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October 25, 2023

Regulations and reputation drive sustainability in France

Our recent study reveals how businesses in the region can uplevel their sustainability efforts to meet EU regulations and enable a competitive advantage.

As in many European countries, sustainability for French businesses is tightly tied to EU regulations. The Corporate Sustainability Reporting Directive (CSRD), which went into effect this year, requires sustainability reporting for the 2024 financial year, as well as independent audits of those reports. The Corporate Sustainability Due Diligence Directive (CSDDD), which was proposed in 2022 and not yet finalized, would require companies to demonstrate their efforts to protect the environment and human rights throughout the value chain.

The pressure to conform to these regulations can be seen in the accelerated rate of sustainability investments, according to our recent study of 3,000 executives, including 195 in France. In the study, conducted in partnership with Oxford Economics, sustainability budgets are expected to expand, on average, 10.4% per year between 2022 and 2025.

The increased expenditures will be needed to not just measure and report on environmental and social impacts but also develop sustainability-related products, incorporate sustainability into risk management frameworks, and enhance corporate governance to support sustainability integration across all business functions and activities.

In addition to regulations, other key drivers of sustainability include concerns over corporate reputation and attractiveness to investors. The banking and financial services sector in France was the first to experience and respond to these pressures, well before the EU regulations came into play.

For French banks, sustainability has been seen as a way to gain competitive differentiation and market share through innovative lending and investment practices, including green bonds and loans. This puts them ahead of other industries when it comes to applying technologies to sustainability initiatives—such as cloud, analytics, AI and intelligent automation. In our study, use of these technologies was relatively low. Technology use is bound to pick up, as it will take more than manual efforts to meet the rigor of the new regulations.

We’ve developed five recommendations for how French businesses can outperform their markets by embedding sustainability at their core.

#1 Boost sustainability investments to realize full business value

Source: Cognizant Research
Figure 1

Convinced by the benefits of sustainability transformation, and spurred by regulation, businesses across France have been given the green light to increase investment in their initiatives. Budgets are expected to expand from an annual average rate of 6.1% between 2018 and 2020 to 12.5% between 2025 and 2030.

#2 Elevate your internal sustainability initiatives for even greater returns

Source: Cognizant Research
Figure 2

Businesses in France already recognize that digital tools are fundamental to success in sustainability efforts as nearly four in five are using them today to make operations more energy efficient. In addition, a higher share of companies in France than in any other country surveyed (63%) is recycling waste from manufacturing processes.

Looking ahead to 2025, supported by technology, many will keep their attention on internal initiatives, such as creating digital twins to optimize resource management (44%) and leveraging data analytics to identify improvement opportunities (42%). Nearly half (48%) plan to move to more sustainable premises.

#3 Expand your sphere of influence, upstream and downstream, to achieve greater business benefits and impact

Source: Cognizant Research
Figure 3

Unique among countries surveyed, businesses in France have focused their sustainability strategy relatively evenly across their supply chain (58%), operations (57%) and products and services (51%). For most businesses around the world, the emphasis is predominantly on internal operations as it stems from the confidence and control businesses can exert in this area.

In France, however, regulations focused on supply chain sustainability metrics are pushing these businesses to engage with supply chain partners to report on and lower impacts. Today’s technology can help businesses extend their reach, providing visibility and influence across the entire value chain when deployed effectively.

#4 Explore new ways to apply and deploy mature and emerging technology

Source: Cognizant Research
Figure 4

IoT, artificial intelligence and cloud are the most-commonly implemented technologies to support sustainability efforts, but some less deployed technologies may be more impactful. Although only 45% of businesses in France have applied intelligent automation in their sustainability efforts, for example, more than eight in 10 of those that have say it’s effective.

#5 Evolve power structures to allow for necessary shifts in culture and accountability

Source: Cognizant Research
Figure 5

While over 60% of CEOs in France provide the budget and sign off on their sustainability strategy, less than 10% are accountable or have performance measured against the strategy’s success. Instead, it’s the chief sustainability officer (CSO) and senior managers who are responsible for outcomes, despite their absence from the strategy table.

To embed sustainability into company culture, businesses must clarify roles and responsibilities, and clearly connect these to an incentives system to encourage senior leaders and all employees to participate in sustainability endeavors.

Learn how your business (or you) can become sustainable to the core in our report “Deep Green: How data, technology and collaboration will drive the next phase of sustainability in business.”

For even more on this topic, visit our Sustainability & Resilience webpage.

Yanina Fedyunina

Banking & Financial Services Consulting - Sustainable Finance

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Yanina Fedyunina is Cognizant Consulting’s Sustainable Finance Community Leader. She has deep knowledge of the sustainable finance challenges across asset management, banking and insurance gained from working with key industry players.

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