On 18. August 2021 the Swiss Federal Council decided on the parameters for future mandatory climate reporting by large Swiss companies. The Federal Department of Finance (FDF) has been commissioned to prepare for implementation of the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) for Swiss companies. Here is a summary of the key points:
- The FDF, together with other federal units, will prepare a consultation draft by summer 2022.
- Public companies, banks and insurance companies with 500 employees or more, over CHF 20 million in total assets or more over CHF 40 million in turnover will be obliged to report publicly on climate-related issues.
- In addition to the financial risk of its climate-related activities, a company will also have to disclose the impact of its business activities on the climate and the environment (also in line with the European Union's approach).
- Minimum requirements will ensure that disclosures are meaningful, comparable and, where possible, forward-looking and scenario-based.
- The binding implementation of the TCFD recommendations is expected to take place from 2024 for the 2023 financial year.
- The TCFD suggest 11 recommendations to be included in a company’s main financial reporting, divided into four categories: governance, strategy, risk management, and metrics and targets.
What does this mean for large Swiss companies?
It’s clear that the new requirements are going to have a major impact on large Swiss companies. On the other hand, with the announcement of the implementation of the TCFD requirements we already have considerably more legal certainty than before. Organisations can get ahead of the game by starting to prepare now. PwC was the chosen partner to run industry forums to help industry prepare for TCFD, provide data analytics to support TCFD’s annual progress review and are members of TCFD, so we’re well equipped to have the right conversations with C-suite managers of companies aiming to do so. We can help you understand the new requirements and how they relate to any other non-financial reporting obligations outside Switzerland that your company might need to fulfil.
In a conversation of this sort, we’ll encourage you to ask a number of important questions.
- Does TCFD apply to your business?
- What are the synergies between the regulatory obligations in TCFD to CSRD?
- What I have to do to be compliant with Swiss & EU Standards?
- Where does your company currently stand in terms of plans, progress and readiness?
- Where are there opportunities for an initial maturity assessment or programme review?
- What kind of information can we help you with on good practices, pitfalls, etc.?
- Is it on your internal and external audit plan?
Are you ready?
At this stage it’s crucial for the management of companies potentially affected by the new disclosure requirements – especially the CFOs who will ultimately be responsible for implementing them – to get a clear picture of where their organisation stands, precisely what areas will be affected, and how. Whether conducted internally or under the guidance of an external advisor, the conversation will likely involve talking in more depth to key people within your organisation to gauge where you’re at in terms of readiness for the new requirements.
Ostensibly the new requirements relate to climate. But actually delivering the disclosures demanded and making sure you have a reporting narrative aligned with the reality of your business is going to involve changes in many different areas, from compliance to finance, governance and IT. This means you have to have answers to a varied set of questions.
Are they sufficiently well-informed on the strategic, business and financial implications of climate change? Are you compliant with the new obligations? First you have to understand the obligations and regulatory impact before you should start an ESG transformation.
There are also important questions for chairs, CEOs and board members to answer: Do they have a clear picture of the company’s exposure to climate risks beyond physical risks? Are the right governance structures in place? Do they have an understanding of how climate change could financially impact the business?
CFOs should be clear about whether data/reporting systems provide adequate management information on climate risks. Are they able to explain these risks to investors and regulators? And CROs and CIOs need to be aware of whether effective processes are in place which integrate climate change into credit, market, investment and operational risk at the asset, client/beneficiary, portfolio and institutional levels.
The time to start is now
As you can see, there’s extensive ground to be covered to assess where your company stands and precisely how to go about preparing for the (fairly imminent) implementation of the new reporting requirements. If you’re wondering what opportunities this move might mean for your business, talk to us to get the conversation going.