Switzerland moves to extend climate reporting scope

The Swiss Federal Council has opened a consultation on a revision to the scope of the national climate reporting requirements that will likely mean a wider range of smaller companies will be forced to disclose climate issues. The Climate Reporting Ordinance, which has been in force since 1 January 2024, will be amended to reflect the latest international and European developments, not least the EU’s recently extended Corporate Sustainability Reporting Directive (CSRD). The consultation will run until 21 March 2025 and the revision is expected to enter into force on 1 January 2026. “The Climate Reporting Ordinance stipulates that in-scope companies must draw up a report on climate issues when and if implementing the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). As international standards incorporate these recommendations, the TCFD is no longer applicable. The revised Climate Reporting Ordinance states that the obligation to report on climate issues will be deemed met if the report complies with a recognised international standard or the equivalent EU standard,” explained Dr Vaïk Müller, partner and head of banking & finance at the Geneva office of international law firm CMS. “Concretely, this means that the standards of the International Sustainability Standards Board (ISSB) will be recognised in Switzerland. This also means the European Sustainability Reporting Standards (ESRS) E1, the standards applied in the EU that define the characteristics and general information to be included in the report (e.g. policy, measures and objectives), and the ESRS E2 on the structure and content of the thematic ESRS will be recognised as IISB standards in Switzerland,” he added. Müller explained that the consultation draft also sets out minimum requirements for the preparation of roadmaps, or transition plans, in which companies describe how they intend to redirect their financial flows to achieve the goal of net-zero emissions by 2050. “Currently, some companies have voluntarily set a net-zero target by applying the Science Based Targets initiative (SBTi) or the principles of the Glasgow Financial Alliance for Net Zero (GFANZ). “These roadmaps will be compliant with the requirements set out in the Federal Act of 30 September 2022 on Climate Protection Objectives, Innovation and Enhanced Energy Security. Given the nature of their activities, companies active in the financial sector will have to meet different minimum requirements than those of companies in the real economy,” explained Müller. The legal expert said that where feasible and appropriate, the roadmaps should include scientifically based quantitative reduction targets by asset class and sector for all significant greenhouse gas (GHG) emissions and targets for the development of climate-friendly technologies. The roadmaps must be updated in the event of any significant change, but periodic updates (e.g. on an annual basis) should not be prescribed. In general, it is recommended that a reduction trajectory be defined that includes intermediate targets for at least 2030 and 2040 that are compatible with Switzerland’s climate objectives, and that show a linear decrease in 2030, 2040 and 2050 objectives, said Müller. He added that, for certain asset categories, it may also be advisable to set intermediate targets for 2035 and 2045, depending on the sector. According to the Swiss Federal Council, when drawing up their roadmaps, companies can refer to international best practices (e.g. the work of the Transition Plan Taskforce or TPT). A roadmap should also provide, where possible and appropriate, forward-looking information on planned actions, particularly in the areas of governance, strategy, resources and risk management, explained Müller. The provisions of the Climate Reporting Ordinance apply to companies that are required to draw up an annual report on non-financial issues in accordance with the Swiss Code of Obligations (CO). “Importantly, the obligation to report on non-financial matters only applies to large Swiss companies, which are defined as companies of ‘public interest’ within the meaning of the article 2(c) of the Swiss Audit Oversight Act. This definition includes public companies and companies supervised by the Swiss Financial Market Supervisory Authority (FINMA), which together, along with controlled companies in Switzerland and abroad, have at least 500 FTEs annually on average and total balance sheet assets in excess of CHF20m (€21.6m) or revenues in excess of CHF40m,” said Müller. The current revision of the provisions of the CO on transparency in non-financial matters plans to extend their personal scope, extending it to a larger number of companies in a manner like the EU Corporate Sustainability Reporting Directive (CSRD), pointed out the lawyer. Once the CO revision comes into force, the extended scope will automatically be reflected in the Climate Reporting Ordinance. The exemptions set out in the CO should also be reflected in the scope of the Climate Reporting Ordinance, said Müller. The alignment with the EU CSRD on the non-financial matters reporting set out in the CO and proposed by the Swiss Federal Council on 26 June 2024 will include in its reporting scope both non-financial matters and climate issues, he added. “The revision of the Climate Reporting Ordinance is another step forward for Switzerland in its goal to align Swiss sustainability reporting requirements with international standards and EU rules. If the Climate Report Ordinance and the revision of the CO are adopted in their current form, it remains to be seen what impact these new requirements will have on the new concerned entities (including smaller companies), particularly at the operational level,” concluded Müller.

Switzerland moves to extend climate reporting scope

Want to read this article?

Read Next

APAC firms lead the way in ESG incentive plans

Australia updates earthquake hazard assessment

Indian insurance market to lead global growth: Swiss Re

Wefox transfers run-off portfolio to Darag

SRS Altitude expands into North American market

APAC firms lead the way in ESG incentive plans

Australia updates earthquake hazard assessment

Indian insurance market to lead global growth: Swiss Re

Wefox transfers run-off portfolio to Darag

SRS Altitude expands into North American market

Keep yourself informed

Sign up for Commercial Risk’s newsletters

Want to read this article?

Read Next

APAC firms lead the way in ESG incentive plans

Australia updates earthquake hazard assessment

Indian insurance market to lead global growth: Swiss Re

Wefox transfers run-off portfolio to Darag

SRS Altitude expands into North American market

Related Articles

Keep yourself informed

Sign up for Commercial Risk’s newsletters