4.3 Transparency on Non-Financial Matters Pursuant to Art. 964a-c Code of Obligations

4.3.1 Companies within the scope of application

Swiss companies (i.e., companies which have their registered office in Switzerland) are subject (in scope) to reporting obligations on non-financial matters if they are listed on a Swiss stock exchange or abroad and, combined with their controlled companies in Switzerland and abroad, (i) have an annual average of at least 500 full-time equivalent employees (FTEs) in two successive financial years, and (ii) exceed either total assets of CHF 20 million or sales revenue of CHF 40 million in two successive financial years. 

Art. 964a-c CO generally only apply to Swiss companies. However, according to the “Guidelines on Corporate Governance Information” published by SER, foreign companies whose shares are listed on SIX Swiss Exchange (SIX) must submit a report on non-financial matters in accordance with Art. 964b CO.

Swiss companies are exempt from the new reporting obligations on non-financial matters if they are controlled by another company subject to the new regulations, or by a company subject to reporting requirements under foreign law that are considered equivalent to the new Swiss non-financial reporting standard. The Swiss Code of Obligations does not specify which standards should be considered equivalent. Since Swiss regulations are modeled on the NFRD, which was replaced by the CSRD in 2023, any reporting required under the CSRD is likely to be considered equivalent. Other foreign reporting standards may also be equivalent, but issuers will need to make a case-by-case analysis.

According to the aforementioned preliminary draft, the scope of sustainability reporting is set to be expanded. In the future, all Swiss companies listed on a Swiss or foreign stock exchange will be required to report on sustainability, regardless of whether they exceed certain thresholds or not. The thresholds will only apply to unlisted companies.

4.3.2 Content of Annual Reporting Pursuant to Art. 964b CO

The report on non-financial matters must cover: 

• Environmental matters, especially the applicable CO₂ goals

• Social issues

• Employee-related issues

• Respect for human rights

• Combating corruption

The report must also contain the information required to understand the business performance, the business result, the state of the company, and the effects of its activity on these non-financial matters. 

Specifically, the report must include: 

Compared to the current reporting obligation for non-financial matters, the preliminary draft mentioned above expands and elaborates on the scope of sustainability information. The terminology of the current regulations would largely be replaced by new terms with similar meanings. 

In line with the reporting obligations under the Ordinance on Climate Reporting of November 23, 2022, which came into force on January 1, 2024, the preliminary draft requires companies within its scope to report on their progress toward achieving the 2050 net-zero greenhouse gas emissions target (limiting global warming to 1.5°C above pre-industrial levels). This includes reporting on Scope 1, Scope 2, and, where applicable, Scope 3 greenhouse gas emissions, in accordance with the current GHG Protocol Corporate Accounting and Reporting Standard.

The most significant change compared to the current non-financial reporting requirements is that all information must be presented in accordance with the standards used in the EU (i.e., the European Sustainability Reporting Standards, ESRS) or another equivalent sustainability reporting standard. The chosen standard must be adopted in its entirety. The Federal Council will specify in an ordinance which standards are considered equivalent to the ESRS.

4.3.3 Climate reporting

In relation to climate matters, the regulations in Art. 963a-c CO have been supplemented by the Ordinance on Climate Reporting of November 23, 2022. The ordinance, which came into force on January 1, 2024, recommends that issuers report on climate matters (as part of the reporting on environmental matters required under Art. 964b para.1 CO) in accordance with the recommendations of the “Task Force on Climate-related Financial Disclosures” in the current version (June 2017) and the annex “Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures” of October 2021. The initial reports in accordance with TCFD recommendations must be published in 2025 for the 2024 financial year. For the 2023 financial year, reporting on climate matters is only governed by Art. 963a-c CO.

One of the key features of reporting under the ordinance and indirectly under the TCFD recommendations is a requirement for issuers to publicly disclose quantitative information on CO₂ targets and, where applicable, targets for other greenhouse gases and quantitative information regarding all greenhouse gas emissions (including Scope 3). Furthermore, issuers are required to disclose their basic assumptions and methods in order to increase comparability among market participants. In line with the requirement under the CSRD, the report on climate matters must be published at least in a human-readable format (e.g., PDF) and a machine-readable format (e.g., XBRL) starting from 2026, after a one-year transition period. Since the report on climate matters is to be included in the report on non-financial matters, the requirement of machine-readability will de facto be extended to the entire non-financial report.

According to the preliminary draft, the sustainability report must be prepared in a standardized electronic format that complies with an internationally recognized standard.

4.3.4 Double materiality

Reporting must generally follow the double materiality principle: Issuers must provide non-financial information if it either influences the value of the issuer (outside-in perspective) or it is material from environmental and social perspectives,¹ i.e., it is necessary for an understanding of how the issuer’s activities impact people and the environment (inside-out perspective).

The principle of double materiality, which already applies under current law, is explicitly set to be incorporated into the legislation under the preliminary draft.

4.3.5 Comply-or-Explain

The new reporting on non-financial matters follows a “comply-or-explain” approach (Art. 964b para. 5 CO): If an issuer does not report on one or more non-financial matters to be reported pursuant to Art. 964b para. 1 CO, this is permitted if the issuer provides a clear explanation and reasons for not adopting a particular policy.

It is important to note that Art. 964b para. 5 CO only provides a comply-or-explain option for reporting on the implemented policies, the actions taken and their effectiveness. The key non-financial matters under the principle of double materiality, as well as the risks and performance indicators related to relevant non-financial matters, must be addressed in the non-financial report.

In line with the CSRD, the preliminary draft proposes removing the existing legal provision that allows companies to opt out of reporting on specific sustainability topics under certain conditions.

4.3.6 Relation to international disclosure frameworks

Under Art. 964b para. 3 CO, the report may be based on national, European, or international reporting standards, particularly the standards of the Global Reporting Initiative (GRI). At the time of publishing the 4th edition of the handbook, all Swiss issuers listed on SIX that opted in for sustainability reporting under the Corporate Governance Directive followed the GRI Standard. If a reporting standard does not cover all aspects required under the Swiss standard for reporting on non-financial matters, those aspects must be addressed in a supplemental report. If an international standard is applied, then the international standard or the applicable regulations applied must be expressly named in the report.

Swiss regulations for reporting on non-financial matters were developed on the basis of the NFRD. This has been replaced by the CSRD. Since the regulations of the CSRD are stricter than those of the NFRD, compliance with this standard should also meet the currently applicable Swiss standard. According to the preliminary draft, future reporting must comply with the standards used in the EU (i.e., the European Sustainability Reporting Standards, ESRS) or another equivalent sustainability reporting standard.

The GRI Standards generally cover the same subject areas as the Swiss legal standards with regard to non-financial reporting. However, whether a company that reports according to the GRI Standards also meets the Swiss legal standards for non-financial reporting depends on the specific implementation of the GRI Standards. This is because the GRI Standards give issuers broad discretion as to how the standards are implemented. It is therefore advisable to carry out a detailed analysis. Additional disclosure may be necessary for the matters of human rights and anti-corruption. Here, references to the relevant Swiss statutory provisions and the international treaties that Switzerland is a party to must be included in the report.

4.3.7 Reporting format

In Art. 964b OR ist nicht festgelegt, ob der Bericht als eigenständiger Bericht veröffentlicht werden muss oder ob er Teil des Geschäftsberichts sein kann. Nach den Gesetzesmaterialien sollte die Berichterstattung in einem separaten Bericht erfolgen.² Ein separater Bericht war auch gemäss der NFRD möglich (vgl. Art. 19a der NFRD). Nach der CSRD sind die Emittenten jedoch verpflichtet, den nichtfinanziellen Bericht in den Geschäftsbericht aufzunehmen. Die Bestimmungen von Art. 964a ff. OR sollten ebenfalls die Einbeziehung des nichtfinanziellen Berichts in den Geschäftsbericht erlauben. Dies wird im erläuternden Bericht zum Vorentwurf explizit festgehalten.

Gemäss CSRD müssen Emittenten aus Drittländern (einschliesslich der Schweiz) mit einem Nettoumsatz von mehr als 150 Mio. EUR in der EU auf konsolidierter Ebene und mindestens einer Tochtergesellschaft (gross oder börsenkotiert) oder Zweigniederlassung (Nettoumsatz von mehr als 40 Mio. EUR) in der EU, einen Nachhaltigkeitsbericht auf konsolidierter Ebene der obersten Drittlandgesellschaft (d. h. Nicht-EU) erstellen. Nachhaltigkeitsberichte der Drittlandgesellschaft müssen nach einem eigenen EU-Berichtsstandard, dem für EU-Emittenten geltenden Standard oder einem (gemäss Entscheid der EU-Kommission) als gleichwertig erachteten Standard erstellt werden. Die Berichterstattung im Rahmen der CSRD für Nicht-EU-Emittenten wird im Jahr 2028 in Kraft treten, wobei die erste Meldung im Jahr 2029 fällig wird.

Art. 964b Abs. 6 sieht vor, dass der Bericht auch auf Englisch (oder in einer anderen Amtssprache der Schweiz) veröffentlicht werden kann. Auch ein Bericht, der nur auf Englisch verfasst ist, ist zulässig.

4.3.8 Approval by shareholders

As a practical matter, the report will need to be produced in accordance with the schedule for preparing the annual report and the annual financial statements. The main reason for this schedule is that Art. 964c CO requires the report to be approved by the issuer’s shareholders. The issuer’s board of directors should therefore approve and recommend the report for approval by shareholders at the meeting at which it also approves the remaining items on the agenda for the annual general meeting.

Shareholders can approve or reject the report, but they cannot submit a proposal to amend or change the report. If the vote on the report is negative, this does not have any immediate legal consequences. The board of directors will need to review the reasons for the rejection and then take the appropriate measures in view of the reasons. The board of directors will not be required to resubmit the report for approval. It is sufficient if the board of directors addresses the issues that have led to a negative vote in the next report.

4.3.9 No audit requirement

Under current Swiss regulations on the reporting on non-financial matters, issuers are not required to have the report audited by an external audit firm. In line with the CSRD, which requires sustainability reports to be published with an assurance statement, the preliminary draft mandates that sustainability information must be reviewed by an audit firm or a conformity assessment body.

4.3.10 Publication of report on non-financial matters

The report must be published in electronic form immediately upon approval and must remain accessible for at least ten years. Under Art. 964c para. 2(1), publication would only be required after shareholders have approved the report. However, as a practical matter, the report will need to be made available prior to the annual general meeting so that shareholders can vote on the report on an informed basis.