<h3>Federal Council Proposes to Align Current Rules With the EU Corporate Sustainability Reporting Directive</h3>
<p>On June 26, 2024, the Swiss Federal Council opened a consultation process regarding potentially stricter corporate sustainability reporting for Swiss companies. The proposed amendment (the <strong>Draft Amendment</strong>) of articles 964a &#8211; 964c of the Swiss Code of Obligations (<strong>CO</strong>) is intended to bring the current Swiss non-financial matter reporting provisions in line with the EU Directive 2022/2464 of December 14, 2022 on corporate sustainability reporting (Corporate Sustainability Reporting Directive, <strong>CSRD</strong>). The consultation process lasts until October 31, 2024.</p>
<p>Rather than fully replicate the CSRD, the Federal Council has proposed modifying the existing reporting requirements on non-financial matters under the CO, including by broadening its scope of application, with the effect that more companies will be required to prepare and publish a report on sustainability aspects. According to the Federal Council, whereas the existing reporting obligations affect around 300 companies, the proposed rules would obligate approximately 3,500 companies to report on risks relating to the environment, human rights, and corruption, and the measures they are taking to mitigate these risks.<a href="#_ftn1" name="_ftnref1">[1]</a></p>
<p>The main changes proposed by the Draft Amendment are summarized in the table under Section A, followed by a more detailed discussion of key aspects of the Draft Amendment.</p>
<h3>A. Overview of Key Changes to the Existing Rules</h3>
<h4>1. Scope:</h4>
<p><img decoding="async" src="https://cms.homburger.ch/wp-content/uploads/2024/06/Tabelle-Scope-1.jpg" /></p>
<h4>2. Content:</h4>
<p><img decoding="async" src="https://cms.homburger.ch/wp-content/uploads/2024/06/Tabelle-Content-1.jpg" /></p>
<h4>3. Reporting standard:</h4>
<p><img decoding="async" src="https://cms.homburger.ch/wp-content/uploads/2024/06/Tabelle-Reporting-1.jpg" /></p>
<h4>4. Audit / assurance requirements:</h4>
<p><img decoding="async" src="https://cms.homburger.ch/wp-content/uploads/2024/06/Tabelle-Audit-1.jpg" /></p>
<h4>5. Approval requirements:</h4>
<p><img decoding="async" src="https://cms.homburger.ch/wp-content/uploads/2024/06/Tabelle-Approval-1.jpg" /></p>
<p>&nbsp;</p>
<h3>B. Key Aspects of the Draft Amendment</h3>
<h4>1. Extended Scope</h4>
<p>The proposed modified sustainability reporting provisions would apply to the following entities:</p>
<ol>
<li>«Public interest entities» (<em>Gesellschaften des öffentlichen Interesses</em>);</li>
<li>Companies that exceed two of the following figures in two consecutive financial years: (i) total assets of CHF 25 million; (ii) revenue of CHF 50 million; (iii) 250 full-time employee positions per year on average;</li>
<li>Companies obliged to prepare consolidated financial statements and that exceed two of the thresholds in (b) above in two consecutive financial years.</li>
</ol>
<p>As of today, only «public interest entities» with at least 500 full-time equivalents on annual average in two consecutive financial years that exceed either the relevant balance sheet total (CHF 20 million) or revenue threshold (CHF 40 million) in two consecutive financial years are subject to the non-financial matters reporting requirements.</p>
<p>Under the Draft Amendment, «public interest entities» are generally subject to the new reporting requirement, regardless of whether they meet any of the quantitative thresholds described in item (b) above, unless they qualify as an exempted small company (as further described below). In addition, any company, irrespective of whether it qualifies as a «public interest entity», that satisfies two of the three quantitative thresholds described in item (b) above on a standalone or a consolidated basis would also have to establish a sustainability report. The Draft Amendment also contemplates reducing the «full-time equivalents» from 500 to 250.</p>
<p>Companies that would otherwise have to report but are controlled by another company that prepares a Swiss law sustainability report or an equivalent report under foreign law are exempt. Also exempt are small companies that alone or together with domestic or foreign companies that they control do not exceed two of the applicable thresholds (viz. total assets of CHF 450,000, sales revenue of CHF 900,000, 10 full-time employees on annual average in two consecutive years).</p>
<h4>2. Annual Sustainability Report: Format</h4>
<p>Companies subject to the Draft Amendment would continue to be obliged to produce an annual sustainability report. The annual sustainability report may be prepared as a separate report or, in alignment with the CSRD, it may be integrated into the management report pursuant to article 961c CO. The report must be in an electronic reporting format established in accordance with an internationally recognized standard, namely the one used by the EU member states.</p>
<h4>3. Reporting Requirements</h4>
<p>Compared to the existing non-financial matter reporting, the Draft Amendment further expands and specifies the scope of the information on sustainability. The current law&#8217;s terminology would largely be replaced with new terms that have a similar meaning. The information to be reported on is described as follows:</p>
<ul>
<li>Environmental factors (<em>e.g.</em>, climate protection &#8211; including greenhouse gas emissions, water and marine resources, resource utilization and the circular economy, soil, water, and air pollution, and biodiversity and ecosystems &#8211; as well as human health and safety and the use of renewable and non-renewable energy, including exposure to coal and oil-and gas-related activities);</li>
<li>Social aspects, including employee matters (<em>e.g.</em>, measures to protect various interest groups (such as shareholders, employees, and customers), working conditions, diversity, measures against violence and harassment, disability accommodations, and work-life balance);</li>
<li>Human rights aspects; and</li>
<li>Governance aspects (<em>e.g.</em>, the role of the board of directors and management in respect of sustainability aspects, the strategy for linking incentives for board and management members to sustainability aspects, internal controls and risk management systems related to sustainability, policies and measures to combat corruption).</li>
</ul>
<p>In line with the reporting requirements under the Federal Ordinance on Reporting on Climate of November 23, 2022, which became effective on January 1, 2024, the Draft Amendment requires in-scope companies to report on the statues regarding achieving the net-zero greenhouse gas emissions target by 2050 to limit global warming to 1.5°C above pre-industrial levels. This will include reporting on Scope 1, Scope 2 and, where applicable, Scope 3 greenhouse gas emissions in accordance with the current GHG Protocol Corporate Accounting and Reporting Standard.</p>
<p>The Draft Amendment would also expressly require reporting on governance matters, beyond reporting on the combat of corruption.</p>
<p>Like the existing law, the Draft Amendment continues to list specific sustainability aspects that must be described in the report in more detail, such as the company&#8217;s business model and strategy, applied due diligence processes in respect of sustainability aspects, material risks the company faces with respect to sustainability aspects or material financial, and non-financial performance indicators. However, the list included in the Draft Amendment adds new items, such as a description of the time-bound sustainability targets that the company has set itself, a description of the role of the board of directors in relation to sustainability, or information on any incentive systems linked to sustainability that are offered to directors and executives.</p>
<p>The most significant change to current non-financial matter reporting is that all information must be provided in compliance with the standards used in the EU (<em>i.e.</em>, the European Sustainability Reporting Standards (ESRS)) or another equivalent standard for sustainability reporting (the explanatory report also mentions the IFRS Sustainability Disclosure Standards or the Global Reporting Initiative (GRI) as examples). The selected standard must be adopted in its entirety. The Federal Council will designate the standards that are equivalent to the ESRS in an ordinance.</p>
<p>Under the Draft Amendment, the applicable standard will be determined by the board of directors; however, the standard may also be determined based on a shareholder vote at a general meeting.</p>
<p>Further information regarding the specific reporting matters is available in the Federal Council&#8217;s related explanatory report.<a href="#_ftn1" name="_ftnref1">[1]</a></p>
<h4>4. Double Materiality Principle</h4>
<p>The Draft Amendment clearly establishes the principle of «dual materiality» in line with the CSRD. The sustainability report must therefore disclose the information necessary to understand the impact of the company&#8217;s activities on sustainability issues and the impact of sustainability issues on the company&#8217;s business, financial performance, and position.</p>
<p>In contrast with the current law, in which the principle of «double materiality» already applies, the proposed draft seeks to clarify that, in accordance with EU law, information must be disclosed that is material under both aspects as well as information that is material under only one aspect.</p>
<h4>5. «Comply or Explain»</h4>
<p>The option available under the current law to waive reporting on certain sustainability topics under certain conditions («comply or explain») would no longer be available under the Draft Amendment. The «comply or explain» approach is also not available under the CSRD framework.</p>
<h4>6. New Auditing and Assurance Requirements</h4>
<p>The current law does not impose any audit or assurance requirements on the reporting of non-financial matters. By contrast, under the Draft Amendment, the sustainability information included in the report must be made subject to assurance. Either independent audit firms<a href="#_ftn2" name="_ftnref2">[2]</a> or conformity assessment bodies (<em>Prüfgesellschaft</em>) may provide assurance.</p>
<p>The Federal Council will determine, taking into account international developments, including EU law, whether any assurances from audit or conformity assessment bodies should take the form of a «positive» / reasonable assurance or a «negative» / limited assurance. The EU contemplates introducing a positive reasonable assurance requirement by October 1, 2028.</p>
<p>In addition, in respect of companies subject to an ordinary audit pursuant to article 728a CO, the Draft Amendment would require the statutory auditor to conduct an audit on whether there are material inconsistencies between the information in the sustainability report and the audited standalone and consolidated financial statements. This audit review does not include a material audit of the accuracy of completeness of the information published in the sustainability report.</p>
<h4>7. Shareholder Vote</h4>
<p>The Draft Amendment maintains the requirement that the sustainability report be approved by shareholders at each annual general meeting. The CSRD does not require shareholder approval of sustainability reports. The explanatory report to the Draft Amendment expressly states that the shareholder vote on the sustainability report is binding, and not advisory, contrary to the currently prevailing practice under the existing law.<a href="#_ftn3" name="_ftnref3">[3]</a></p>
<h4>8. Criminal Law Provisions</h4>
<p>The criminal law sanctions for an inaccurate or incomplete report remain unchanged in substance. A fine of up to CHF 100,000 will be imposed on anyone who intentionally makes false statements in the reports, fails to make the required reports, or fails to comply with the legal obligation to keep and store the report.</p>
<h4>9. Timeline</h4>
<p>The Federal Council will determine the date on which the new provisions become effective. Companies will then have two years to adapt to the new law. During this two-year transition period, the current law will apply.</p>
<h6><a href="#_ftnref1" name="_ftn1">[1]</a>   <em>See </em>Federal Council, «Änderung des Obligationenrechts (Transparenz über Nachhaltigkeitsaspekte): Erläuternder Bericht zur Eröffnung des Vernehmlassungsverfahrens», 25-33 (<em>available at </em><a href="https://www.newsd.admin.ch/newsd/message/attachments/88435.pdf">https://www.newsd.admin.ch/newsd/message/attachments/88435.pdf</a>).</h6>
<h6><a href="#_ftnref2" name="_ftn2">[2]</a>   Pursuant to article 6a of the Auditor Oversight Act of December 16, 2005</h6>
<h6><a href="#_ftnref3" name="_ftn3">[3]</a>   <em>See </em>Federal Council, «Änderung des Obligationenrechts . . .» at 36-37.</h6>
<h6><a href="#_ftnref1" name="_ftn1">[1]</a>   <em>See </em>Federal Council, &#8220;Nachhaltige Unternehmensführung: Bundesrat schlägt strengere Regeln für Berichterstattung vor&#8221; (June 26, 2024), <em>available at </em><a href="https://www.admin.ch/gov/de/start/dokumentation/medienmitteilungen.msg-id-101585.html">https://www.admin.ch/gov/de/start/dokumentation/medienmitteilungen.msg-id-101585.html</a>.</h6>
<p>&nbsp;</p>


Homburger_Illu_ZPO_BH_Preview_2020_10 (2)

Swiss Corporate Sustainability Reporting

<p>On December 3, 2021, the Federal Council announced that the indirect counter-proposal to the popular initiative «The Responsible Business Initiative – Protecting human rights and the environment», including the provisions of an implementing ordinance (the <strong>Ordinance</strong>), would enter into force on January 1, 2022. The new statutory provisions, on reporting of non-financial matters and the new due diligence and transparency obligations regarding minerals and metals from conflict areas and child labor will apply for the first time to the financial year beginning one year after the entry into force of the new provisions. This means that companies must apply the new provisions for the first time with respect to the financial year beginning in 2023. The first reports based on the new statutory provisions must therefore be issued in 2024/2025 with respect to the financial year beginning in 2023.</p>
<p>Based on the results of the consultation procedure, the Federal Council has tightened the new statutory regime in certain areas and made clarifications in others.</p>
<p>For example, the Federal Council has limited the exemption applicable to SMEs such that SMEs are only exempt from the new due diligence and reporting obligations if they do not offer products or services that were «patently» manufactured or provided using child labor (Art. 8 of the Ordinance). SMEs are companies which, together with the domestic and foreign companies they control, fall below two of the following thresholds in two consecutive financial years: A balance sheet total of CHF 20 million, sales revenue of 40 million and 250 full-time positions on an annual average.</p>
<p>Furthermore, the general exemption from the due diligence and reporting obligations in relation to recycled metals has been removed. The Ordinance continues to provide for certain exemptions with regard to recycled metals (e.g., no requirement for a notification procedure, no risk management and no audit by an auditing company), but according to the revised provisions, a supply chain policy, a system to trace back the supply chain must nonetheless be established and a report must be prepared with regard to recycled metals (art. 12 para. 3 of the Ordinance). This is in contrast to Regulation (EU) 2017/821, which in relation to recycled metals requires only that companies make their origin determination of the metals public and describe what measures they have taken with regard to this determination.</p>
<p>The new Ordinance requires companies to establish a notification procedure that enables all interested persons to express substantiated concerns about the existence of a potential or actual adverse effect in connection with minerals and metals from conflict and high-risk areas or child labor (Art. 14 of the Ordinance).</p>
<p>The Federal Council has extended the list of the internationally recognized equivalent regulations that companies must adhere to in order to be exempt from the due diligence and reporting obligations with regard to child labor. For this purpose, companies must now apply both ILO Conventions no. 138 and 182, the ILO-IOE Child Labor Guidance Tool for Business and either the OECD Due Diligence Guidance for Responsible Business of May 30, 2018 or the UN Guiding Principles on Business and Human Rights. According to the initial draft Ordinance, in addition to the application of ILO Conventions no. 138 and 182, the application of either the ILO-IOE Child Labor Guidance Tool for Business or the OECD Due Diligence Guidance for Responsible Business of May 30, 2018 would have been sufficient for an exemption from due diligence and reporting obligations.</p>
<p>In other areas, the Federal Council has made clarifications in the Ordinance itself and in the explanatory report to the Ordinance. For example, the Ordinance now clarifies that companies subject to consolidated reporting are exempt from separate reporting (Art. 17 para. 1 of the Ordinance).</p>
<p>In the explanatory report to the Ordinance, the Federal Council has made clear that the documentation required by the Ordinance (cf. Art. 3, 5, 7, 12, 13, 14 of the Ordinance) does not need to be published and hence, business secrets can be kept protected.</p>
<p>The revised explanatory report to the Ordinance also clearly stipulates that due diligence obligations may generally be prioritized and graded according to the associated risks. In particular, risks should be assessed according to the probability of their occurrence and severity of the possible harmful effects, and the measures to be taken are to be prioritized accordingly. The first draft of the explanatory report contained this principle only with regard to the system to trace back the supply chain in relation to child labor.</p>


New ESG due diligence and reporting obligations enter into force

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Homburger News

Homburger will further strengthen its long-standing development partnership with DeepJudge after having been using DeepJudge Search throughout the firm for over a year. The adoption rate has been remarkable, with more than 80% of Homburger's legal professionals incorporating it into their workflow and a level of engagement that is unparalleled compared with other legal tech tools at the firm.

Homburger Further Strengthens Partnership with DeepJudge

<p>Homburger will further strengthen its long-standing development partnership with <a href="https://www.deepjudge.ai/product">DeepJudge</a> after having been using <a href="https://deepjudge.ai/">DeepJudge Search</a> throughout the firm <a href="https://www.homburger.ch/en/news/homburger-partners-with-deepjudge">for over a year</a>. The adoption rate has been remarkable, with more than 80% of Homburger&#8217;s legal professionals incorporating it into their workflow and a level of engagement that is unparalleled compared with other legal tech tools at the firm.</p>
<p>DeepJudge Search connects our firm’s legal experts with our extensive internal data repositories and know how. The tool excels at interpreting the intent of search queries and delivering the most relevant information from our vast array of documents in a multitude of languages. The platform&#8217;s advanced classification capabilities have brought an unprecedented level of granularity to our management system. This intelligent, automated classification enhances efficiency and ensures that the firm&#8217;s collective expertise is instantly available to our experts and fully leveraged across all our service offerings and other LegalTech and AI tools.</p>
<p>«DeepJudge is a cornerstone technology within our tech stack, empowering our professionals daily and on top of that enhancing the capabilities of Generative AI,» remarks David Oser, partner at Homburger. «Having onboarded a variety of Generative AI tools, we recognize that to fully harness their potential, it is essential that we can first retrieve the relevant data that feeds into them. DeepJudge is outstanding in this regard and has become the essential gateway for all new tools and our internal data.»</p>
<p>In our <a href="https://www.homburger.ch/en/news/homburger-partners-with-deepjudge">continuing partnership with DeepJudge</a>, Homburger will focus on supporting the platform&#8217;s further development. The goal is to further enhance DeepJudge&#8217;s value for our legal professionals, including through a seamless integration into our tech stack and optimizing the efficiency of our daily work.</p>
<p>«Homburger, as a leading Swiss law firm, has been an amazing partner to us. It is wonderful to collaborate with firms that actively strive to innovate and embrace technology, all with the ultimate goal of providing the best services and the most sound advice to their clients,» says Paulina Grnarova, CEO and co-founder of DeepJudge.</p>


Harvey.ai

Homburger partners with Harvey

<p>In a landmark move set to redefine the landscape of legal analytics and service delivery in Switzerland, Homburger announces its partnership with Harvey, a legal generative AI platform that helps lawyers enhance their productivity and efficiency. This collaboration marks Homburger as the first Swiss customer of Harvey, heralding a new era of legal solutions powered by cutting-edge AI technology.</p>
<p>As part of the cooperation, Homburger will incorporate Harvey&#8217;s AI tools and analytics into its practice, improving legal research, document analysis and ideation for drafting and negotiation. The partnership showcases our commitment to innovation in legal services and positions Homburger at the forefront of adopting AI solutions in Switzerland&#8217;s legal sector.</p>
<p>Harvey&#8217;s technology platform leverages machine learning and natural language processing to automate and enhance a wide range of aspects of legal work, such as contract analysis, due diligence, litigation strategy and regulatory compliance. By adopting these tools, Homburger aims to significantly improve efficiency, reduce turnaround times for legal research and offer more predictive insights into case strategies for the benefit of our clients.</p>
<p>Flavio Romerio, Managing Partner at Homburger, commented: «Harvey is leading the way in AI innovation, with the most trusted and secure platform in the market. We are thrilled to be Harvey&#8217;s first customer in Switzerland.» David Oser, Partner at Homburger, added: «Harvey and Homburger share fundamental values: Providing a cutting-edge service to our customers by rendering reliable and actionable advice, based on best practices and with new use cases redefining the nuts and bolts of service delivery. Harvey and Homburger are a natural fit.»</p>
<p>Harvey is a leading provider of AI-driven legal technology solutions. Its platform offers innovative tools designed to transform the practice of law, making legal research and analysis more efficient and accessible. Harvey is committed to pushing the boundaries of legal tech and empowering legal professionals with the tools they need to succeed in an ever-evolving landscape.</p>
<p>«We are delighted to partner with Homburger, a leading Swiss law firm that shares our vision of transforming legal services with AI. We are confident that Harvey will enable Homburger to deliver faster and smarter legal solutions to their clients. As the first Swiss customer of Harvey, our partnership with Homburger marks a milestone for us as we expand our presence in the European market.» – Winston Weinberg, co-founder and CEO of Harvey</p>


<p>Homburger has deployed DeepJudge’s <a href="https://deepjudge.ai/product">Knowledge Search</a> as its enterprise search engine following a successful pilot. <a href="https://deepjudge.ai/">DeepJudge</a> is an AI-first company that connects legal professionals to their internal documents using natural language.</p>
<p>Homburger chose DeepJudge’s Knowledge Search for its effortless knowledge retrieval experience, which blends the capabilities of semantic and keyword search, and is powered by the company’s cutting-edge and proprietary technology. The tool is built to handle sensitive legal data with absolute privacy &#8211; no information is shared with external third parties and existing security protocols are respected. DeepJudge offers automatic integration of Knowledge Search with Homburger&#8217;s document management systems via a secure single sign-on and all native ethical walls and access permissions are maintained. Performance of the search has been fine-tuned on our internal enterprise data. Additionally, each document is automatically classified into an extensive taxonomy for easy filtering and AI-predicted tags enrich existing metadata.</p>
<p>«For many years, we&#8217;ve been looking for a search engine that allows us to reuse our internal knowledge effectively. With DeepJudge&#8217;s Knowledge Search, we have found an excellent solution that can navigate millions of internal documents intuitively with natural language, which relieves us from hours of identifying and retrieving relevant information using slow and error-prone keyword searches. We are also working with DeepJudge on developing trustable generative models by using Knowledge Search as a foundation.» shared <a href="https://www.homburger.ch/de/team/david-oser/">David Oser</a>, Partner in M&amp;A at Homburger.</p>
<p>«We have been working with the DeepJudge team over the last year to help shape the product and are very pleased to be able to now deploy Knowledge Search, a platform that is very much tailored to our needs. We see great benefits in leveraging technology to empower our attorneys to do their best work. This helps us to continuously deliver high-quality and efficient performance for our clients and attract the new generation of talent,» added <a href="https://www.homburger.ch/de/team/andreas-muller/">Andreas Müller</a>, Partner in M&amp;A at Homburger.</p>
<p>Paulina Grnarova, CEO and co-founder of DeepJudge, shared, «Homburger is known in the legal industry for their tech-forward approach when it comes to attorney experience. We’re excited to be a part of their journey by delivering highly secure and scalable solutions that ultimately improve productivity and business impact.»</p>
<p><strong>About DeepJudge </strong></p>
<p>DeepJudge, an AI-first company, enables legal professionals to find and navigate their firm’s collective knowledge using natural language. DeepJudge was founded by Paulina Grnarova, Kevin Roth and Yannic Kilcher, all ex-Googlers with PhDs in Artificial Intelligence from ETH Zurich. The team brings advanced Natural Language Processing and Machine Learning capabilities to the legal domain, enabling attorneys to spend their efforts on high-impact strategic work. DeepJudge is committed to offering solutions that are semantic, scalable and secure.</p>


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Oser

Homburger Further Strengthens Partnership with DeepJudge

Homburger partners with Harvey

Homburger partners with DeepJudge to leverage AI-powered Knowledge Search for trustworthy generative models.

Swiss Corporate Sustainability Reporting

New ESG due diligence and reporting obligations enter into force

The Shareholder Rights and Activism Review: Switzerland

Chapter 15: Compensation Rules of Listed Swiss Corporations

ESG reporting and due diligence obligations introduced in Switzerland

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Homburger Further Strengthens Partnership with DeepJudge

Homburger partners with Harvey

Homburger partners with DeepJudge to leverage AI-powered Knowledge Search for trustworthy generative models.

Swiss Corporate Sustainability Reporting

New ESG due diligence and reporting obligations enter into force

The Shareholder Rights and Activism Review: Switzerland

Chapter 15: Compensation Rules of Listed Swiss Corporations

ESG reporting and due diligence obligations introduced in Switzerland

Join the Team

David Oser

Career

Languages

Bar Registration

Teams

David
Oser