Background
On 30 March 2022, the Swiss Federal Council opened consultations on the Ordinance on climate reporting for large Swiss companies. The draft Ordinance aims at implementing the existing legal provisions of the Swiss Code of Obligations on the reporting of non-financial matters in connection with the climate as an integral part of reporting by large Swiss companies on non-financial matters, including environmental issues. The Ordinance is expected to come into force on 1 January 2023.
Large Swiss companies
The obligation to report on non-financial matters only applies to large Swiss companies, which are defined as companies of "public interest" within the meaning of the article 2(c) of the Swiss Audit Oversight Act. This definition includes public companies and companies supervised by the Swiss Financial Market Supervisory Authority (FINMA), which together with controlled companies in Switzerland and abroad have at least 500 FTEs annually on average and total balance sheet assets in excess of CHF 20 million or revenues in excess of CHF 40 million.
Report, consolidation and publication
Any large Swiss company will have the obligation to issue a climate report that must be integrated and consolidated within the company's report covering non-financial matters, including the environment, social issues, employee-related issues, respect for human rights and combating corruption.
The consolidated report, prepared in one of the Swiss national languages or English, must be adopted by the board of directors, approved by the general meeting of shareholders and published in electronic format on the company's website. The consolidated report must remain available for at least a ten-year period.
Presumption of compliance
Based on the Swiss Code of Obligations, the obligation to report on climate issues in accordance with the law will be deemed fulfilled if the report complies with the relevant provision of the Swiss Code of Obligations and is based on the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD). This presumption does not exclude the possibility that companies may issue a climate report based on guidelines or standards other than the TCFD recommendations. In such a case, the company must prove that the reporting obligation is otherwise fulfilled (i.e. there will be no presumption of compliance).
Sanctions
The provision of false information in the report, the intentional failure to produce the report or failure to comply with statutory obligations to retain and document the report may result in a fine of up to CHF 100,000. Mere negligence may lead to a sanction of up to CHF 50,000. In principle, if guidelines other than TFCD standard are used, the risk of sanction could increase.
Legalities
As a rule, formal legal provisions of private law, such as the provisions of the Swiss Code of Obligations, may be supplemented by an implementing ordinance from the Swiss Federal Council only if the relevant law contains a formal delegation empowering the Swiss Federal Council to do so.
In this case, even if the provisions on non-financial matters reporting in the Swiss Code of Obligations include features of public law, they remain in essence private law provisions. In particular, there is no explicit delegation to the Swiss Federal Council to enact an implementing ordinance. Nevertheless, the Swiss Federal Council is of the opinion that it has the authority to issue an Ordinance based solely on the Swiss Federal Constitution. The Council's position shows the increasing influence of public law in business domains governed by private law.
Outlook
The draft Ordinance adopts a balanced approach, even if the potential risk of sanctions could drive the market towards an adoption of the TFCD recommendations as the "golden" standard. Generally, the scope of this reporting obligation remains limited to large Swiss companies. As long as this scope is not expanded further (or adapted to other market participants), the overall impact on Swiss companies, largely composed of SMEs (including in the financial sector), should remain modest.
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