Understanding the Swiss Ordinance on Climate Disclosures and Its Implications for Companies
Many of us are exposed to news about climate change, sustainability or ESG sometimes on a weekly, maybe even daily basis. While this creates a growing awareness among consumers, it gives a false idea about the current corporate state of affairs. Incoming regulations should further push companies to become transparent about their actions (or lack thereof – comply or explain).
In Switzerland, an ordinance on climate disclosures was published in November 2022 to specify how companies need to comply with the reporting obligation as outlined in the Swiss Code of Obligations (CO) from January 2024. We found that in 2022, only 16% of the 258 companies listed on the SIX Stock Exchange had reported on their sustainability performances and practices based on internal research of which the majority were not aligned with the recommendations suggested by the Ordinance: the TCFD framework (Task Force on Climate-related Financial Disclosures).
Among this year’s speakers, at the Swiss Climate Reporting Forum, Marquard Christen, Partner and Head of the Swiss Competition and Public Procurement Teams and member of the global ESG Task Force at the international law firm CMS, provided an overview of the legal framework in Switzerland for climate disclosures.
INTRODUCTION TO THE ORDINANCE
The Ordinance on Reporting on Climate Matters of 23 November 2022 regulates the reporting by companies on climate issues as part of the environmental matters to be reported on under Articles 964a – 964c CO on transparency on non-financial matters.
A. Who is obliged to report on climate matters?
According to Article 964a para. 1 CO, companies are obliged to report on non-financial matters which, according to Article 964b para. 1 CO, include environmental matters, in particular the CO2 goals, and thus climate matters
The obligation does not apply to companies that are controlled by another company to which Article 964a para. 1 CO applies or that must prepare an equivalent report under foreign law (Article 964a para. 2 CO).
The Ordinance itself does not establish the obligation to report but rather only states that compliance with the obligation to report on climate issues under Articles 964a – 964c CO is presumed if the disclosure is made in accordance with the recommendations of the TCFD as outlined in Article 3 of the Ordinance (Article 2 para. 1 of the Ordinance).
B. What are the obligations under the Ordinance
The Ordinance is a so-called implementing (or enforcement) ordinance and, thus, only specifies the obligations already contained in the CO. Accordingly, the purpose of the Ordinance mainly consists of outlining how companies can fulfill the transparency obligations on climate matters under Articles 964a – 964c CO.
The Ordinance does so by declaring that a disclosure made in accordance with the recommendations of the TCFD as outlined in Article 3 of the Ordinance presumably meets the reporting obligations. Alternatively, the Ordinance states in Article 2 para. 2 that a company that does not make disclosures on climate issues in accordance Article 3 of the Ordinance must either (i) demonstrate that it complies in other ways with the disclosure obligation or – in accordance with the principle of comply or explain – (ii) declare that it does not follow any climate concept and justify this decision.
Furthermore, the Ordinance specifies in Article 4 para. 2 the obligation contained in Article 964c para. 2 number 1 CO to publish the report on non-financial matters electronically by stating that the electronic publication shall be in a least one human-readable and one machine-readable electronic format in international use.
C. From when must climate matters be reported on?
According to the transitional provision in the CO, companies must report on non-financial matters, including climate issues, for the first time for the financial year that begins one year after the entering into force of Articles 964a – 964c CO, i.e. for the financial year commencing one year after January 1, 2022. As a result, the first reports will have to be published in 2024.
The Ordinance does not change this temporal scope of the obligation to report on non-financial matters, and only states in Article 5 that the obligation to publish the report in the format as defined in Article 4 para. 2 of the Ordinance shall be met within one year after the entering into force of the Ordinance on 1 January 2024.
Join us on May 22nd at the Swiss Climate Reporting Forum to learn more, last tickets available here.