Financial Crime World

Switzerland’s Financial Reporting and Compliance: A Step Towards Transparency

The Swiss Federal Council has taken a significant step towards increasing transparency in financial reporting by enacting the ordinance on climate disclosures. This move provides guidance to large public companies, banks, and insurance companies on the climate-related information they must include in their non-financial reports.

Double Materiality in Climate Reporting

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The new rules adopt a double materiality approach, which was first introduced by the EU in 2019. This means that companies must disclose both:

  • The financial risks associated with climate change
  • The impact of their business activities on the environment

This approach provides stakeholders with a more comprehensive picture of a company’s sustainability performance.

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The ordinance also implements the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), which has gained global acceptance in climate reporting. The Swiss Federal Council’s strategy is to link domestic non-financial reporting obligations to international trends, making it essential for companies to comply with stricter foreign regulations.

Staying Ahead of the Curve

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Swiss companies with significant operations in neighboring countries will be required to comply with new European reporting standards, which are likely to affect even those without subsidiaries or branches abroad. Investors, consumers, and non-governmental organizations are increasingly demanding detailed and comparable information on environmental, social, and governance (ESG) matters.

EU Regulations as a Compass

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The Swiss sustainability regulations tend to follow EU developments, with the recent counterproposal to the Responsible Business Initiative (RBI) aiming to align with the EU’s Non-Financial Reporting Directive. The upcoming Corporate Sustainability Reporting Directive will further increase the reporting requirements, making it essential for companies to consider international best practices.

Key Takeaways

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For Swiss companies, regulatory alignment with EU rules is crucial. They should:

  • Monitor developments in Switzerland and abroad when devising a sustainability reporting strategy
  • Prepare for stricter reporting formats and more comprehensive due diligence
  • Consider the impact of EU regulations on their non-financial reporting
  • Identify long-term risks and opportunities related to ESG matters

Swiss Sustainability Regulations

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The recent amendments to the RBI introduced due diligence and transparency obligations in relation to:

  • Minerals and metals from conflict-affected areas
  • Child labor

Companies must set up a supply chain policy and management system that ensures traceability, with an audit required for due diligence on minerals and metals.

Conclusion

Switzerland’s financial reporting and compliance landscape is evolving to increase transparency and accountability. Companies must stay informed about international trends and regulatory developments to ensure compliance and maintain their competitive edge in the global market.