Switzerland has announced a major plan to change its corporate sustainability rules. The new Federal Act on Sustainable Corporate Governance aims to bring the country’s reporting and due diligence requirements in line with changing European standards. This effort is part of a larger goal to harmonize with the European Union’s regulations, especially the Corporate Sustainability Reporting Directive and the Corporate Sustainability Due Diligence Directive. 

This proposal arrives as European sustainability rules are being revised due to the EU’s recent Omnibus I changes. By updating its rules, Switzerland wants to stay compatible with regulations and ensure its companies remain competitive and compliant in international markets.

Higher Thresholds Narrow Scope of Reporting

A key part of the proposed law is the introduction of higher thresholds for sustainability reporting. Under the new rules, only companies with at least 1,000 employees and annual revenues of CHF 450 million (about €488 million) will need to disclose sustainability information. This represents a significant change from Switzerland’s current regulations, which apply to companies with more than 500 employees.

As a result, the number of companies that must report sustainably is expected to drop from around 200 to about 100. Despite this reduction, the reporting requirements will be more demanding. Companies will need to follow internationally recognized frameworks like the European Sustainability Reporting Standards or similar benchmarks. This will ensure consistency and comparability with EU-based companies.

Alignment with Evolving EU Rules

The Swiss proposal reflects recent changes in the European Union, particularly the updated thresholds set by the CSRD and CSDDD. The EU has raised its reporting threshold to companies with at least 1,000 employees and €450 million in revenue, while due diligence obligations now apply only to firms with over 5,000 employees and €1.5 billion in turnover.

By adopting similar criteria, Switzerland shows its intent to stay closely aligned with EU regulations, even as some requirements are scaled back. This alignment is important for Swiss companies operating in European markets, as it helps reduce compliance complexity and avoid regulatory confusion.

Expanded Due Diligence Requirements

In addition to reporting, the proposed law introduces detailed due diligence obligations for large corporations. These rules will apply to companies with at least 5,000 employees and CHF 1.5 billion (about €1.6 billion) in revenue, affecting about 30 firms according to the Swiss Federal Council.

Under these rules, companies must assess whether their operations, along with those of their subsidiaries and business partners, pose risks to recognized human rights and environmental standards. This includes identifying potential and actual negative impacts across supply chains and taking steps to address them.

Firms will need to integrate due diligence into their corporate strategies and risk management systems, create codes of conduct, and implement measures to prevent and reduce risks. If harm has already occurred, companies must take corrective action and provide remedies. Additionally, organizations will need to establish channels for complaints and reports and continually monitor the effectiveness of their measures.

Building on Existing Swiss Frameworks

Switzerland already has a base of sustainability-related regulations. Current laws require companies with more than 500 employees to publish annual reports on environmental, social, human rights, and anti-corruption issues. The country also requires reporting on greenhouse gas emissions, climate risks, and transition plans, based on recommendations from the Task Force on Climate-related Financial Disclosures.

However, the existing due diligence requirements are fairly limited, focusing mainly on high-risk areas like child labor and conflict minerals. The new proposal significantly expands this scope, introducing a more thorough and structured approach to corporate responsibility across global value chains.

Balancing Competitiveness and Accountability

The Swiss government’s proposal aims to balance reducing administrative burdens for smaller companies with increasing accountability for large corporations. By limiting mandatory reporting to larger firms, the law aims to simplify compliance while ensuring that the most impactful businesses are still closely overseen.

At the same time, aligning with EU standards strengthens Switzerland’s reputation as a reliable and transparent business environment. For multinational companies, consistent regulations across different regions are becoming increasingly important as ESG factors shape investment decisions and corporate strategies.

Next Steps in the Legislative Process

The proposed Federal Act on Sustainable Corporate Governance will now go through Switzerland’s legislative process, where it will undergo consultation and possible revisions before it can be adopted. If enacted, the law could represent a significant advancement in Switzerland’s sustainability framework, bringing it closer to global best practices.

As sustainability reporting and due diligence requirements evolve around the world, Switzerland’s approach highlights the growing need for harmonized standards that promote transparency, accountability, and long-term value creation in the corporate sector.