Swiss Federal Council sets course for corporate sustainability reporting and due diligence framework



Major Swiss companies are now required to be transparent in certain areas of their business, reporting on environmental, social, labour, human rights and anti-corruption risks. Such reporting must also outline the measures they have adopted in these areas (i.e. "non-financial reporting obligation").

In addition, companies whose activities present risks in the sensitive areas of child labour and minerals and metals from conflict zones must also comply with a more extensive reporting obligation and specific duties of due diligence. These rules have been crystalised in the Swiss Code of obligations.

In the aftermath of this first step towards the introduction of a Swiss corporate sustainability reporting and due diligence framework, the Swiss Federal Council announced further adjustments to the current rules on 22 September 2023.

Swiss Federal Council position

The Swiss Federal Council made the following announcements in view of ensuring the harmonisation of Swiss rules with international standards:

  • extension of the scope of non-financial reporting rules (NFRRs);
  • introduction of an audit requirement; and
  • maintaining flexibility for the choice of reporting standards.

Scope of the NFRRs

The NFRRs will concern a broader scope of companies. Under the current rules, the NFRRs apply only to companies defined as companies of "public interest" within the meaning of 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.

The Swiss Federal Council proposes reducing the minimum yearly average FTEs from 500 to 250 to fall in line with EU standards. It is unclear whether the reduction of this threshold will apply only to companies of "public interests" or if the scope of concerned companies will be expended beyond this definition.

Audit requirements

The Swiss Federal Council proposes an external audit requirement, which is currently not applicable under current NFRRs. This proposal will align Swiss requirements with the EU Corporate Sustainability Reporting Directive (CSRD).

Reporting standards

The Swiss Federal Council plans to give companies a degree of flexibility. Swiss companies will have the choice of applying either the European standard or another equivalent standard (e.g. the OECD standard) to comply with reporting obligations. In a further departure from EU regulations, however, the Swiss Federal Council is not willing to include a third-country regime.


On forthcoming Swiss aspects

The proposals of the Swiss Federal Council remain guiding principles to align the Swiss legal framework with EU regulations. Until, however, a concrete legislative proposal is on the table by mid-2024, it remains uncertain if and to what extent these legislative proposals will follow EU regulations.

On forthcoming EU rules and impact for third countries like Switzerland

The Swiss Federal Council is closely following EU developments, particularly those relating to the Corporate Sustainability Due Diligence Directive (CSDDD) and their potential impact on Swiss companies. The Swiss Federal Council expects to complete its review by the end of 2023.

In the meantime, Swiss companies should not wait to consider the potential impact of EU rules, particularly those arising from the CSRD and the CSDDD. The CSRD, which strengthens existing EU non-financial reporting requirements introduced by the Non-Financial Reporting Directive (NFRD), entered into force on 5 January 2023 with a transposition target in EU member states of 6 July 2024. The CSDDD is not yet applicable since it must be approved by EU Parliament and the EU Council. Both directives, however, could have an impact on certain Swiss companies, particularly those with subsidiaries or branches in the EU.

For more information on sustainability and ESG regulations in Switzerland, contact your CMS client partner or local CMS expert.