The European Union has introduced several frameworks aimed at enhancing transparency and accountability in corporate sustainability efforts. Among these, the Corporate Sustainability Reporting Directive (CSRD) stands out as a transformative regulation that will have significant implications not just within the EU, but also for companies outside its borders, including Switzerland.
Transition from NFRD to CSRD
The CSRD replaces the Non-Financial Reporting Directive (NFRD), which applied to large public-interest entities with more than 500 employees. The NFRD required these companies to disclose non-financial information related to environmental, social, and governance (ESG) issues. However, with the introduction of the CSRD, the scope of reporting has significantly expanded to include a broader range of companies. Over 50,000 companies will now be required to report on their sustainability efforts, compared to around 11,000 under the NFRD. This shift represents a substantial increase in both the number of companies affected and the level of detail required in sustainability reporting.
Key Features of the CSRD
The CSRD aims to improve the quality and comparability of sustainability reporting across the EU. It mandates that companies report on their environmental, social, and governance impacts through a standardized framework known as the European Sustainability Reporting Standards (ESRS). This standardization ensures consistency and reliability, making it easier for stakeholders to assess corporate ESG performance. One of the most notable features of the CSRD is the concept of double materiality, which requires companies to report on two key areas:
Financial materiality: How sustainability issues affect the company’s financial performance, risks, and opportunities.
Impact materiality: How the company’s activities affect the environment and society.
In addition to the CSRD, the Sustainable Finance Disclosure Regulation (SFDR) and the EU Taxonomy work together to ensure that financial market participants disclose sustainability risks and opportunities, while the Taxonomy classifies which economic activities are environmentally sustainable.
Who Needs to Report?
The CSRD will apply to a wide range of companies, including:
Large businesses meeting two of the following criteria: more than 250 employees, €40 million in turnover, or €20 million in assets.
Listed small and medium-sized enterprises (SMEs) on EU-regulated markets, with reporting expected to start in 2026.
Non-EU companies generating over €150 million in turnover within the EU, provided they meet specific thresholds.
Failure to comply with CSRD requirements can result in financial penalties and reputational damage, with sanctions varying across EU member states.
How Swiss Companies Are Affected
Although Switzerland is not an EU member, Swiss companies will likely feel the effects of the CSRD due to cross-border operations and business relationships with EU-based partners. Companies that generate over €150 million in turnover within the EU, or that have EU subsidiaries, will be required to comply with CSRD reporting standards.
Swiss companies are already subject to non-financial reporting requirements under the Swiss Code of Obligations (Art. 964a–964c CO), but these are less stringent than the CSRD. The Swiss law focuses primarily on financial materiality, while the CSRD requires a deeper look into both financial and impact materiality. Furthermore, the CSRD mandates external verification of sustainability reports, which is not currently required under Swiss regulations.
Switzerland’s Progress Towards Alignment
Switzerland is taking steps toward aligning its non-financial reporting standards with the CSRD. On September 6, 2023, the Swiss Federal Council launched a consultation to strengthen its reporting requirements, potentially lowering the threshold to companies with 250 employees and introducing mandatory external verification. The consultation is set to close in October 2024, and Swiss policymakers have indicated a willingness to harmonize local regulations with the EU’s sustainability approach to maintain competitiveness within European markets.
The Broader Implications
For Swiss companies, the CSRD offers an opportunity to remain competitive and transparent in international markets. Many EU-based businesses will require their Swiss partners and suppliers to comply with ESG standards, especially when it comes to carbon footprint disclosures. As a result, even Swiss companies not directly subject to the CSRD may need to adhere to its standards to maintain their business relationships with EU clients.
In summary, the CSRD represents a significant shift toward greater corporate transparency and accountability. While Swiss law currently imposes less stringent non-financial reporting obligations, the indirect effects of the CSRD on Swiss businesses will be profound. By proactively aligning with CSRD requirements, Swiss companies can not only meet emerging regulatory expectations but also position themselves as leaders in the global sustainability movement.
Type of Company | Criterias: employees / revenue M€ / balance sheet M€ | CSRD reporting |
Companies under NFRD | > 500 emp. 1/2: Rev >50M€ Or Bal > 25M€ | 2024 / 2025 |
EU companies | 2/3: > 250 emp. / Rev. >50M€ / Bal > 25M€ | 2025 / 2026 |
Non EU listed | 2/3: > 250 emp. / Rev. >50M€ / Bal > 25M€ | 2025 / 2026 |
Listed SMEs | > 10 emp. / Rev. >900k€ / Bal > 450k€ | 2026 / 2027 |
Non-EU companies with subsidiaries or branches in the EU | Rev. >150M€ on last 2 years in EU & EU subsidiary > 250 emp. | 2028 / 2029 |