Ethos supports consultations with shareholders who object to sustainability reports | News

The Ethos Foundation in Switzerland is proposing a formal consultation with key shareholders in the event that corporate sustainability reports are rejected at the companies’ annual general meetings (AGM).

“This solution is inspired by the UK Corporate Governance Code, which requires shareholder surveys for agenda items where more than 20% agree and aims to ensure accountability and transparency,” said Matthias Narr, Head of Engagement at Ethos, in a LinkedIn -Contribution.

The foundation proposes to include a reference to the rejection and the results of consultations with shareholders in the companies’ sustainability reports, according to a statement to the Swiss government (Federal Council).

The Swiss government has launched a consultation, which ended yesterday, to amend the law on corporate sustainability reporting (Swiss Code of Obligations) to align it with the European Union’s Corporate Sustainability Reporting Directive (CSRD).

The government has proposed extending the scope of the law in Switzerland to around 3,500 companies with 250 employees, a balance sheet total of CHF 25 million (€26.6 million) and a turnover of CHF 50 million. Today the obligation only applies to around 300 companies with 500 or more employees, a balance sheet total of CHF 20 million and a turnover of CHF 40 million.

In its statement, Ethos toughened up the government and called on it to extend the scope of the law to all public interest companies, 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 amendment to 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 crucial that the chosen standards take into account the principle of so-called double materiality, as is the case with European standards, and that the calculation bases for the most important indicators are identical,” the statement said.

The proposal to have sustainability reports audited by third parties is positive, also to avoid greenwashing, said the foundation, but the law needs to be “tightened” to require companies to submit all of their sustainability reports to external control and not just some of them Indicators.

In its statement to the government, Ethos emphasized that the majority of shareholders of companies listed in Switzerland are international investors and that 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 largely take transparent non-financial information into account when making their investment decisions,” it continues.

The risk is that investors or ESG rating agencies downgrade companies’ ratings and turn away from the market due to a lack of transparency.

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