Swiss Sustainability Reporting and Due Diligence – Federal Council proposes greater alignment with EU standards

As per the draft legislation, mandatory sustainability reporting would be required for Swiss companies¹ with >1,000 FTE and >CHF 450 m worldwide turnover (or Swiss subsidiaries of foreign groups meeting these thresholds), whereas human rights and environmental due diligence would only be required for very large companies (>5,000 FTE & >CHF 1.5 bn turnover, or large licence/franchise models). The existing Swiss due diligence regime for conflict minerals and child labour remains largely unchanged.

^{1 Companies having either their registered office, place of residence, headquarters or principal place of business in Switzerland ('Swiss companies')}

As per the draft, the sustainability statements shall - based on a double materiality assessment and on the chosen reporting framework - include disclosures at minimum on the following sustainability matters, outlining the respective strategy, risks, targets and metrics: 

• Environment (incl. transition roadmap, actions and status relating to a net‑zero target by 2050) - the explanatory report to the draft legislation explicitly mentions that this also includes the value chain of the reporting entity, 
• Social issues, 
• Human rights, and
• Governance. 

To comply with the disclosures above, companies must apply European Sustainability Reporting Standards (ESRS) or an equivalent standard recognised by the Federal Council – the respective list of recognised standards has not yet been published. As a result, selective reporting on individual datapoints only would no longer be feasible or acceptable. The draft also foresees that in cases where an equivalent reporting standard only includes the impact (inside-out) perspective or the financial (outside-in) materiality perspective, a top-up to ensure the full double materiality perspective would need to be provided by the reporting entity. 

With the draft legislation, the Federal Council furthermore introduces a limited assurance requirement for the entire sustainability statement, which would apply to all companies in scope of the regulation. 

Audit firms providing limited assurance on sustainability reports must maintain independence, avoid self-review, and comply with ethical standards such as IESBA. These requirements apply to both elected and ad hoc auditors, aligning sustainability assurance regulations with those for financial audits and ensuring robust, objective reporting.

Reports must be published electronically within six months after year‑end and remain publicly available for ten years.

While the current due diligence requirements in Switzerland under the Ordinance on Due Diligence and Transparency (‘DDTrO’) are limited to child labour and conflict minerals and will largely be maintained in their current form, the draft introduces a broader scope covering the environment and human rights. Companies in scope would have to assess actual or potential negative impacts along their chain of activities, applying a risk-based approach. In practice, due diligence requires documented risk analyses, prioritisation of severe risks, preventive and remedial measures, grievance mechanisms and continuous internal documentation.

The draft contains two options for liability to allow for a broader discussion: 

• In the first option, the new draft legislation refers to the general liability rules and introduces a new liability provision. This provision implements the EU requirements in the form of fault-based liability. Accordingly, companies in scope of the due diligence obligations would be liable for damages they have caused abroad, provided they have breached these obligations intentionally or through negligence.
• In the second option, the draft only refers to the current liability provisions of the Code of Obligations. Organisations which are required to apply the sustainability due diligence rules must therefore ensure compliance with the general Swiss liability regime. This approach closely aligns with the CSDDD as amended by the Omnibus Directive, which refers to the liability provisions imposed at EU Member State level. 

In both options, the draft foresees that a special conciliation procedure must be conducted in Switzerland in every case prior to any potential court proceedings. To this end, the cantons shall establish a single, specialized conciliation authority that possesses the necessary expertise and has jurisdiction over the entire canton.

Beyond reporting thresholds and revised requirements, the key change lies in enforcement: sustainability reporting and due diligence will for the first time be subject to active supervision by the Swiss Federal Audit Oversight Authority (FAOA). The renamed Federal Audit and Sustainability Supervisory Authority (RNAB) succeeding the FAOA shall be also charged with: 

• maintaining a publicly accessible register of supervised entities,
• publishing the respective sustainability statements,
• conducting risk-based checks on compliance with due diligence obligations, and
• conducting risk-based checks on compliance with the formal aspects of reporting obligations.

This marks a shift from largely formal compliance to substantive supervisory scrutiny, significantly increasing the importance of assurance readiness, documentation and internal controls.

Sustainability reporting

Whether your company is already subject to current reporting obligations or will be newly in scope, the following applies:

• Companies already reporting or preparing to report based on ESRS should continue their efforts while monitoring Swiss-specific requirements and compliance timelines.
• Companies currently reporting based on other standards (e.g. GRI or IFRS S1/S2) should track whether the Federal Council recognises that standard as equivalent to ESRS in the expected new ordinance. Otherwise, the company will need to assess gaps between its current reporting and the requirements of ESRS or another recognised standard and needs to address these gaps within the two-year transitional periodCompanies that have not yet obtained limited assurance on their sustainability statement – or only on selected disclosures – should engage with their assurance provider early to assess the steps needed to ensure timely assurance readiness.

Due diligence

Companies in scope of the new due diligence requirements would need to:

• Extend their due diligence processes to cover both environmental and human rights topics beyond the current child labour and conflict minerals obligations under the DDTrO.
• Continuously document compliance internally through written risk analyses, supplier checks or equivalent measures, structured so that the supervisory authority can trace and verify compliance at any time.

It is important to note that the existing due diligence thresholds under the DDTrO remain unchanged. The new requirements and higher size thresholds apply only to the additional topics of broader human rights and the environment.

Sustainability reporting

Whether your company is an advanced reporter or at an earlier stage of its sustainability reporting journey, the following applies:

• Companies that are already advanced reporters might consider continuing their sustainability reporting journey by applying sustainability reporting standards on a voluntary basis (e.g., ESRS, GRI).
• Companies that are at an earlier stage of its sustainability reporting journey should carefully assess whether they are in the value chain of another company in scope of mandatory reporting requirements and would therefore need to provide additional information. If this is the case, reporting according to the VSME standard should be considered.

Due diligence

Companies out of scope of the new due diligence requirements should consider that:

• The NUFG would not change the thresholds to the existing due diligence obligations as per the DDTrO.
• Separate due diligence provisions with regards to conflict minerals, metals and child labour would therefore remain.