REGIONAL PRESENTATION: From National Requirements to a European Framework - the Advanced French Experience 13:00-14:00

Contents 1. Presentation of the Grenelle 2 Act 2. Comparative analysis of the EC draft and the Grenelle 2 Act 3. Towards a European framework to support the EC directive the German-French project Conclusion

Introduction Who When What Highlights of the Grenelle 2 Act This Act is consistent with the approach of integrated reporting: companies have to include in their annual management report «information on the way in which society takes account of the social and environmental consequences of its activity as well as its societal commitments for sustainable development» No sanctions if companies fail to comply on time Comply or explain 42 environmental, social and societal topics Data + reporting process need to be audited 4

Introduction Who When What WHO is concerned Companies exceeding specific thresholds in terms of sales, FTE, balance sheet (see next slide) The reporting scope is wide: companies will have to consolidate the extrafinancial information for all of their subsidiaries, as long as the parent company exceeds the thresholds even for their non-french subsidiaries. Not every form of company is concerned: The decree modifies the Commercial Code (article 225-102-1), which applies to limited companies and exclude some forms of companies: limited liability companies and private limited companies (less restrictive forms of limited company), general partnerships, property investment companies and joint-interest organizations For public authorities: the article 226 of the Grenelle II Act includes extrafinancial reporting requirements for public authorities. 5

Introduction Who When What WHEN: The implementation schedule and the thresholds Reporting requirements + certificate of compliance Verification Listed companies and companies borrowing on the stock markets Companies > 5,000 employees with total assets or annual net sales > 1 billion FY 2012 FY 2012? FY 2012 FY 2017 Companies > 2,000 employees with total assets or annual net sales > 400 million Companies > 500 employees with total assets or annual net sales > 100 million FY 2013 FY 2014 FY 2017 FY 2017 6

Introduction Who When What WHAT? Transparency + Reliability Transparency first : comply or explain Reliability: - independent third-party body approved by the COFRAC, the French accreditation body - Checks the data, the processes and the declarations - The report is included in the annual management report report which deals with the honesty of the information provided by the company, the explanations provided when an information is not reported («comply or explain» rule) and the due diligences performed - This body is appointed either by the CEO or at the annual general meeting 7

Introduction Who When What Which information? The decree sets information and CSR topics to be reported by companies and not specifically indicators: For instance companies need to report on the frequency and seriousness of incident but not specifically on their LTIFR (Lost Time Incident Frequency Rate) or on their TRIR (Total Recordable Incident Rate) This guideline is consistent with major international reporting and CSR frameworks (see table pages 8,9,10). For instance, companies can use the GRI to report on the regulatory topics (however there is no specific reference to any CSR framework in the Act) Listed companies and companies borrowing on the stock markets need to report additional information (in blue on the reference table page 8,9,10) 8

EC draft & G II requirements are very similar Comparative analysis Legislative vehicle Geographical scope EC draft Grenelle 2 Art 46 of 4th accounting directive and art 36 of the 7th directive UE countries + ICE + NOR + LIE (30 countries Commercial code art 225 French societies (inc French subsidiaries of foreign groups) Companies concerned and thresholds Implementation schedule Where to put the CSR information? Companies concerned by the 4th & the 7th directive and > 500 employees + either net sales > 40 M or total assets > 20 M 18,000 companies 20 days after it is published in the Journal Officiel The annual report ex when it a a subsidiary and the parent group reports it or if the company publishes a CSR report Companies concerned by the Commercial Code and > 500 employees + either net sales or total assets > 100 M 1,500 2,000 companies concerned FY 2012 FY 2013 FY 2014 depending on the size of the companies (see detailed thresholds) Annual management report ex when it a a subsidiary and the parent group reports it Compliance type Comply or explain, no sanction Comply or explain, no sanction Link with international guidelines Strong incitation to refer to international guidelines: UNGC, UN Guiding Principles on Human Rights, ISO 26000, GRI, ILO, OECD Incitation to state if the company refers to guidelines + compliance is required with ILO conventions 12

EC draft & G II requirements are very similar Comparative analysis Spirit of reporting CSR topics mentioned Which kind of CSR information Verification / audit EC draft Grenelle 2 Call for a material, concise and reliable reporting Material for the company and its stakeholders at least environmental, social and employee matters, respect for human rights, anticorruption and bribery matters. Precise reporting on diversity matters - a description of the policy pursued by the company in relation to these matters; - the results of these policies - the risks related to these matters and how the company manages those risks. - KPIs No specific requirements but the report of the statutory auditors should also contain an opinion concerning the consistency of CSR information Transparency of the impacts (data) and the corrective actions. Reliable data 42 environmental, social and societal topics a few indicators major CSR topics are refered in the decree - Actions lead and orientations - Presentation of the data (over several years if possible) - Measures to take into account the environmental, social and societal consequences of the company s activities and to meet its social engagements - Certificate of compliance - Independent and accredited third-party body appointed - Specific requirements as of FY 2012 for listed companies (FY 2017 otherwise) - Data + processes (definitions, protocols) 13

Towards a European framework to support the EC directive the German-French project Objectives: - Drive convergence with Europe and especially among countries which implemented consistent schemes on CSR reporting - accelerate the appropriation of CSR reporting to support the reputation of European brands and companies in the world 15

3 major common perspectives are emerging The necessity to integrate in a coherent way both financial and extra-financial data to give a material view of the business model to the investors and others stakeholders, in the spirit of IIRC proposal the recognition of the principle comply or explain as the key of choices by the company concerning their disclosure approach and selection of relevant data and free indicators to be detailed Active recommendation by public authorities and financial markets in Europe to disclose ESG data within financial data for all companies beyond 500 employees, through comparable standards, as GRI (G4) and Effas, and to encourage external attest of the data s reliability, required by the governance and the stakeholders 16

Conclusion Keep on bringing convergence Use G4 s materiality test and the priorization method for the comply or explain Make European stock exchanges take the lead Specific activities such as mutual and co-operative banking need to be recognized in the guidelines (G4 + financial services sector supplement) Our aim: promote a responsible social market economy to re-build trust 18

We look forward to discussing with you Institut RSE management Patrick d Humières pdh@institutrse.com +33 643005741 Nicolas Jandot nj@institutrse.com +33 626766646 Our website : www.institutrse.com contact@institutrse.com