The Ethos Foundation in Switzerland is proposing a formal consultation with key shareholders in the event corporate sustainability reports are rejected at companies’ annual general meetings (AGMs).
“This solution is inspired by the UK Corporate Governance Code which mandates shareholder consultations for agenda items receiving more than 20% dissent, and aims to ensure accountability and transparency,” said Matthias Narr, head of engagement at Ethos, in a LinkedIn post.
The Foundation proposes to include a reference to the rejection, and the results of consultations with shareholders in corporate sustainability reports, it said in a statement sent to the Swiss government (Federal Council).
The Swiss government has started a consultation, which ended yesterday, to amend the law on corporate sustainability reporting (called Swiss Code of Obligations) to align it with the European Union’s Corporate Sustainability Reporting Directive (CSRD).
The government has proposed to extend the scope of the law in Switzerland to approximately 3,500 companies, with 250 employees, a balance sheet total of CHF25m (€26.6m) and a turnover of CHF50m. Today, the obligation only applies to around 300 companies with 500 or more employees, CHF20m in total assets and a turnover of CHF40m.
Ethos has doubled down in its statement, calling on the government to extend the scope of the law to all companies of public interest, regardless of their size, total assets or turnover.
The Foundation has also called on the government to clarify which standard applies to sustainability reporting and to limit the choice to “two, maximum three” standards.
The Federal Council’s draft to amend the Swiss Code of Obligations refers to the European Sustainability Reporting Standards (ESRS), and other equivalent standards, which will be named in a second step.
“It is central that the chosen standards include the principle of so-called double materiality, as is the case with European standards, and that the basis of calculation of the most important indicators is identical,” it added in the statement.
The proposal to audit sustainability reports by a third party is positive, also to avoid greenwashing, the Foundation said, but the law “must be tightened” to oblige companies to hand out their entire sustainability reports to external control and not just some of the indicators.
Ethos has underlined in its statement to the government that the majority of shareholders in companies listed in Switzerland are international investors, and the Swiss stock exchange also requires the application of an international accounting standard for financial reporting (IFRS).
“It is crucial to follow the same logic when reporting on sustainability. International investors already widely take transparent non-financial information into account when making their investment decisions,” it added.
The risk is that investors or ESG rating agencies could downgrade the ratings of companies and turn away from the market due to lack of transparency.
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