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Key points of the article
Introduction to CSRD
The Corporate Sustainability Reporting Directive (CSRD) is a new European directive that is changing the landscape of sustainability reporting. Although Switzerland is not a member of the European Union, this directive will have a significant impact on many Swiss companies. Whether you run a large multinational or a local local SMEit’s crucial to understand the implications of CSRD for your business.
In this article, we take a detailed look at the challenges of CSRD for Swiss companies, and suggest concrete ways of preparing for it. We will also look at the regulatory developments planned in Switzerland, in particular the amendment of Article 964 of the Swiss Code of Obligations, which aims to bring Swiss requirements into line with those of the EU.
What is CSRD?
The CSRD, adopted by the European Union in December 2022replaces the Non-Financial Reporting Directive (NFRD). It represents a paradigm shift in sustainability reporting, with implications far beyond the EU’s borders.
The main changes brought about by the CSRD are :
- Significant expansion of the scope of companies concerned
- More detailed and standardized reporting requirements
- Introducing the concept of “double materiality
- An obligation to audit published information
The CSRD aims to improve the quality, consistency and comparability of sustainability information published by companies, a crucial aspect of corporate sustainability. corporate sustainability. It covers a wide range of topics, from greenhouse gas emissions to human rights and corporate governance.
Direct impact on Swiss companies
Although Switzerland is not a member of the EU, some Swiss companies will be directly affected by the CSRD. According to the explanatory report of the Federal Department of Justice and Police, the criteria for direct application are as follows:
- The company generates over 150 million euros in net sales in the EU
- The company has at least one subsidiary or branch in the EU exceeding certain thresholds
Take Swiss food giant Nestlé, for example. The company, which generates a significant proportion of its sales in the EU, will be directly concerned by CSRD. It will have to adapt its strategy and reporting to meet the new requirements, notably by setting up a sustainability committee at board level and increasing the quantity and quality of ESG information published in its annual report.
Indirect impact on Swiss companies
The impact of the CSRD extends far beyond the companies directly concerned. This domino effect is due to the fact that large companies subject to the CSRD will pass on their obligations to their suppliers and business partners.
For Swiss SMEs, this means that they will probably have to provide detailed information on their environmental impact, social practices and governance to their European customers, even if they are not directly subject to the CSRD.
Imagine a small textile company in Lausanne supplying fabrics to a major French fashion brand. The latter, subject to the CSRD, is likely to request detailed information on the environmental impact, social practices and governance of its Swiss supplier. If the Lausanne-based company is unable to provide this information, it risks losing this important customer.
It’s important to note that in the EU, companies will have three years before they are obliged to include supplier data in their reports. This gives SMEs some time to prepare, but it’s crucial to start anticipating these changes now.
With Mon Entreprise Durable by Coptain, you can easily prepare for CSRD reporting.
Challenges for Swiss companies
CSRD presents several major challenges for Swiss companies:
- Access to the European market: More than half of Switzerland’s foreign trade is with the EU. To maintain this crucial access, Swiss companies will need to integrate ESG standards into their strategy and ensure that it meets CSRD requirements.
- New disclosure requirements: Companies will have to collect and analyze new dataThis may require significant investment in information systems and staff training.
- Adaptation of corporate governance: The directive introduces new corporate governance mechanisms. Swiss companies may need to review their governance structure to ensure that it meets CSRD expectations.
- Additional costs: According to the estimates in the explanatory report, the direct costs for the companies subject to the law would amount to around 620 million Swiss francs, over 50% of which will be spent on auditing. For indirectly affected companies, costs are estimated at 61 million Swiss francs.
- Need for new skills: According to the various players involved, up to 3,000 additional jobs will be needed in this field in Switzerland in the medium term, if we keep to the announced costs. These companies will need operational staff at the same time, which could create a skills shortage.
Benefits of CSRD compliance
Despite the challenges it presents, CSRD compliance can bring several benefits to Swiss companies:
- Enhanced transparency and reputation : By publishing detailed information on their sustainable practices, companies boost the confidence of their stakeholders.
- Attracting ESG-conscious investors: More and more investors are taking ESG criteria into account in their investment decisions.
- Reducing sustainability-related financial risks: By analyzing their sustainability-related impacts and risks in depth, companies can anticipate and mitigate certain financial risks.
- Positioning as a leader in sustainability: Companies that anticipate these developments position themselves as leaders in their sector.
Take the example of Logitecha Swiss company specializing in computer peripherals. By anticipating the requirements of the CSRD, Logitech has been able to strengthen its position as a sustainability leader in its sector. In particular, the company has set up an ambitious program to reduce its CO2 emissions, and has considerably increased the transparency of its ESG reports.. The result? An improved reputation and greater attractiveness to responsible investors.
Non-compliance risks
Non-compliance with the CSRD can entail several risks for Swiss companies:
- Financial sanctions: Although Switzerland is not directly subject to EU sanctions, European subsidiaries or branches of Swiss companies could be.
- Reputational damage: In a world where sustainability is increasingly important to consumers, failure to comply with CSRD could seriously damage a company’s image.
- Difficulties accessing financing: Many banks and investors now include ESG criteria in their financing decisions.
- Loss of competitiveness: Companies that fail to adapt quickly risk losing market share to competitors who are more proactive in terms of sustainability.
How to prepare for CSRD?
To prepare for CSRD, Swiss companies can follow these key steps:
- Assess your situation: Determine whether your company is directly or indirectly concerned by CSRD.
- Carry out a dual materiality analysis: assess both the company’s impact on the environment and society, and the impact of sustainability issues on the company.
- Set up data collection systems: Ensure you have the tools needed to collect and analyze the data required by the CSRD.
- Training teams: Sustainability is not just one person’s business. It’s crucial to train employees in ESG issues and the importance of CSRD.
- Integrating sustainability into strategy: CSRD is not just a matter of reporting. It must be integrated into the company’s overall strategy.
- Anticipate costs: According to estimates, the average cost of producing a report is around CHF 100,000, and of auditing it around CHF 113,000. Initial costs to prepare for the first year of reporting should also be taken into account.
Take the example of Givaudan, a world leader in flavors and fragrances based in Vernier. The company anticipated the requirements of the CSRD by implementing a comprehensive sustainability program called “A Sense of Tomorrow”. This program includes ambitious targets for CO2 emissions reduction, responsible sourcing and diversity. Givaudan has also invested in ESG data collection and analysis tools, enabling it to produce detailed reports in line with CSRD requirements.
A Swiss perspective on corporate sustainability
The Swiss Federal Council recently adopted guidelines for the development of Swiss rules on sustainable corporate management. These guidelines are largely inspired by international standards, including the CSRD.
The draft amendment to the Swiss Code of Obligations plans to adapt Article 964 to align reporting requirements with those of the CSRD. The main changes proposed are as follows:
- Lowering the application thresholds to 250 full-time employees, 50 million francs in sales or 25 million francs on the balance sheet.
- Inclusion of listed SMEs (excluding micro-enterprises)
- The obligation to have reports verified by an independent third party
- Introduction of financial penalties for reporting inaccuracies
With these changes, it is estimated that around 2,850 companies will be subject to the reporting obligation and and up to 50,000 Swiss companies indirectly affected.
It is important to note that the preliminary draft provides for certain deviations from EU law, including the possibility of choosing between different reporting standards (ESRS, ISSB, GRI) and the extension of the circle of companies authorized to verify reports.
Let’s take the example of Migros, Switzerland’s largest retailer. Although not directly subject to the CSRD, Migros has chosen to voluntarily align its reporting practices with international standards, including the CSRD. Each year, the company publishes a detailed sustainability reportcovering aspects such as the reduction of CO2 emissions, sustainable sourcing and working conditions in its supply chain.
To conclude...
The CSRD represents a major change in the sustainability reporting landscape, with significant implications for Swiss companies. While the challenges are significant, particularly in terms of costs and systems adaptation, CSRD compliance also offers opportunities in terms of transparency, investor attractiveness and market positioning.
It is crucial for Swiss companies to anticipate these changes and start preparing for them now. This means not only putting in place the necessary reporting systems, but also truly integrating sustainability into corporate strategy and operations.
The new requirements are due to come into force two years after the law is passed in Switzerland. This gives companies some time to prepare, but it’s important not to underestimate the scale of the task ahead.
Here’s a summary table by company type:
| Type of company | Impact of CSRD | Actions to be taken |
|---|---|---|
| Large companies (>250 employees, >CHF 50M sales, >CHF 25M balance sheet) | Direct impact | Prepare comprehensive report, set up data collection systems, train teams |
| Listed SMEs | Direct impact | Prepare an appropriate report, set up basic systems |
| SME suppliers to EU companies | Indirect impact | Prepare to provide ESG data to their customers, start collecting relevant data |
| Other SMEs | Potential future impact | Monitor regulatory developments, start thinking about business sustainability |
CSRD FAQ
Here are some frequently asked questions about CSRD and their answers:
Does the CSRD apply directly to Swiss companies?
No, not directly. However, Swiss companies that have a significant presence in the EU or are suppliers to European companies will be impacted.
When will the new requirements come into force in Switzerland?
The preliminary draft provides for entry into force within two years of the law's adoption. The exact date has not yet been set.
What are the penalties for non-compliance?
The preliminary draft provides for financial penalties only in the event of inaccuracies in the reports. The exact amounts have not yet been defined.
Are SMEs concerned by CSRD?
SMEs listed on the stock exchange will be directly affected. Other SMEs may be indirectly impacted if they are suppliers to companies subject to the CSRD. Please see our article"The CSRD is coming to Switzerland: How SMEs can prepare now".
What reporting standards will be accepted in Switzerland?
The preliminary draft provides for a choice between ESRS, ISSB or GRI standards, unlike the EU, which imposes ESRS standards.
