Background to the ESG reform
The first “Omnibus Simplification Package” is an initiative to simplify and standardise existing ESG reporting obligations. The aim of the European Commission is to reduce the administrative burden on companies without compromising transparency or sustainability goals. In view of increasing regulatory requirements, particularly in the EU, the package is intended to create clarity and efficiency for affected companies. The package will particularly affect reporting obligations based on the Corporate Sustainability Reporting Directive (CSRD), the EU Supply Chain Directive (CSDDD) and the EU Taxonomy Regulation.
In EU legislation, an omnibus regulation refers to the process of harmonising several regulations and directives in a single legal act.
Key points of the innovation
In order to gain an insight into the intended changes, a few important ones are outlined below. The Corporate Sustainability Reporting Directive (CSRD) will only apply to companies with 1,000 or more full-time employees, not 250 as previously. Voluntary reporting is also to be introduced for companies that no longer fall within the scope of the regulation. In connection with this, the amendment to the Taxonomy Ordinance, for example, stipulates that companies that fall within the scope of the CSRD in accordance with the amendment, i.e. employ 1000 full-time equivalents, can voluntarily prepare a taxonomy report if the financial thresholds are met. Industry-specific reporting, which was provided for in the CSRD, will no longer be implemented thanks to the amendment.
In general, the reduction in reporting obligations will mean that companies will have to provide less detailed information in ESG reports in future and certain duplicate reporting obligations will no longer apply.
In addition, a standardised structure for ESG reports is to be developed as part of the provision of comparability and digital reporting formats and automated ESG reporting tools are to be further promoted. This will be coupled with the implementation of ESG data management systems and blockchain technologies, which should enable secure and traceable ESG data management. Harmonisation with international standards is to be achieved through better coordination with global ESG requirements and uniform definitions so that inconsistencies can be prevented in future.
In addition, the integration of climate reporting obligations with existing EU sustainability reporting requirements should contribute to sustainability reporting.
Large companies with complex compliance structures in particular will benefit from the simplification of ESG reporting obligations. At the same time, SMEs must continue to bear in mind that regulatory requirements remain in place and long-term ESG strategies are required. Standardisation should make it easier to compare companies and at the same time reduce the scope for interpretation.
Criticism of the changes
Despite the announced simplification of reporting through the development of various digital services, some uncertainties remain regarding the practical implementation of the changes. The promotion of digital reporting will also require additional resources from a large number of companies and result in implementation costs.
The planned reduction in reporting obligations will also mean that significant sustainability aspects will no longer be taken into account, insofar as they fall under voluntary reporting. A large number of companies will use these “loopholes” in their favour and consciously and unconsciously move away from the actual idea of sustainability reporting.
What applies to Switzerland?
The first “Omnibus Simplification Package” will have an impact on companies in Switzerland, even though Switzerland does not fall within the scope of the legislative package.
The Swiss legislator has formulated its own “ESG reporting obligations” through the introduction of Art. 964a ff. of the Swiss Code of Obligations, but only for companies that exceed certain thresholds.
Switzerland intends to align the aforementioned provisions of the Code of Obligations (CO) with the EU’s Corporate Sustainability Reporting Directive (CSRD) as early as 2024. Initially, only companies with at least 500 full-time employees were affected by non-financial reporting under the CO. The Federal Council then announced in its preliminary draft that with the adjustments to the EU’s CSR requirements through Art. 964c of the Swiss Code of Obligations, companies with “only” 250 full-time employees will now also be subject to this obligation if they also fulfil the specified financial thresholds. In view of the first “Omnibus Simplification Package”, which would also lead to simplifications in CSRD reporting, this will also have an impact on the provisions in Switzerland.
If the Swiss legal basis is amended in accordance with the preliminary draft of June 2024, Swiss companies that are geared towards the European market will face competitive disadvantages, as the EU is now cancelling its stricter reporting obligations.
With its endeavours to adapt to international trends in the area of ESG, the Swiss legislator is acting proactively, but is neglecting the economic needs of the companies affected. The rapid curbing of sustainability reporting requirements in EU legislation is evidence of a development in a different direction to that which the Swiss legislator is aiming for with its preliminary draft of Art. 964a et seq. of the Swiss Code of Obligations.
The implementation of non-financial reporting by companies with significantly fewer resources would cause additional expense and an allocation of resources that would work against the idea of sustainability reporting.
Topics relating to sustainable corporate management and corporate social responsibility (CSR) should always be taken into account, but not without overlooking international developments.
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