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New law on sustainable corporate governance under consultation: Switzerland set for stricter ESG rules

Company law Competition law

The Federal Council is pushing ahead with regulations on sustainable corporate governance – thereby sending a strong signal to major Swiss companies. The new Federal Act on Sustainable Corporate Governance (NUFG) is intended to strengthen human rights and environmental standards, but is also sparking heated debate over competitiveness and liability risks.

With the launch of the consultation on the Federal Act on Sustainable Corporate Governance (NUFG) on 2 April 2026, the Federal Council has taken a further step towards more comprehensive regulation of corporate responsibility. The draft bill is set against the backdrop of the ongoing political and social debate on corporate responsibility along global value chains and should also be seen as an indirect counter-proposal to the so-called Corporate Responsibility Initiative 2.0.

Historical background and international developments

The starting point for the current developments is the vote on the original Corporate Responsibility Initiative in 2020, which, although supported by a majority of the population, failed to secure the required majority of cantons. Since then, the regulatory environment has changed significantly. In particular, the European Union (EU) has substantially developed its requirements for sustainable corporate governance in terms of reporting and due diligence obligations in supply chains with regard to statutory audit. With the publication of the Omnibus Directive in the Official Journal of the EU in February 2026, the EU has subsequently introduced simplifications and adjustments to reduce the administrative burden. These regulatory developments are also of considerable significance for Swiss companies.

You can find more on this topic in previous articles:

 

Extension of due diligence obligations for large companies

The NUFG builds on the existing provisions in the Swiss Code of Obligations, which have required certain reporting and due diligence obligations since 2022. Whilst previously the scope mainly covered companies with specific risks in the areas of child labour and conflict minerals, the new law provides for a significant expansion. In future, all large Swiss companies will be required to carry out systematic risk analyses relating to human rights and the environment and to take appropriate measures to minimise risks. This represents a comprehensive approach that extends across the entire value chain.

Specifically, the new due diligence obligations apply to companies that exceed certain thresholds, such as having more than 5,000 full-time employees or generating turnover of more than CHF 1,500 million domestically or abroad (Art. 4 para. 1 lit. a NUFG). These companies are obliged to conduct a risk-based analysis of their business activities and those of their controlled entities and business partners (Art. 6(1) NUFG). This includes, in particular, the identification, assessment and prioritisation of potential adverse impacts on human rights and the environment. Building on this, companies must develop appropriate preventive and remedial measures, for example by introducing codes of conduct, risk management systems or grievance mechanisms along the supply chain. In addition, companies are obliged to continuously monitor the effectiveness of these measures and to report on them both internally and externally (Art. 7 NUFG).

These obligations are accompanied by comprehensive documentation, reporting and cooperation obligations towards the supervisory authority (Art. 8 NUFG). Companies must continuously document their due diligence processes and sustainability reports, report annually and actively notify the competent authority (Art. 7 NUFG). At the same time, the Act provides for certain simplifications, such as the option to rely on equivalent international frameworks (Art. 5 NUFG). Overall, this establishes a risk-based, internationally coordinated compliance approach that both strengthens corporate responsibility along global supply chains and allows for a degree of flexibility in practical implementation.

 

Sustainability reporting and external audit

In parallel, the obligation to report on sustainability remains in place, with the content continuing to include information on environmental, social and labour issues, as well as anti-corruption measures. A key new feature is that these reports must in future be subject to an external audit, which is intended to enhance the quality and reliability of the disclosed information.

 

Institutional supervision and enforcement

A central element of the draft law is institutional supervision, which is regulated in Chapter 4 of the NUFG (Art. 20 ff.). Compliance with due diligence and transparency obligations is to be monitored by a specialised, independent authority. The responsibility is to be assigned to the Federal Audit and Sustainability Supervisory Authority (RNAB), which builds on the existing structures of the Audit Oversight Authority (RAB). In doing so, the Federal Council is deliberately relying on a professionally established supervisory body that utilises existing expertise and infrastructure. The authority is bound by constitutional principles, in particular equal treatment, proportionality and the principle of legality, thereby ensuring supervision that is underpinned by the rule of law and predictable.
In terms of substance, the supervision encompasses, in particular, the maintenance of a public register of the companies concerned, the formal review of reporting, and ensuring compliance with statutory due diligence obligations. In doing so, the authority deliberately limits itself to a supervisory function and does not assume an advisory role in order to avoid conflicts of interest. Of particular note is the active supervisory role: the authority may act on its own initiative and identify companies that are failing to meet their obligations. In addition, the central publication of reports ensures greater transparency and facilitates access for the public, the media and academia.

 

Liability regime at the heart of the discussion

The proposed rules on the liability of parent companies, which are set out in detail in Chapter 3 of the NUFG (Art. 15 to 19), are particularly worthy of discussion. The draft makes it clear that companies can be held liable under civil law for breaches of their due diligence obligations.

At the heart of this is a specific form of fault-based liability modelled on Article 41 of the Swiss Code of Obligations (CO). Companies are liable for damages – particularly abroad – if they breach their duty of care intentionally or through negligence. This special statutory provision functions as a lex specialis and, within its scope of application, supersedes the general liability rules of the Swiss Code of Obligations, thereby aiming to create greater legal certainty.

The prerequisites for liability are damage, a breach of the duty of care, a causal link and fault. Liability may also be based on omissions, for example where a parent company fails to take appropriate measures despite being aware of irregularities at a subsidiary.

At the same time, the draft provides for an important limitation: liability for the conduct of business partners is generally excluded. This limits liability to the company’s own sphere of influence.

In addition, the law contains procedural simplifications, particularly regarding the disclosure of evidence, to reduce information asymmetries. Alternatively, a variant is being discussed that dispenses with a separate liability provision and refers to the existing Swiss Code of Obligations.

In both cases, a preliminary conciliation procedure is envisaged, which is intended to relieve the burden on the courts and promote amicable solutions.

Overall, it is evident that the liability regime constitutes a central element of the NUFG and is intended to contribute significantly to the enforcement of due diligence obligations, yet at the same time it is highly controversial both politically and economically.

Criticism from the business community and assessment

The proposed liability provisions are at the centre of political and economic debate. Representatives of the business community have levelled strong criticism at the draft. They view the planned provisions as potentially over-regulatory and warn of competitive disadvantages for Switzerland as a business location. In particular, it is argued that the Federal Council is in some respects going beyond current EU standards, for example by providing for an independent liability regime, whereas the EU has refrained from such harmonisation. Furthermore, it is criticised that developments aimed at minimising economic barriers in the EU through the Omnibus Regulation have not been sufficiently reflected in the current consultation draft, thereby placing Switzerland in a worse position than the EU.

This criticism warrants a nuanced assessment. On the one hand, it cannot be denied that additional regulatory requirements entail administrative burdens and liability risks. On the other hand, the Federal Council’s explicit aim with the NUFG is to incorporate international developments and create legal certainty. For globally active companies in particular, clear and consistent regulation can also offer advantages by facilitating compliance with international standards and reducing reputational risks. Furthermore, it should be borne in mind that the Act is deliberately limited to large companies, and SMEs are largely exempt from the key obligations or are not intended to fall directly within the scope of the NUFG.

 

Practical implications for companies

In practical terms, the NUFG will have significant implications, particularly for large companies and their business partners. They must review and, where necessary, adapt their internal compliance structures to meet the expanded due diligence obligations. This applies in particular to the implementation of risk management systems, the monitoring of supply chains and the documentation of relevant measures. Preparing for the external audit of sustainability reports is also likely to require additional effort. For companies that collaborate with large enterprises, this also means an indirect application of the NUFG, as they must expect higher standards from such enterprises. Furthermore, audit firms are also affected, as the scope of their audits is expanded under the current version of the NUFG to include sustainability reporting.

 

Conclusion and Outlook

In conclusion, it can be stated that the NUFG represents a further step towards stronger regulation of sustainable corporate governance. It navigates the tension between international harmonisation, the protection of human rights and the environment, and economic competitiveness. The coming months of the consultation process will reveal the extent to which adjustments will be made to the draft and whether a balanced compromise can be reached. For affected companies, it is advisable to monitor developments closely from now on and to take preparatory measures at an early stage.

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