Switzerland Proposes Ambitious Expansion of Sustainability Reporting Requirements

Introduction

The Swiss Federal Council has proposed a major amendment to non-financial reporting in Switzerland.The changes, which were put out on June 26, 2024, would expand the scope of the Swiss reporting requirements from the current 300 corporations to an estimated 3,500 once they go into effect.

Current Legislation

Large corporations in Switzerland must currently disclose their environmental, social, employee, human rights, and anti-corruption risks, along with the corresponding mitigation measures. These requirements apply to companies meeting specific thresholds: at least 500 employees, a balance sheet total of CHF 20 million, and turnover of CHF 40 million. The legislation aligns with global standards, including the European Non-Financial Reporting Directive. Moreover, starting from 2024, large companies are mandated to report under a ‘comply or explain’ framework based on the TCFD guidelines, as outlined in the Swiss Climate Disclosures Ordinance 2022.

What’s New?

Aiming to better integrate Swiss reporting requirements with the new European Corporate Sustainability Reporting Directive (CSRD), the Swiss Federal Council published a draft law on June 26, 2024. The rationale for this decision, according to the Council, is that more harmonization would be beneficial because many Swiss firms are already subject to the CSRD because of their substantial worldwide integration. 

Companies that reach two of the following three thresholds would now be in scope of the reporting obligations:

• 250 employees;
• CHF 25m in total assets; and
• CHF 50m in turnover.

At the same time, the following companies are exempt from the obligation to publish a sustainability report:

1. Companies that are controlled by another company that is subject to the obligation to prepare a sustainability report or that prepares a sustainability report in accordance with foreign law
2. Companies that do not exceed at least two of the following thresholds:

• a balance sheet total of CHF 450,000;
• sales revenue of CHF 900,000;
• 10 full-time employees on average per annum;
• an annual average of CHF 900,000.

The report has to address a wide variety of sustainability-related topics, such as:

• environmental considerations, namely the company’s position with respect to meeting the goal of net-zero greenhouse gas emissions by the latest in 2050, which aims to keep global warming to 1.5°C over pre-industrial levels;
• societal factors, such as issues with employees;
• factors pertaining to human rights;
• features of governance, such as institutional controls against corruption.

Similar to the CSRD, the Swiss Draft mandates that businesses perform a double materiality assessment and disclose the information needed to comprehend how their operations affect sustainability issues as well as how sustainability issues affect their business performance, outcomes, and standing. The report should include details on the company’s supply chain, commercial partners, and internal operations. 

The draft also suggests adding the requirement to have independent, third-party verification for the sustainability data that is reported. The report needs to be written in either English or one of Switzerland’s official languages. It must be written in accordance with an internationally recognized standard and in a standardized electronic format.

While the CSRD and the proposed reporting features have many similarities, there is a significant distinction in the standards that serve as the foundation for the reporting requirements. Businesses in Switzerland will be able to select an alternative standard or base their sustainability report on the EU requirements. Equivalent requirements will be specified in a similar ordinance by the Federal Council.

Additional Review of Due Diligence Obligations

The Swiss Federal Council said that it will carry out a comprehensive examination of the effects that the new CSDDD (EU Corporate Sustainability Due Diligence Directive) will have on Swiss firms, in addition to working on the future of ESG reporting in Switzerland.

The Council passed the CSDDD in May 2024, and enterprises with more than 1000 workers would be subject to stringent supply chain due diligence procedures starting in 2027 and continuing until 2029. By the fall of 2024, the analysis will be completed, and then the following steps will be disclosed.

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