ESG Disclosure: Article 2 | Around 3500 companies are affected in Switzerland

«ESG disclosure will also be decisive for the future of Swiss SMEs.»

This is the current proposal for ESG disclosure from the Federal Council.

«At its meeting on June 26, 2024, the Federal Council opened the consultation process for the corresponding amendments to the Swiss Code of Obligations (CO). It is proposing stricter rules for sustainability reporting. Specifically, it wants to oblige around 3,500 companies to report on their risks in the areas of the environment, human rights and corruption, as well as the measures taken against them. As in the EU, companies with 250 employees, CHF 25 million in total assets and CHF 50 million in turnover will also be required to report in Switzerland in addition to public companies. However, only if they reach two out of three thresholds for two consecutive years. Today, this obligation only applies from 500 employees, CHF 20 million in total assets and CHF 40 million in turnover. This applies to around 300 companies. In addition, reporting is to be reviewed in future by an external auditing company or a conformity assessment body.»

The obligation applies to the following Swiss companies throughout Europe.

Swiss companies with large and/or listed subsidiaries in the EU are directly subject to the CSRD regulations. From 2028, Swiss companies with a turnover of more than EUR 150 million and an EU subsidiary subject to CSRD or an EU branch with a turnover of more than EUR 40 million will also be affected.

Even if they are not currently directly subject to EU regulations, Swiss companies as a whole will have to deal with the CSRD and ESRS requirements. On the one hand, in order to remain competitive and, on the other, to anticipate future regulatory developments in Switzerland today.

Organizational hurdles.

Sustainability reporting is often a cross-departmental task in the corporate organization. Depending on the company, the preparation of sustainability reports is assigned to the finance department, the sustainability department, the communications department or a dedicated team. The complexity of reporting, the wealth of information and the interpretation of standards pose challenges for many companies. At the same time, specific specialist knowledge and close cooperation between different departments is required.

Indirect concern.

Large companies are increasingly demanding comprehensive sustainability information from their suppliers, especially SMEs, as part of their obligation to provide evidence. Many SMEs face considerable challenges in this regard. They often lack the necessary resources or expertise to collect the required data. This lack of expertise will significantly reduce their competitiveness in the future.

To counter such situations, large companies have a choice of several options: They offer their suppliers assistance with data collection, focus on incremental improvements or, as a last resort, have to consider alternative suppliers. The latter may become the case if no progress is made in the sustainability reporting of the SME in question. In short, the impact of ESG disclosure is not only crucial for large companies, but also for SMEs.

Would you like to find out more details about ESG disclosure or the automated creation processes for sustainability reporting?

Book a connect call with Fabio Negro, COO at MDD or view his contact details below. 

Note on the article series:

• This was article Nr. 2 which provides information on the current ESG disclosure rules and which companies are affected in Switzerland.
• Article Nr. 1, provides basic insights into ESG disclosure and the obligation to publish a sustainability report. Read it here
• Article Nr. 3 answers the most important questions on how companies can prepare for the obligation to publish a sustainability report.
• Article Nr. 4 illustrates the advantages of the MDD platform in the preparation of sustainability reports.