Gérard Schoun, Founder and CEO of the French sustainability consulting firm Destination26000, shares insights from his recently published book on how French companies can meet the challenges of the PACTE Law which aims to facilitate companies in their growth, transformation and sustainability impact. From an interview by Prof. Adrian Zicari, ESSEC Business School.

France: Putting the Lens on the PACTE Law by Gérard Schoun and Adrian Zicari. With kind acknowledgements to Louis Armengaud Wurmser at ESSEC Alumni.

The PACTE Law: Its impact on French companies

The PACTE Law amends the Napoleonic civil code with regard to the very concept of the company. A first since 1804! Article 1833 makes social and environmental responsibility part of the corporate purpose of all companies, from small businesses in the rural Creuse region in France to CAC40 multinationals.

For the most committed, the law allows companies to opt for the status of société à mission (company with a purpose), by including environmental and social objectives in their articles of association. In this way, the pursuit of profit is no longer the sole compass of management and staff.

In a way, the law makes a wager: the key to performance lies in the ability to make the company a meaningful project. Romain Gary once said, “You can’t expect life to have a sense, you have to give it a sense. The word sense is rich, dense, carrying 3 meanings: sensation, direction, signification.

The law is a success: already 1,400 purpose-driven companies are listed throughout France. An ecosystem is being set up, with impact funds seeking to invest in companies that can demonstrate a positive contribution to society.

How the European CSRD will change the corporate landscape

The European CSRD Directive, which has just been transposed into French law, is changing the way ESG issues are taken into account. Previous standards, Grenelle 2 and NFRD (DPEF), have certainly helped extra-financial reporting to evolve, but they remained very poor and too accounting-based to really change attitudes.

The CSRD reference framework – through the ESRS standards developed by EFRAG – asks companies the right questions: what are your main challenges, how do you link them to your strategy/business model, is your operational and corporate governance really involved, are the action plans and trajectories set relevant to ensuring a transition towards a more sustainable world?

Some companies see it as just another compliance exercise, albeit an extremely cumbersome one, while others use it to revisit their vision of the future. I tend to think that the winners will be the latter.

The PACTE, CSRD and the Anglo-Saxon Perspectives of SASB and IR: Can they come together?

The essential debate concerns the notion of materiality. The American approach of simple materiality or financial materiality, defended by the ISSB (which incorporates the earlier work of SASB and IR), claims a clear choice.

The information sought is intended for financiers, investors and banks, to (re)calculate the cost of capital. Europe advocates a dual materiality approach: financial materiality (outside-in) and impact materiality (inside-out), which measures the company’s impact on nature and mankind.

The convergence between ISSB and EFRAG is very strong on financial materiality, but only impact materiality aims at sustainable development. Let’s hope that, for once, the USA will align with the EU and not the other way around, and adopt dual materiality.

How can students or young graduates contribute?

Gérard Schoun is currently working on the design of a 90-hour learning course that will be accredited by the French auditing authority (Haute Autorité de l’Audit), as part of the grandfather clause provided for by law to train future signatories of sustainability report certification statements.

After 2026, an 8-month course will be able to be integrated into masters’ programs for students wishing to become sustainability experts.

Useful links:

• Discover Gérard Schoun’s book (in French): Diriger après, vivre avec… la loi Pacte, la révolution numérique, le réchauffement climatique, l’effondrement de la biodiversité, le coronavirus
• Link up with Gérard Schoun on LinkedIn
• Read a related article: Are Global Reporting Initiative Standards Relevant for the Global South?
• Discover ESSEC Business School and apply for the MBA and EMBA programmes.

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