Risks of prohibited and unethical practices in the conduct of business by employees or third parties could put the EDF group at risk of non-compliance with regulations, or even violations of human rights or fundamental freedoms.
The international nature of the Group’s activities and the strengthening of regulatory frameworks that punish unethical business practices, in particular, are likely to expose the Group, its employees or third parties acting on behalf of the Group to breaches of its ethical commitments or non-compliance that could damage its reputation or lead to civil or criminal sanctions.
The Group has implemented all the necessary measures to ensure that its practices comply with the regulations in force. Reporting to the General Secretariat, the Group Ethics and Compliance Department (DECG) is responsible for disseminating knowledge of, and compliance with, the Group’s ethical values, as well as the main regulations to which the Group is subject by virtue of its activity and geographical locations. In particular, thirteen programmes have been set up to prevent risks relating to ethical breaches or non-compliance. These programmes cover the following topics:
These programmes are set out in section 3.3.2 “Ethics, compliance and human rights”. Failure to comply in any way with the regulations associated with these various topics could cause legal action to be taken against EDF, which could adversely affect the Group’s results and reputation.
Proceedings or litigation could have a significant financial or reputational impact on the Group.
In the ordinary course of its business, the EDF group is involved in litigation, the development of outcome of which could have a material adverse effect on its results or financial position.
In particular, the EDF group is subject in France to proceedings initiated by its competitors or by administrative authorities owing to its position in certain markets. Claims made against EDF could be considerable and could lead to the payment of compensation or a fine, or even lead to orders being issued that could have an impact on some of EDF’s activities. For example, in proceedings before the competition authorities in France or by the European Commission, the amount of fines may be as high as 10% of the consolidated revenues of the company concerned(or of the group to which it belongs, as the case may be). The EDF group may also be involved in litigation relating to commercial or fiscal disputes with significant stakes, the outcome of which is inherently unpredictable.
The EDF group considers that overall, in all the countries in which it operates it complies with all the specific regulations in force, and mainly those relating to the conditions under which it carries out its nuclear activities, but it cannot anticipate in this respect what the supervisory and administrative or judicial authorities, which are consulted, may decide. These risks are monitored with particular vigilance and give rise to implementation of prevention policies (contractual policies, compliance policies, etc.). A procedure is in place to provide information to the Group’s Legal Department on actual or potential material litigation or other disputes and investigations.
The main proceedings in which the EDF group is involved are described in notes 17.3,5 and 1.4.1 of the appendix to the consolidated financial statements and in section 7.1.5 “Disputes”.
EDF is responsible for certain general interest missions, in particular public service missions, the costs of which are covered by mechanisms that might not fully compensate for the additional costs incurred in connection with these obligations, or which might be called into question.
In France, public service missions are assigned to EDF under French law (in particularArticles L. 121-1 et seq. of the French Energy Code), which also provides for compensation mechanisms in favour of EDF in respect of the discharge of such missions. The estimated amount of public service energy costs to be offset in France in 2021 for EDF amounts to €9,492.1 million (decision of the Energy Regulation Commission of 15 July 2020 on the assessment of public service energy costs for 2021) (it must be noted that the repayment schedule came to an end and that the historical CSPE receivable was thus entirely reimbursed). The amounts of public service charges are set out in the Finance Act n°2020-1721 of 29 December 2020 for 2021.
The development of renewable energies connected directly to the distribution network may, in certain regions, saturate the reception capacities of the source substations and networks. This situation may possibly generate local imbalances, or disputes if Enedis must disconnect certain producers or connect them with significant delays. New investments may be required in these regions, with the risk that the costs associated there with may not be taken into account.
More broadly, the texts provide for EDF to be fully compensated for the public service charges it bears. However, even if this principle of full compensation of public service obligations is legislated, it cannot be completely ruled out that the terms of said compensation may be called into question and that said compensation may not include any new public service obligation allocated to EDF (for example, at the end of the negotiations on the new public service contract).
EDF maintains a close dialogue with the French State authorities on the issue of financing public energy service obligations in order to implement and secure the compensation mechanism (particularly with respect to working capital requirements), so as to secure payment by the French State at the end of the year and avoid year-on-year arbitrations by the French State.
The occurrence of any of these events may have an adverse impact on EDF’s activities, results and financial position. Such situations could also call into question the Group’s ability to meet its CSR goals, mainly those aiming at helping fragile populations (see section 3.3.4 “Energy poverty and social innovation”).
