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Environmental laws in France: What are the effects of the Grenelle laws on firms?

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Abstract

The aim of this paper is to analyze the effects of Grenelle I and Grenelle II laws on financial performance, social performance, and risk-taking in France. The study is focussed on SBF120 (The SBF120 index consists of the 120 largest capitalizations listed on the French Stock Exchange market (SBF: Société des Bourses Françaises)) firms between 2005 and 2016. It provides the following results: first, it shows that after the introduction of the Grenelle I and II laws, financial performance decreased while corporate risk increased, particularly in low polluting industries. One explanation for this is that Grenelle laws are based on the comply or explain principle which may lead to adaptative and interpretative disclosure strategies. In addition, environmental regulations may involve high costs of compliance. In the short-term, environmental disclosure regulations do not drive businesses to improve their social performance: they have not been able to undertake socially and environmentally responsible projects based on good governance practices. Using the Environmental Policy Stringency EPS index to measure the stringency of environmental policy, we show that international binding laws such as the Paris Agreement, unlike locally binding Grenelle laws, are able to enhance the overall social performance through the environmental, social and governance channels. In the long-term, Grenelle laws show effective results on the environmental performance and the quality of governance which enhance the overall social performance without impairing the financial one. Finally, quantile regression analysis provides evidence that businesses are likely to increase their environmental performance at the expense of low financial and overall social performances.

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Notes

  1. https://www.unep.org/events/un-day/un-framework-convention-climate-change-unfccc-cop26

  2. https://unfccc.int/process-and-meetings/the-paris-agreement/the-paris-agreement

  3. https://ec.europa.eu/environment/action-programme/

  4. Treaty of Lisbon (europa.eu)).

  5. https://www.europarl.europa.eu/about-parliament/en/in-the-past/the-parliament-and-the-treaties/treaty-of-amsterdam

  6. https://unfccc.int/kyoto_protocol

  7. https://www.diplomatie.gouv.fr/IMG/pdf/Mandatory_reporting_built_on_consensus_in_France.pdf

  8. https://www.fastcompany.com/912480/green-innovation-drivers-what-community-says

  9. They consider among others environmental regulations enacted by the European Union (EU-ETS), international agreements (such as the Kyoto Protocol) and national environmental policies aimed at environmental protection by targeting water, soil and air (WSA) pollution: they.

  10. https://solability.com/the-global-sustainable-competitiveness-index/the-index

  11. https://climate-laws.org/geographies/france/laws/grenelle-i

  12. https://www.legifrance.gouv.fr/loda/id/JORFTEXT000022470434

  13. https://climate-laws.org/geographies/france/laws/grenelle-ii

  14. https://www.iea.org/policies/8737-law-on-energy-transition-for-green-growth-ltecv

  15. https://unfccc.int/process-and-meetings/the-paris-agreement

  16. https://climate-laws.org/geographies/france/laws/grenelle-ii

  17. https://www.diplomatie.gouv.fr/IMG/pdf/Mandatory_reporting_built_on_consensus_in_France.pdf

  18. EPS index has been introduced by the OECD to measure how much environmental policies put an explicit of explicit price on polluting or environmentally harmful behavior in many countries.

  19. https://www.legifrance.gouv.fr/loda/id/JORFTEXT000000223114/

  20. https://www.legifrance.gouv.fr/loda/id/JORFTEXT000025746900

  21. https://www.legifrance.gouv.fr/jorf/article_jo/JORFARTI000022471678

  22. https://www.diplomatie.gouv.fr/IMG/pdf/Mandatory_reporting_built_on_consensus_in_France.pdf

  23. Beji et al. (2020) did not explore Grenelle I effect. Also, they did not analyze Grenelle II effects on corporate risk and corporate financial performance.

  24. https://edubourse.com/guide-bourse-euronext-eurolist/

  25. This data access was funded by CTE-Gestion, University of Montpellier.

  26. https://vigeo-eiris.com/fr/

  27. More details are provided in appendix 1 regarding the areas covered by VigeoEiris to calculate the global CSR score.

  28. https://unfccc.int/process-and-meetings/the-paris-agreement

  29. We tested the effects of the subprime crisis of 2007 and the introduction of the gender quota law in 2011. The estimates are not significantly different. For the sake of simplicity, we did not add them to our variables. All details are available upon request.

  30. https://www.eurofound.europa.eu/en/resources/article/2011/french-law-increase-number-women-directors

  31. Results are available upon request.

  32. https://www.unepfi.org/fileadmin/documents/PRI-FrenchEnergyTransitionLaw.pdf

  33. https://www.asso-sherpa.org/le-fcrse-exige-du-gouvernement-quil-respecte-ses-engagements-en-matiere-de-transparence-des-entreprises

  34. https://www.oecd.org/economy/greeneco/how-stringent-are-environmental-policies.htm

  35. https://www.oecd-ilibrary.org/environment/data/oecd-environment-statistics/environmental-policy-stringency-index_2bc0bb80-en#:~:text=The%20OECD%20Environmental%20Policy%20Stringency,polluting%20or%20environmentally%20harmful%20behaviour.

  36. https://www.citepa.org/fr/secten/

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Authors and Affiliations

  1. Montpellier Research in Management MRM, University of Montpellier, Montpellier, France

    Ouidad Yousfi

  2. University of Carthage, Tunis, Tunisia

    Nadia Loukil

  3. ISG Bizerte, FCF LR, FSEG Tunis, Université Tunis-ELManar, Tunis, Tunisia

    Nadia Loukil

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  1. Ouidad Yousfi
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Correspondence to Ouidad Yousfi.

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Appendix 1

Appendix 1

A brief summary of VigeoEiris CSR scores.

CSR scores

Human resources (HR)

Environment (ENV)

Business behavior (BB)

Corporate Governance (CG)

Community involvement (CIN)

Human rights (HRts)

Social dialogue

Environmental strategy

Product safety

Board of directors

Local social and economic development

Fundamental rights

Employee participation

Pollution prevention and control

Information to customers

Audit and internal controls

Societal impact of products and services

Fundamental labor rights

Responsible re-organizations

Green products and services

Responsible customer relations

Shareholders

Philanthropic contributions

Nondiscrimination and diversity

Career development

Biodiversity

Supply chain management (Contractual Standards)

Executive remuneration

 

Forced labor and child labor

Responsible remuneration systems

Water

Supply chain management (Environmental standards)

   

Health and safety

Energy

Supply chain management (Labor standards)

   

Responsible working hours

Atmospheric emissions

Corruption

   
 

Waste management

Competition

   
 

Local pollution (noise/vibration)

Lobbying

   
 

Transportation

    
 

Impacts of product use and disposal

    

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Yousfi, O., Loukil, N. Environmental laws in France: What are the effects of the Grenelle laws on firms?. Eur J Law Econ (2024). https://doi.org/10.1007/s10657-024-09802-2

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