ESG reporting: Switzerland stands at a crossroads

Switzerland, despite being outside the EU, has made significant efforts to align its non-financial reporting regulations with those of the union. The non-financial reporting landscape in Switzerland is heavily influenced by its proximity to the EU, but the country nevertheless has a unique regulatory approach that is distinct from the EU rules. While the EU is a pioneer in ESG regulation, Switzerland lags behind, with less stringent regulations, as it aligns with union rules at a slower pace than the EU enacts new ones.

This article provides an overview of the latest developments concerning ESG reporting in Switzerland and a high-level outlook on the regulatory changes we may expect. It does not cover the reporting obligations under the due diligence and transparency obligations in relation to conflict minerals and child labour, which were discussed in Advestra’s corresponding article in 2023.

The scope of Swiss enterprises subject to ESG reporting (in Swiss legal terms, “non-financial reporting”) is narrower than for those in the EU. Prudentially supervised financial institutions and Swiss public enterprises that have at least 500 full-time employees per year in two consecutive years and that have a balance sheet total of at least CHF20 million or a turnover of at least CHF40 million (in each case, calculated on a consolidated basis per year in two consecutive years) are subject to the requirement to produce a report on non-financial matters.

Public enterprises comprise not only companies with equity securities listed on a stock exchange but also Swiss companies with bonds outstanding or companies contributing at least 20% of the assets or turnover to the consolidated accounts of companies with equity securities listed on a stock exchange or with bonds outstanding. Enterprises controlled by another company that is a subject enterprise or that is required to produce a similar report under foreign law are exempted from the obligation to report on non-financial matters.

The Swiss Code of Obligations provides an exhaustive list of matters to be covered in a non-financial report; namely:

• Environmental matters;

• Employment matters;

• Respect of human rights; and

• Combating corruption.

The report must include information necessary to understand the business performance and result, the situation, and the impact of its activities on these matters. In addressing the above-mentioned areas, an enterprise must include:

• A description of the business model and of the policies adopted in relation to the matters covered;

• A presentation of the measures taken to implement these policies and an assessment on the effectiveness thereof;

• A description of the main risks related to these matters; and

• The main performance indicators for the activities in relation to the matters referred to above.

Swiss subject companies must publish and submit the report on non-financial matters to the body that is responsible for the approval of the annual financial statements, which is typically the annual general meeting of shareholders (AGM). The requirement for ESG reporting kicked in for the first time in 2024.

While many Swiss companies – in particular, larger ones – had already published an ESG report for several years in line with international standards, some smaller companies had to put great efforts into their first version of the non-financial report. Despite the criticism of some proxy advisers – in particular, the most prominent Swiss proxy advisers, Ethos – most of the reports on non-financial matters were approved with an overwhelmingly large majority.

Interestingly, the most prominent dispute on this topic did not relate to the content, but to the form of AGM approval. While many Swiss companies opted for a consultative vote arguing that a “no” may not result in direct consequences, some proxy advisers opposed this view by referring to the Swiss Code of Obligations, which does not explicitly provide for a consultative vote, as it does in other instances. While the Swiss legislator remained silent on this question under currently enforced legislation, it has expressed its view for a binding vote under proposed amendments (see below).

Further criticism by proxy advisers was made on a case-by-case basis but regularly did not provoke the AGM to largely oppose the approval of the non-financial report in question. It is too early to tell how this year’s AGMs will evolve. So far, it seems that we can expect a similar approach to that of Swiss companies last year.

In trying to align Swiss law with EU regulation – in particular, with the Corporate Sustainability Reporting Directive (CSRD) – the Swiss Federal Council proposed, in summer 2024, to amend the current regime on non-financial matters, despite its recent adoption. Rather than fully incorporating the CSRD, the Swiss government tried to adapt the CSRD requirements to Switzerland by amending the existing Swiss framework on non-financial reporting.

The proposal’s main change is the extension of the scope of applicability, which would lead to a significant number of Swiss enterprises falling under the reporting obligation. Based on the extended scope of applicability, the following enterprises would become subject to the new rules:

• Public interest entities; i.e., prudentially supervised financial institutions and Swiss public enterprises; or

• Companies exceeding two of the following figures in two consecutive financial years: (i) total assets of CHF25 million, (ii) revenue of CHF50 million, (iii) 250 full-time employee positions per year on average; or

• Companies obliged to prepare consolidated financial statements and that exceed two of the above thresholds in two consecutive financial years.

Although the proposal provides for limited exemptions, the extension of the scope drew significant criticism in connection with the consultation process. Many fear that smaller companies will face considerable difficulties in properly implementing the requirements and that they have neither the necessary know-how nor workforce for this task, given that smaller listed companies that meet the applicable thresholds and fall under the current regime have faced difficulties in the implementation. Furthermore, it is questionable whether reports from privately held companies will be read and will have the desired effect; i.e., to make subject enterprises more sustainable. In addition, the extra financial resources are estimated to be significant.

The amended and extended reporting requirements were less controversial than the extension of the scope of applicability, as they align the Swiss law requirements with the requirements of the EU.

The Swiss Federal Council proposed an assurance requirement for reports on non-financial matters, while delegating it to the Swiss Federal Council as to whether such assurance should be taken in the form of a positive/reasonable assurance or whether a negative/limited assurance is sufficient, with the goal that the Swiss Federal Council will align this requirement with international standards, including the requirements of the EU. The assurance may be provided by an independent audit firm or a conformity assessment body (Prüfgesellschaft). While such an assurance requirement is in line with the international trend, it places an additional burden on smaller companies.

As a reaction to last year’s debate as to whether an AGM vote has to be binding or if a consultative vote is sufficient, the Swiss Federal Council clarified that the AGM vote will have to be a binding vote under the revised regime.

The Swiss Federal Council has not yet formulated an official view on the outcome of the consultation process. In light of the EU’s ‘omnibus’ proposal (see below), it will be interesting to see how the Swiss government reacts. While Switzerland’s proposal tried to catch up with the EU’s requirements, the EU is already one step ahead in the meantime, increasing its thresholds for the determination of the scope of applicability. For the Swiss government, this is hopefully a sign that it is worth waiting and observing the EU prior to the enactment of any new legislation.

The Ordinance on Climate Disclosures entered into force on January 1 2024 but is already subject to an overhaul by the Swiss Federal Council. With the amendment of the ordinance, the Swiss Federal Council would like to take into account that the reference to the Task Force on Climate-related Financial Disclosures (TCFD) is no longer necessary, since the recommendations of the TCFD have been incorporated into international standards and the task force has been dissolved. The current ordinance provides an assumption that enterprises applying the TCFD recommendations comply with the climate-related disclosure required under the rules for non-financial reporting. As a result of the dissolution of the TCFD, the Swiss Federal Council proposes to refer to the international standards that incorporate the recommendations of the TCFD.

As the consultation process is ongoing, the outcome to this proposal is not yet known.

With the implementation of the CSRD, EU subsidiaries of non-EU enterprises might be included in the scope of the EU’s reporting obligations under the CSRD. The CSRD provides for reporting obligations for non-EU enterprises with subsidiaries in the EU if these subsidiaries reach or cross certain thresholds, in a staggered approach. While the first enterprises are already facing the CSRD reporting obligations, others will need to report from 2026 or 2029.

Hence, even if a Swiss enterprise is not subject to the Swiss non-financial reporting obligations, it might be obliged by the EU to report. As a result, certain Swiss companies have to make sure they apply Swiss and EU law requirements when preparing and publishing their ESG report.

With the adoption of the Corporate Sustainability Due Diligence Directive (CSDDD) in the EU, large Swiss enterprises that meet certain thresholds might face additional duties related to human rights and the environment in their operations and value chains. Depending on the size of the enterprise, the duties are applicable from the financial year 2027, 2028, or 2029.

In February 2025, the European Commission published its first omnibus package, which would delay the dates of application of the CSRD and the CSDDD. In the context of the CSRD, certain thresholds would be increased. As a result, it remains to be seen which Swiss companies will fall under the scope of application under the CSRD and/or the CSDDD.

With Switzerland being slower than the EU in the implementation of ESG reporting obligations, it has the opportunity to take into account the lessons learnt from the union. Furthermore, the past has shown that investors are often leading companies on the scope and content of non-financial reports, with Swiss law reproducing what investors have already asked for. In particular, larger Swiss companies tend to adopt the EU standard on a voluntary basis as their investor base often asks for a report that is comparable to those of EU-incorporated companies.

Hopefully, the Swiss Federal Council will take into account the feedback in the consultation process, and the new omnibus proposal from the EU, applying a pragmatic approach when defining the new scope of application in connection with the revisions of the rules on non-financial reporting. This would be a significant relief for smaller and mid-size enterprises in Switzerland.