Switzerland Launches Consultation on New Sustainability Reporting Requirements – An Overview for U.S.-based Multinationals

The Swiss Federal Council has commenced a consultation on proposed amendments to the Swiss Code of Obligations that would introduce significantly expanded sustainability reporting requirements. The intent of the proposed amendments is to align Swiss sustainability reporting with the EU’s Corporate Sustainability Reporting Directive. 

Subject Companies

Swiss sustainability reporting currently is limited to approximately 200 public interest entities (listed companies and financial institutions). The proposed amendments would expand reporting to more than 3,000 additional companies – including Swiss subsidiaries of many U.S.-based multinationals.

As proposed, reporting generally would be required by Swiss-organized companies that meet two of the following thresholds for two consecutive years (either individually or on a consolidated basis):

• CHF 25 million total balance sheet assets
• CHF 50 million turnover
• 250 full-time employees on average (full-time equivalent)

The public interest entities required to report also would be expanded, although those thresholds are not discussed in this post since they generally are not relevant to U.S.-based multinationals. 

As many readers know, in addition to having an EU entity trigger, the CSRD brings into scope non-EU entities (“third-country undertakings” in CSRD parlance) with €150 million of EU turnover. A similar trigger intentionally was excluded from the Swiss proposal. The Explanatory Report notes that, if Switzerland were to include a similar provision, the threshold would probably have to be set much lower, reflecting the smaller size of the Swiss market. The Explanatory Report also notes that few companies with headquarters outside Switzerland or the EU would be affected by an equivalent Swiss third-country undertaking reporting requirement.  

Exemptions

A subsidiary entity would be exempt from reporting if it is controlled by another company required to report on sustainability matters under Swiss law. A subsidiary also would be exempt from reporting if it is controlled by a company that prepares an equivalent report under foreign law (equivalent reporting is further discussed below). A subsidiary that relies on a parent company reporting exemption would be required to indicate in the notes to its financial statements the company in whose report it is included.

There also is an exception for micro-enterprises, which is not discussed in this post.

Reporting

Annual sustainability reporting would be required. 

The report would be required to address the following sustainability topics:

• Environmental factors, in particular progress toward a 2050 net zero target;
• Social matters, including workers' concerns;
• Human rights; and 
• Governance, including organizational arrangements to combat corruption.

The report would be required to describe:

• The company's business model and strategy;
• The time-bound sustainability objectives the company has set;
• The role of the top management or administrative body in relation to sustainability matters;
• The company's sustainability policy;
• Management incentives linked to sustainability matters;
• Due diligence concerning sustainability matters;
• Material actual or potential negative sustainability impacts and the measures taken to identify and monitor those impacts;
• The measures taken to prevent, mitigate, remedy or end actual or potential negative sustainability impacts and the success of the measures;
• The material sustainability risks to which the enterprise is exposed and the management of those risks; and
• The relevant indicators relating to the foregoing information.

Like the CSRD, Switzerland proposes a double materiality approach to reporting, i.e., requiring reporting if a particular sustainability topic is either financially or impact material. In addition, reporting would take into account both the subject company’s business activities and its value chain.

As proposed in the amendments, reporting generally would be required to comply with the European Sustainability Reporting Standards (ESRS) adopted by the EU in connection with the CSRD. 

Alternatively, reporting could align with an equivalent standard designated by the Swiss Federal Council. The example cited in the Explanatory Report is reporting in accordance with a combination of the Global Reporting Initiative standards and the IFRS Sustainability Disclosure Standards of the International Sustainability Standards Board. 

However, the bar for equivalence appears to be very high. The Explanatory Report notes that equivalence will be predicated on there being no or only minimal deviations from the ESRS with regard to the scope and level of detail of the information, approval, report format, double materiality and comparability, among other factors.

Reports would be required to be in English or a Swiss national language. In addition, information would be required to be in an electronic format that complies with an international standard. The Explanatory Report indicates that, to ensure comparability of sustainability reports, the electronic reporting format would be required to conform to the standard used by the EU.

External Assurance

External assurance would be required. The Federal Council would be permitted to adopt either a limited assurance or a reasonable assurance standard. However, the Explanatory Report indicates that the Federal Council would be required to be guided by international developments, in particular by EU law, in order to remain internationally coordinated.

In addition, the financial statement auditor would be required to assess whether there are discrepancies between the annual consolidated financial statements and sustainability report.

Timing

The consultation is open until October 17. If legislation is adopted, some commentators expect that to occur during the back half of 2025. The proposed amendments contemplate a two-year transition period.

Five Quick Take-aways

• If adopted, the amendments to the Swiss Code of Obligations will add another new sustainability reporting requirement for many U.S.-based multinationals.
• Swiss sustainability reporting will need to be harmonized with emerging sustainability reporting requirements across many other jurisdictions, as well as with voluntary sustainability disclosures. 
• However, for many U.S.-based multinationals, the incremental impact may be negligible based on their CSRD reporting.
• At a minimum, potentially impacted U.S.-based multinationals should add Switzerland to the growing list of sustainability reporting requirements they are assessing and monitoring.    
• As a more proactive approach, impacted U.S.-based multinationals should consider whether to engage in the consultation through industry groups or directly.

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