its business, its economic and financial results and impact of its activity”, the NFPS “presents information on the way the company takes into account the social and environmental consequences of its activity”. For listed companies, Article L. 22-10-36 of the French Commercial Code adds “the effects of this activity on respect for human rights and the fight against corruption and tax evasion” (the statement may refer, where applicable, to the information mentioned in the vigilance plan provided for in paragraph I of article L. 225-102-4 of the French Commercial Code).

The NFPS “includes in particular” information relating to:

- the consequences on climate change of the company’s activity and the use of the goods and services it produces;
- its societal commitments in favor of sustainable development, circular economy, fight against food waste, fight against food insecurity, respect for animal welfare and responsible, fair and sustainable food;
- collective agreements ratified within the company and their impact on the company’s economic performance as well as on the working conditions of employees;
- actions to prevent discrimination and promote diversity and measures taken in favor of those with disabilities.

Article R. 225-105 of the French Commercial Code sets out the structure to be followed for the NFPS, which must, in particular, present:

- “the business model of the company or, as the case may be, of all the companies for which the company prepares consolidated financial statements".
- for each category of information mentioned in paragraph III of Article L. 225-102-1 or in the second paragraph of Article L. 22-10-36 of the French Commercial Code:

• " 1° A description of the main risks associated with the business of the company or of all companies, including, where relevant and proportionate, the risks created by its business relationships, products or services”;
• "2° A description of the policies applied by the company or group of companies, including, where applicable, the due diligence procedures implemented to prevent, identify and mitigate the occurrence of the risks mentioned in 1°”;
• "3° The results of these policies, including key performance indicators".

Where the company does not apply a policy with respect to one or more of these risks, the NFPS should include a clear and reasoned justification.

Our team remains available to discuss the content of your NFPS and improve it to align with best market practices.