7.3 Framework Conditions in Europe (CSRD and CSDDD)
Switzerland is a significant trading partner of the EU. This means that many Swiss companies must be aware of the EU’s legal requirements.1 With the implementation of the Corporate Sustainability Reporting Directive (CSRD) and the newly introduced ESRS E1 standard (Climate Change), the disclosure requirements for transition plans have become more rigorous. The adoption and subsequent national implementation of the Corporate Sustainability Due Diligence Directive (CSDDD) and its Art. 15 (“Climate Change Mitigation”) will make climate transition plans mandatory in the interest of protecting the climate.
The requirements for climate transition plans in Switzerland and the EU, as set forth by the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD), share both similarities and differences. A comparison:
| Schweiz | EU (CSRD und CSDDD) | |
Regulatory framework and scope | Switzerland: Swiss legislation focuses on transparency and the integration of sustainability aspects into corporate reporting. Companies are encouraged to disclose their climate strategies and describe specific actions to reduce greenhouse gas emissions. | The EU goes further by establishing more extensive reporting and due diligence requirements for companies. The CSRD mandates detailed sustainability reports, including specific information on climate transition plans. The CSDDD expands these requirements to cover the entire value chain, mandating that companies identify and manage climate-related risks and impacts. |
| Reporting obligations and transparency | Companies must regularly report publicly on their climate goals and progress. This report should be transparent and traceable to enhance stakeholder trust. | The CSRD requires comprehensive and standardized reports to be prepared according to specific sustainability standards. In addition, the CSDDD requires companies to take and report on measures to minimize negative climate impacts throughout their supply chains. |
| Scope of climate strategies | The focus is on reducing internal emissions and incorporating climate-friendly technologies. Companies are encouraged to set long-term climate goals and communicate them clearly. | EU requirements emphasize not only internal measures but also responsibility throughout the entire value chain. Companies must consider both direct and indirect emissions (Scope 1, 2, and 3) and integrate measures to reduce these emissions into their climate strategies. |
| Degree of Obligation | The requirements are often voluntary or based on comply-or-explain principles, whereby companies must either meet specific standards or explain why they do not. For instance, Art. 2 of the Ordinance on Climate Reporting states that a company can also clearly justify why it does not pursue a policy in this area. | The requirements are mandatory depending on the materiality assessment, and there are penalties for non-compliance. The CSDDD provisions go beyond the mere transparency efforts of the CSRD, explicitly requiring the adoption and implementation of measures within a transition plan, which also increases the legal risks for companies and boards of directors. This requires companies to adopt a more proactive and comprehensive approach to implementing their climate transition plans. Due to business relationships with affected companies as part of their supply chains, small and medium-sized enterprises in Switzerland may also be indirectly impacted. |
Overall, it is clear that the EU, with the CSRD and CSDDD, adopts a stricter and more comprehensive approach than Switzerland, particularly with regard to due diligence along the value chain and detailed reporting obligations. However, both systems aim to encourage companies to adopt more sustainable and climate-oriented business practices. The pressure from clients on many Swiss companies should not be underestimated, nor should the reputational consequences for those that do not provide sufficient transparency and fail to take necessary action. Around half of the 100 largest companies in Switzerland (both private and public) currently report in accordance with or in alignment with the TCFD.
1 | Text adapted from “ESG: From Voluntary to Mandatory Climate Transition Plans in Switzerland and the EU”. |