Swiss Federal Council suggests alignment with European sustainability reporting requirements

In addition to the current scope the following are suggested: Entities or Groups (irrespective of whether they are public) exceeding two of the following thresholds in two consecutive financial years:

• CHF 25 million balance sheet total;
• CHF 50 million revenue;
• 250 full-time equivalents on annual average.

The Explanatory Report estimates this to result in approx. 3’500 companies being in scope of Swiss sustainability reporting obligations compared to approx. 200 today.

Note: These thresholds are not the same as the thresholds in CO article 963a paragraph 1 cipher 1 regarding the duty to prepare consolidated financial statements, which remain at CHF 20 million balance sheet total, CHF 40 million revenue and 250 FTEs on annual average.

The established exemptions for subsidiaries, if they are included in the parent entity’s consolidated sustainability, report remain.

The currently applicable requirements for Swiss Sustainability Reports (CO 964a- c) should be aligned towards the CSRD requirements. The details on this are planned to be included in a separate consultation draft.

Given that the currently applicable requirements can be seen as a principles-based executive summary of the European Sustainability Reporting Standards (ESRS), the suggested path forward does not change the fundamental basis for Swiss Sustainability Reports (CO 964b). However, there is a certain level of scope expansion given the extent and relative clarity of guidance in the ESRSs.

As opposed to entities within the EU, Swiss entities should keep the choice to apply either the EU standard (CSRD) or another framework if considered equivalent, such as for example GRI in combination with IFRS® Sustainability Disclosure Standards).

Based on the explicit references to the CSRD and ESRS it could be seen as logical that this will also include the disclosures required by the EU Taxonomy Regulation, which are a core element of the EU CSRD. This is however neither explicitly confirmed nor excluded in the Exposure Draft and the Explanatory Report.

The electronic format should correspond to an internationally applied standard.

We are still waiting for the publication of the final format for ESRS, which is supposed to be already applicable in this first year of CSRD reporting. Given the delay in finalization it is to be seen if this requirement will be deferred by a year.

The more burning question for many Swiss entities is when the electronic format required for their Climate Reporting section as per Climate Ordinance (with a one-year delay allowed in the transition provisions) will be available.

Swiss Sustainability Reports should be subject to external verification.

This is to improve the reliability of the information and to foster interconnectivity of financial and sustainability reporting going forward.

It is expected that the level of Assurance and other details will follow the same path as the EU requirements, starting with the standard of a ‘review’, i.e., limited Assurance.

For Swiss companies that are either

• in ‘Wave 1’, i.e., preparing their first sustainability report based on the EU-CSRD for the 2024 reporting period; or
• impacted by ‘Wave 2’, i.e., preparing at least for parts of the group (‘artificial consolidation’) a sustainability report based on the EU CSRD for the 2025 reporting period;

the expected impact is minimal.

Only those companies which did not plan to base their group sustainability report on CSRD until the 2027 reporting period will face an acceleration of that timeline.

The Federal Council estimates the number of entities already directly or indirectly impacted by the CSRD to 3’000 – 14’000. It follows that the vast majority of Swiss companies newly in scope of Swiss sustainability reporting requirements are already directly or indirectly impacted by the CSRD.

Only a minority of Swiss companies are in scope of the current Swiss Sustainability Reporting obligations (CO 964a), but not (directly or indirectly) impacted by the CSRD (yet).

From our experience the foreseen transition period of two years is manageable but requires effort and a timely start.

The first step for Swiss companies is to undertake a comprehensive assessment of the applicability of Sustainability Reporting obligations and the comparison with their current Sustainability Reporting Practice. This includes a legal scoping against relevant sustainability regulations, identifying data sources, evaluating existing strategies and policies, and understanding the gaps.

It's crucial to prioritise key areas for improvement rather than trying to address all issues simultaneously. Through strategic prioritisation, organisations can efficiently allocate their IT, financial, and human resources to the tasks that will have the greatest impact.

Ensure that the data underpinning your reports is robust and verifiable to withstand external scrutiny. Establishing a systematic process for data collection and verification is fundamental for accurate and reliable reporting.

A trusted assurance provider is essential to ensure that your final sustainability reports comply with all regulatory and procedural requirements. Engage with a reputable assurance provider with the necessary CSRD experience to perform the assurance engagement.

Instead of treating ESRS as a mere compliance obligation, use it as a valuable guide to improve your sustainability practices. ESRS prompts an in-depth review of governance, impact risks, and business fit, which can facilitate a shift towards a more sustainable business model.