By Chiara Rinaldi and TobiasrnStalder

Today’s societies facernunprecedented global challenges such as climate change or biodiversity loss. Increasingly,rnstakeholders expect companies to be part of the solution to these global challenges.rnAlong with the increasing expectations on companies to act more sustainably,rnsustainability-related regulations are sharply increasing in Switzerland and internationally.rnThese regulations directly affect companies located in Switzerland.

Swiss regulations

Following many other countriesrnand most notably the European Union, the Swiss regulator recently introduced twornsustainability-related regulations that directly affect companies located inrnSwitzerland.

In November 2020, thernSwiss people rejected the responsible business initiative (RBI). As arnconsequence of this rejection, an indirect counterproposal automaticallyrnentered into force[i].rnThe counterproposal to the RBI includes a reporting obligation forrnnon-financial matters as well as an obligation for due diligence onrnconflict minerals and child labor.

The reportingrnobligation for non-financial matters will apply starting from the reportingrnyear 2023 to any public interest company (PIC) with more than 500 employees (full-time)rnlocated in Switzerland and more than CHF 20 million in total assets and/or morernthan CHF 40 million in turnover. The companies in scope will have to discloserninformation about environmental and social topics, human rights, and anti-corruptionrnactivities on a yearly base.

The obligation for duerndiligence on conflict minerals and child labor applies to companies that haverntheir registered office or principal place of business in Switzerland and arernengaged in the importrnor processing of conflict minerals in Switzerland or offerrnproducts or services which may have been produced or rendered using child labor. It requires the affected companiesrnto have a management system in place to identify and assess such risks, as wellrnas to have a risk management plan with measures to mitigate the identifiedrnrisks.

In addition to therncounterproposal to the RBI, the Swiss Federal Council introduced a climate reportingrnobligation in summer 2021[ii].rnThe climate reporting obligation for climate related risks applies to the same companiesrnthat are subject to the non-financial reporting obligation of the counterproposalrnto the RBI. For the implementation of the reporting obligation for climaternrelated risks, the Swiss Federal Council mandates the use of thernrecommendations of the Task Force on Climate Related Financial Disclosures (TCFD).rnThe TCFD recommendations have been issued by the Financial Stability Board and providernguidance for reporting on impacts of material climate-relatedrnrisks and opportunities[iii].

EU regulations

Beyond Swissrnregulations, various international sustainability-related regulations affectrnSwiss companies, most notably regulations in the European Union. In particular,rnthe Non-Financial Reporting Directive (NFRD) requires public interest companiesrnwith more than 500 employees, banks and insurance companies to discloserninformation about environmental and social matters, human rights,rnanti-corruption, bribery and board diversity. Starting from the reporting yearrn2023, the NFRD will be replaced by the Corporate Sustainability ReportingrnDirective (CSRD)[iv].rnIn comparison to the NFRD, the CSRD will affect any company with more than 250rnemployees in an EU country and will no longer include a public interestrncriterion. While the NFRD affected around eleven thousand companies in Europe, thernCSRD will increase the number of companies that have to report sustainabilityrnmatters to more than fifty thousand[v].rnThe CSRD is expected to affect the subsidiaries of Swiss companies in thernEuropean Union that meet the threshold of 250 employees in an EU country.

In addition to thernCSRD, the European Union recently introduced several otherrnsustainability-related regulations in the context of the European Green Dealrnwhich has the objective of making the EU climate neutral by 2050. On the onernhand, the EU taxonomy for sustainable activities requires companies to discloserngreen revenues and expenditures[vi].rnThe EU taxonomy applies to the same scope of companies that are currently affectedrnby the NFRD. In the years to come, the taxonomy will be expanded to additionallyrncover social aspects and to include smaller companies as well. The SustainablernFinance Disclosure Regulation (SFDR) on the other hand requiresrndisclosures related to sustainable investments and sustainability risks at anrnentity and product level[vii].rnSwiss based managers of EU investments are directly affected by the SFDR.

Beyond regulatoryrnrequirements

Regulatoryrnpressures related to sustainability topics are increasingly affecting companiesrnlocated in Switzerland. Despite the increase in sustainability-related regulatoryrnrequirements, Swiss companies should not view sustainability as a mere compliancerntopic. Regulators are just one of a broad range of stakeholder groups with growingrnexpectations on companies’ sustainability performance. To be successful in thernlong-term, companies should go beyond the regulatory minimum requirements, andrntake this as an opportunity to create long-term value for a broad range ofrnstakeholders, including most notably customers, employees, investors and thernbroader public.

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ChiararnRinaldi is arnsustainability professional and cofounder of Sustainaccount, a Swiss companyrnproviding digital solutions and data analytics for sustainability management.

Tobias Stalder is a member of EY’s Climate Change andrnSustainability Services team and is currently writing his PhD thesis onrnsustainability management in SMEs.

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