Under the Swiss Ordinance on Climate Disclosures, affected Swiss companies will be requested to publicly report on climate issues as of the 2024 financial year; this not only involves reporting on climate-related risks, but also on the impact that companies have on climate. Furthermore, companies will have to describe their reduction targets for their direct and indirect emissions complemented by a detailed plan on how to reach their stated goals. However, the ordinance does not prescribe a specific reporting standard yet.
Overall, sustainability reporting does not yet operate with the same consistency and transparency as financial reporting. Nonetheless, a race towards a consolidation of existing sustainability reporting standards and frameworks has started in 2022. The International Financial Reporting Standards (IFRS) Foundation is a major actor in this effort. It has already consolidated the Climate Disclosure Standards Board (CDSB) and the Value Reporting Foundation’s (VRF) Sustainability Accounting Standards Board (SASB) Standards. In addition, leaning on the newly created International Sustainability Accounting Standards Board (ISSB), the IFRS is currently working with standard setters like the Global Reporting Initiative (GRI) to further drive consolidation in ESG reporting.
In Switzerland, a strikingly high majority of large- and mid-sized SPI companies that published a sustainability report for 2021 opted for GRI standards (92%). The United Nations Global Compact was the second most followed framework (60% of companies). Among companies that disclosed their sustainability performances, 68% relied on a combination of standards and/or frameworks, rather than relying on just one approach.
The length and scope of the reports so far have varied widely, but one commonality was an assessment of the significance and magnitude of the impact of the companies’ operations on economic, environmental, and social aspects of their activities.
A positive sign is that most companies indicated that the overall ESG responsibility lies within the Board of Directors. While there are different approaches on how governance is anchored at the Board level, the dominant approach, followed by 70% of companies, is establishing a specifically dedicated Board committee that deals with ESG matters. To operationalize the company’s ESG agenda, 64% of companies report putting in place a dedicated management-level ESG council or at least a subject matter expert group.
The above suggests that Swiss companies are taking seriously the need to prepare for the entry into force of the Ordinance on Climate Disclosures. It also suggests that companies are seeing a benefit in sustainability reporting, such as being able to better engage with their stakeholders and inform them how the company is addressing both sustainability risks and opportunities. Companies across all sectors are being increasingly confronted with demands for greater transparency and accountability, not only from regulators but from investors, proxy advisors, customers, and even employees. Effective ESG reporting is critical in this regard. If you would like to learn more about how HCM is helping its clients on ESG reporting, or how to embed ESG performance into the compensation framework, do not hesitate to contact us at claudia.wuerstle@hcm.com.