10 key changes that you should know and check!
The amendments to the Code of Obligations proposed by the Federal Council on 26.6.24 (CO Art. 964a - 964c "Transparency on sustainability aspects") contain the following key changes:
1. Adaptation to EU law
The provisions on "transparency on non-financial matters" in the Swiss Code of Obligations (Art. 964a - 964c CO) are to be adapted to the stricter EU standards. This relates in particular to Directive (EU) 2022/2464 of December 14, 2022 (Corporate Sustainability Reporting Directive, CSRD), which replaces the previous Directive 2014/95/EU (Non-Financial Reporting Directive, NFRD).
2. Extended scope of application
Around 3,500 companies are now covered by the extended application (currently around 300)! Subject to the exceptions (see Art. 964b VE-OR), (i) public companies (pursuant to Art. 727 para. 1 no. 1 CO) and supervised entities pursuant to Art. 3 FINMASA, or (ii) companies that exceed certain thresholds (economically significant companies, regardless of whether they are listed!), i.e. that exceed two of three relevant thresholds in two consecutive financial years (CHF 25 million balance sheet total, CHF 50 million sales revenue and 250 full-time employees on an annual average), or (iii) that are obliged to prepare consolidated financial statements (see Art. 963 f. CO) and exceed the aforementioned thresholds.
3. Auditing of the sustainability reports
The sustainability reports must be audited by an auditing company or a conformity assessment body. The Federal Council is yet to determine the depth of the audit.
4. Comply or explain
The option still provided for under current law to waive reporting under certain conditions (comply or explain approach) is no longer available.
5. Choice of standard for reporting
Companies in Switzerland have the choice of basing their sustainability reporting either on the EU standard (ESRS) or on another equivalent standard (e.g. Global Reporting Initiative [GRI] standard in combination with the IFRS Sustainability Disclosure Standards of the International Sustainability Standards Board [ISSB]). The Federal Council will determine the equivalent standards.
6. New reporting requirements
The new extended requirements include detailed disclosures on environmental factors, social and human rights aspects as well as governance aspects. In particular, this includes reporting on the status of achieving the net-zero greenhouse gas emissions target by 2050 at the latest (see our article: ESG: From voluntary to mandatory climate transition plans in Switzerland and the EU.
7. Double materiality (inside-out and outside-in perspective)
In contrast to the current law (see Art. 964b para. 1 sentence 2 CO), in which the principle of "double materiality" already applies, the new wording in Art. 964c para. 2 CO is intended to clarify that, in accordance with EU law, each aspect of materiality must be considered separately, i.e. information must be disclosed that is material under both aspects as well as information that is only material under one aspect.
8. Report
An annual written "report" is required. This may be a separate report or the information on sustainability aspects may also be integrated into the management report (Art. 961c CO) if the other requirements are met (format, language, approval, etc.).
9. Approval
The report must be approved by the highest management or administrative body and the General Meeting. This corresponds to the requirements of the applicable law (Art. 964c para. 1 CO). However, it is clearly stated that the resolution of the general meeting is binding (no consultative vote! See also our article: Non-Financial Report under the CO: Duties of the General Meeting and the Board of Directors.
10. Transitional provisions
The previous law shall apply to financial years that are in progress at the time of entry into force and to financial years that begin in the first two years after entry into force. The Federal Council will determine the effective date. Under the transitional provision, companies will then have two years to adapt to the new law. During this two-year adjustment period, the previous (applicable) law will apply.
These adjustments are intended to ensure that Swiss regulations on sustainable corporate governance remain internationally harmonized and comply with the new EU requirements.
We are happy to support you in clarifying whether your company is now subject to the reporting obligation and which additional requirements must be met in future.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.