Indirect Counterproposal to the Responsible Business Initiative: Swiss Federal Council Launches Consultation on SCGA

On 2 April 2026, the Swiss Federal Council published the preliminary draft of a Federal Act on Sustainable Corporate Governance (SCGA) as an indirect counterproposal to the second Responsible Business Initiative submitted in May 2025. The draft is closely modelled on the EU’s current sustainability regulations, in particular the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD), each in the version as amended by the Omnibus Directive. 

The SCGA has been published for public consultation until 9 July 2026. Companies and other interested stakeholders have until then to submit comments and put forward any proposals for amendment.

Initial situation

Although approved by a majority of Swiss voters, the first Responsible Business Initiative was rejected by a majority of the cantons, which led to the adoption of the Federal Council's indirect counterproposal that gave rise to new provisions in the Swiss Code of Obligations (CO) on non-financial reporting, due diligence and transparency obligations relating to minerals and metals from conflict-affected areas and to child labour. These new provisions entered into force on 1 January 2022.

A new responsible business initiative (Responsible Business Initiative 2.0) was launched in January 2025 and submitted on 27 May 2025. The Responsible Business Initiative 2.0 would introduce a broader risk-based due diligence duty for large multinational companies, climate-related obligations tied to emissions reductions, civil liability for breaches of due diligence obligations, and a new supervisory authority with sanctioning powers. Small and medium enterprises would be excluded while large Swiss companies and certain high-risk sectors, especially commodities, would be covered. 

The Federal Council considers the initiative excessive and recommends rejecting it. Recognising the importance of responsible corporate governance and the need for international action, the Federal Council submitted a new indirect counterproposal in the form of the SCGA. This preliminary draft follows the goals of the Responsible Business Initiative 2.0 while reflecting existing rules on the safeguarding of human rights and protection of the environment. In doing so, it draws on international standards, in particular the CSRD and the CSDDD as revised by the EU Omnibus Directive. According to the Federal Council's stated objective, the draft is intended to ensure better alignment with the international regulatory environment and is not intended to contain any "Swiss finish".

Comprehensive due diligence obligations to protect human rights and the environment

The preliminary draft is intended to introduce new comprehensive, risk-based due diligence obligations in the areas of human rights and the environment. These go significantly beyond the currently applicable regime where only companies whose activities involve risks in the areas of conflict minerals and metals and child labour are subject to due diligence requirements. Under the SCGA, the scope would cover:

• Swiss companies which, together with their controlled entities in Switzerland or abroad, in two consecutive financial years, either have more than 5,000 full-time positions on annual average and achieve worldwide turnover of more than CHF 1.5 billion, or earn more than CHF 75 million from licence or franchise agreements with independent third-party undertakings and at the same time achieve more than CHF 275 million worldwide turnover, provided that these agreements ensure a common identity, a common business concept and the application of uniform business methods.
   
• Foreign companies which, together with their controlled entities in Switzerland or abroad, in the last financial year either have generated turnover of more than CHF 1.5 billion on the Swiss market or have generated more than CHF 75 million in Switzerland from franchise or licence agreements and, at the same time, have generated more than CHF 275 million turnover on the Swiss market with independent third-party undertakings, provided that these agreements ensure a common identity, a common business concept and the application of uniform business methods. Companies meeting these requirements must designate an authorised representative in Switzerland and authorise this representative to cooperate with the supervisory authority.

Both domestic and foreign companies may be exempted from the modalities for implementing the due diligence obligations if they comply with an equivalent, internationally recognised due diligence framework.

According to the explanatory report, around 30 companies would fall within the scope of the new due diligence obligations and must, on a risk-based basis, examine whether their business activities, those of their controlled entities and those of their business partners in the chain of activities have actual or potential negative impact on compliance with binding internationally recognised provisions for the protection of human rights and the environment. To this end, companies must inter alia develop a strategy, implement codes of conduct, prevention measures, corrective action plans, stakeholder engagement, ongoing monitoring and evaluation of the effectiveness of the measures taken.

Furthermore, covered companies would have to document their compliance with due diligence obligations and issue an annual due-diligence report, which would be subject to limited assurance by an independent auditor licensed under the Auditor Oversight Act (AOA) and could, in some cases, be subject to reasonable assurance. The report must be published within six months following the end of the business year and concurrently sent electronically to the supervising authority. To avoid duplication, companies preparing a sustainability report would not need to issue a separate due diligence report.

The preliminary draft also contains – like the CSDDD in the EU – explicit relief for small and medium-sized enterprises (SMEs), which do not fall within the scope of the SCGA and are not directly subject to due diligence obligations, but may be indirectly affected as business partners or as part of the chain of activities. Companies subject to due diligence obligations are required under the SCGA to provide appropriate support to SMEs in the chain of activities (e.g. by providing templates, online platforms, factsheets or helpdesks, and financial support for services such as training or workshops). In addition, companies subject to the SCGA may request information from business partners with fewer than 5,000 FTE only if such information is not otherwise available. This is intended to prevent SMEs from being disproportionately burdened administratively or financially by the passing-on of due diligence obligations or by extensive information requests.

Adjusted sustainability reporting

The SCGA would incorporate the provisions of the current articles 964a et seq. CO on non-financial reporting, while aligning them with the scope under the EU Accounting Directive (Directive 2013/34/EU of 26 June 2013) and the CSRD in the version as revised by the EU Omnibus Directive. The preliminary draft replaces the existing reference to companies of public interest, particularly listed companies and certain supervised banks and insurance undertakings, with a purely size-based approach with significantly higher thresholds. Under the SCGA, only the following companies would be in scope:

• Swiss companies which, together with their controlled entities in Switzerland or abroad, in two consecutive financial years, have more than 1,000 full-time positions on annual average and achieve worldwide turnover of more than CHF 450 million.
   
• Controlled entities or branches in Switzerland of a company with its registered office abroad, if they, together with the entities they control in Switzerland and abroad, have each achieved more than CHF 450 million turnover on the Swiss market in the last two consecutive financial years.

The following companies are exempt from reporting obligations: 

• companies that already prepare an equivalent report under foreign law; 
   
• subsidiaries whose parent company is already subject to reporting obligations or prepares an equivalent report under foreign law; and 
   
• holding companies.

As a result of this adjustment, the Federal Council now assumes that only approximately 110 companies will be subject to reporting requirements, compared with around 200 companies under the current law.

Reporting content is also being adapted. The sustainability report would need to explain both the impact of the company on sustainability issues and the impact of those issues on the company’s business development, performance and financial position. New requirements include, inter alia, disclosures on the status of achievement of the net-zero greenhouse gas emissions target by no later than 2050 (1.5° C), the timeline for the sustainability targets, the role and expertise of the highest governing or management body, any incentive systems at management level, and the risk-based due diligence applied. Furthermore, the sustainability report must comply with the sustainability reporting standard used in the European Union or another equivalent standard, be prepared in an electronic format meeting internationally recognised standards, be subject to limited assurance from an external licensed auditor, and be approved by the board of directors and by the shareholders’ meeting.

New supervisory authority and two liability variants

State enforcement is also new. The existing Federal Audit Oversight Authority would become the Federal Audit and Sustainability Oversight Authority. Its tasks would include maintaining a public list of supervised companies, monitoring formal compliance of due diligence and sustainability reports, publishing management, due diligence, audit and sustainability reports, and verifying compliance with due diligence and transparency duties. The authority would receive notifications of possible violations, conduct investigations, order administrative measures and impose pecuniary administrative sanctions. In the event of a breach, the supervisory authority could issue a warning, order corrective actions, make a formal finding, or confiscate profits. The range of sanctions further extends to exclusion from public procurement for up to five years, pecuniary administrative sanctions of up to 3% of worldwide turnover, and the publication of a final decision as a reputational sanction.

Regarding liability, the Federal Council deliberately presents two variants. The first variant contains a specific and explicit statutory fault-based liability for companies that intentionally or negligently breach their general due diligence obligations and thereby cause damage abroad. The second variant refrains from a specific liability provision and essentially leaves the matter to the Code of Obligations and its general liability rules. In both cases, companies would not be liable for the conduct of their business partners. Any dispute would first have to be submitted through a special conciliation procedure before any proceedings on the merits. 

It is noteworthy that the Federal Council proposes to introduce specific statutory liability rules, although the CSDDD, in its current version, no longer provides for a harmonised liability regime at EU level and implementation at member-state level is not yet complete.

Due diligence obligations in the area of conflict minerals/metals and child labour to be maintained as a separate chapter

The due diligence and transparency obligations regarding conflict minerals/metals and child labour, which are already anchored in the Code of Obligations, would be transferred into a separate chapter of the SCGA with minor formal adjustments. In the area of conflict minerals/metals, the EU has a similar regime and the Swiss regulation is closely aligned with European requirements. Regarding child labour, however, the Federal Council is maintaining an autonomous Swiss special regime, for which there is no direct equivalent at EU level in this form. In view of the stated alignment with EU law and the Federal Council’s expressed intention that the SCGA should not contain any "Swiss finish", this is not self-evident. A special regime within the framework of a broader forced-labour approach following the EU would appear more obvious.

It is also worth noting that these provisions are to be transferred into a separate special chapter. Neither the new liability rules nor the administrative supervision and measures under the fourth chapter would apply in this area. Enforcement would remain limited to a criminal provision, which would even be further reduced compared to the current situation. Only intentional false reporting, failure to report, or breach of the obligation to retain reports would be punishable with fines of up to CHF 100,000. Negligent conduct would no longer be punishable. Moreover, a violation of the substantive due-diligence obligations is already not punishable today and would not be punishable under the preliminary draft either.

Finally, the Federal Council’s explanations on the so-called "reasonable suspicion" of child labour are noteworthy. This currently constitutes the threshold for the applicability of the due diligence and transparency obligations in the area of child labour and frequently leads to uncertainties in practice. According to the explanatory report, when carrying out the suspicion check, academic writings and case-law relating to anti-money-laundering legislation may also be relied on in addition to the relevant OECD guidance. In this context, indications, then concrete observations, and finally reasonable suspicion are to be examined. According to the explanatory report, however, companies cannot be required to systematically review all products and services for a potential suspicion of child labour. They must, however, "exercise vigilance". As soon as they harbour a suspicion, they must initiate investigations in order to clarify the situation. The decisive practical question is therefore likely to remain how extensive and in-depth the initial examination for indications must be. In any event, the debate surrounding the suspicion check is likely to ease if – as provided for in the preliminary draft – the criminal provisions are limited to intentional conduct and administrative supervision, and measures do not apply in this area.

Opportunity to participate now

The SCGA preliminary draft is not yet binding applicable law. Until 9 July 2026, companies and other interested stakeholders may submit comments on the draft in the consultation procedure and file concrete proposals for amendments or additions. Possible topics for such a submission may include further alignment with EU law, the design of supervision and liability, the protection of small and medium-sized enterprises, the recognition of equivalent frameworks as well as the relationship between the new comprehensive due diligence obligations and the special provisions on conflict minerals/metals and child labour, including the question whether and in what form the special provisions in the area of child labour are to be maintained.

Sustainability remains a key corporate governance issue, and the SCGA highlights the Federal Council's intention to impose additional specific human rights and environmental obligations on large Swiss companies, which should begin preparations to face these requirements and challenges. "Out-of-scope" companies should remain alert since they may still be affected through chains of activities or business partnerships.

For more information on the SCGA, contact your CMS client partner or the CMS experts who contributed to this article. 

Access the draft legislation here for further reference: Laufende Vernehmlassungen | Fedlex