The Swiss government announced the release of its new proposed Federal Act on Sustainable Corporate Governance, a new law setting out updated sustainability-related reporting and due diligence obligations for large companies.
The new proposed law would broadly align obligations for Swiss companies with those of their European counterparts under the EU’s recently updated Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD), particularly in terms of the size of companies covered by the regulations. While limiting sustainability disclosure obligations to larger companies the new law would require those companies to report in line with international standards.
The launch of the new proposal follows the completion of the EU’s “Omnibus I” process which dramatically scaled back sustainability reporting and due diligence requirements for companies. Among the key changes in the Omnibus was a significant reduction in the number of companies covered by key sustainability regulations, with the CSRD threshold raised from companies with 250 employees to those with 1,000 employees and at least €450 million in revenue, and the CSDDD changed to include only the largest companies, with a new threshold of 5,000 employees and €1.5 billion in revenue.
Switzerland has a series of sustainability reporting regulations in place, including requirements for companies with greater than 500 employees to publish an annual report on environmental, social, human rights and anti-corruption matters, and its Ordinance on Climate Disclosures, also applying to companies with more than 500 employees and mandating reporting on climate-related factors including greenhouse gas emissions, climate-related risks and impact, and targets and transition plans, based on the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). Switzerland’s current due diligence obligations apply only to companies with activities that pose risks in areas of child labor and conflict minerals.
Similar to the updated CSRD, Switzerland’s new sustainability reporting obligations will apply to companies with at least 1,000 employees and CHF450 million (€488 million), or approximately 100 companies, compared to around 200 under currently required to report on sustainability and climate-related issues. Reporting must be done in compliance with European Sustainability Reporting Standards (ESRS) or an equivalent standard.
The due diligence obligations under the proposed law would also apply a CSDDD-like threshold of 5,000 employees and CHF1.5 billion (€1.6 billion), and will require companies to examine if their activities or those of controlled companies or business partners in the supply chain have actual or potential negative impacts on compliance with internationally recognized human rights and environmental standards, and obligate companies to establish a strategy and code of conduct and integrate them into corporate policy and risk management, identify, assess and prioritize impacts, prevent potential impacts and prepare prevention plans, remediate actual impacts, establish complaint and reporting mechanisms, and monitor effectiveness. The new due diligence obligations would apply to approximately 30 companies, according to the Swiss Federal Council.
