On 1 April 2026, the Federal Council introduced the draft Sustainable Corporate Governance Act as a counterproposal to the Responsible Business Initiative 2.0. The proposed legislation seeks to align Swiss law with the latest amendments to corporate sustainability regulations in the EU by instituting broadly framed sustainability due diligence obligations and enhanced sustainability reporting requirements for large to very large Swiss companies. In addition, the draft outlines the creation of a special liability framework and introduces supervisory mechanisms to ensure compliance.
1) Context
In 2020, the Responsible Business Conduct Initiative (RBCI) proposed a legally binding regime to hold parent companies accountable for environmental and human rights violations occurring in their supply chains. Though the initiative was rejected by a very narrow margin, the Federal Council responded by enacting a counter-proposal to embed non-financial reporting obligations, specific transparency requirements for commodity traders, as well as specific due diligence requirements concerning conflict materials and child labor into Swiss corporate law. These requirements are set forth in articles 964a-l of the Code of Obligations (CO).
By 2023, discussions surrounding corporate responsibility had gained new momentum. The EU adopted two key new regulations, the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD). Building on the then current version of the CSDDD, a new constitutional initiative was launched in Switzerland in 2025, the so-called Responsible Business Conduct Initiative 2.0 (RBCI 2.0). This initiative proposes to introduce broadly framed sustainability due diligence obligations, a requirement for businesses to align their activities with the 1.5°C temperature rise goal of the Paris Agreement, as well as a specific civil liability and supervisory regime to enforce these obligations. In 2025, due to the implementation of the so-called Omnibus-I “simplification package”, the CSRD and CSDDD underwent significant revisions, resulting in notable reductions in their scope and content. In response to these developments, in April 2026, the Federal Council tabled a draft legislative proposal, the Draft Sustainable Corporate Governance Act (Draft SCGA). A public consultation was launched to gather comprehensive feedback, running until 9 July 2026.
2) Sustainability Due Diligence
The Draft SCGA proposes mandatory sustainability due diligence requirements for (very) large companies operating in Switzerland, with the primary aim of preventing and mitigating risks related to human rights violations and environmental damage throughout their global supply chains.
Under the Draft SCGA, companies exceeding specific thresholds for workforce size (5,000 full time employees, FTEs) and global turnover (CHF 1.5 bn) are required to implement a formal system of risk-based human rights and environmental due diligence (HREDD, here referred to as sustainability due diligence). It is currently expected that only around 30 Swiss companies would meet this threshold and thus fall into the scope of the new requirements. Most of these very large Swiss companies would likely meet the respective thresholds for non-EU companies under the CSDDD as well.
Based on the model of HREDD under the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct (OECD Guidelines) and the UN Guiding Principles on Business and Human Rights (UNGP), as adapted by the CSDDD, the framework includes, in particular, the identification, assessment, prevention, and minimization of adverse impacts related to environmental degradation, climate change, forced labor, child labor, etc. Notably, the Draft SCGA adopts the concept of the chain of activity from the CSDDD. This limits the due diligence responsibility mainly to the upstream value chain but imposes only limited responsibility regarding the downstream value chain.
Closely mirroring the respective obligations under the CSDDD, as well as the due diligence requirements as outlined in OECD guidance, sustainability due diligence under the Draft SCGA requires in-scope businesses to:
a) develop a strategy and a code of conduct to be implemented into corporate policies and risk management systems;
b) identify, assess, and prioritize potential and actual adverse impacts on human rights and the environment;
c) prevent potential negative impacts and develop a prevention action plan;
d) address any actual negative impacts, minimize their extent, and develop a corrective action plan;
e) provide remedy for actual negative impacts that have occurred;
f) involve stakeholders;
g) set up and maintain a reporting mechanism and internal complaint procedure for interested parties;
h) provide appropriate support to small and medium-sized enterprises in the chain of activity; and to
i) monitor the effectiveness of the above measures.
Furthermore, companies must ensure that their business partners adhere to the code of conduct. They must also continuously document how they have discharged their due diligence duties. The company‘s top executive body, typically the board, must publicly report on the fulfilment of the company‘s due diligence duties. Moreover, companies must cooperate with the newly established supervisory authority (see section 5 below). Notably, the supervisory authority may request that the due diligence report be audited based on the elevated reasonable assurance standard.
Many large Swiss companies have already voluntarily implemented sustainability due diligence processes based on best industry practices and international standards for responsible business conduct, such as the OECD Guidelines and the UNGP. Nevertheless, the Draft SCGA would make these established business practices mandatory for all in-scope companies, leading to increased scrutiny and standardization.
The Draft SCGA retains the status quo regarding the special due diligence regime for (i) child labor risks and (ii) conflict minerals and metals (conflict materials), currently outlined in articles 964j–l CO. Importantly, these due diligence requirements do not primarily arise from company size (though there is an exception for SMEs with respect to child labor), but are triggered when a company identifies relevant potential risks in its supply chain. The due diligence requirements relating to child labor and conflict materials are carried over into a dedicated chapter of the Draft SCGA without major substantive changes, thereby largely preserving the existing framework.
3) Reporting Obligations
Building on the foundations laid by the CSRD, the Draft SCGA proposes a substantially amended sustainability reporting framework. In-scope Swiss companies (companies with over 1,000 FTE and an annual global turnover of over CHF 450 million) are required to disclose comprehensive sustainability information, which is split into four topics: environment, social matters, human rights issues, and governance.
As part of its requirements for reporting on environmental matters, the Draft SCGA mandates that companies report on their progress toward achieving the net zero goal of limiting the Earth‘s temperature rise to 1.5°C above pre-industrial levels by 2050 (i.e., in alignment with the Paris Agreement). This essentially entails the development and publication of a transition plan. Such obligation would not constitute an entirely new requirement, but is largely aligned with the existing legal obligations for large companies in Switzerland under the Climate Reporting Ordinance and the Climate and Innovation Act.
To ensure consistency and comparability, the disclosures must be aligned with the European Sustainability Reporting Standards (ESRS) or another equivalent standard for sustainability reporting. Compared to the current obligations (articles 964a-c CO), reporting in line with the ESRS leads to more detailed and more standardized reporting. The Federal Council has yet to determine whether reporting in line with the standards issued by the International Sustainability Standards Board (ISSB), potentially in conjunction with the Global Reporting Initiative standard (GRI), will be recognized as equivalent.
A major novelty of the Draft SCGA is the proposed introduction of mandatory verification of sustainability reports. Under the proposal, companies must engage third-party auditors to review and validate their reports, under the limited assurance standard. Furthermore, the draft requires companies to make their reports publicly available in a digital format according to an internationally recognized standard.
Similar to the current law (article 964c CO), the sustainability report must be approved and signed by the board. Additionally, and clarifying similar requirements under the current law, the Draft SCGA stipulates that the report must be presented to the general assembly for a binding vote; if the general assembly rejects the report, the company must nevertheless publish the report but mark it as non-approved.
4) Indirect Effects and Protections for Business Partners
Although the thresholds for due diligence and reporting obligations to apply are set (very) high, companies that fall outside the scope of these requirements (including SMEs) will still be indirectly affected by the new provisions — likely to a greater extent than they are already today. This is primarily because in-scope companies must obtain information from their business partners to comply with their own reporting and due diligence obligations.
Specifically, in relation to due diligence obligations, in-scope companies are explicitly required to extend their due diligence responsibilities to their business partners by ensuring adherence to their code of conduct. Mirroring EU law, the Draft SCGA introduces certain safeguards, including the use of value-chain caps. These caps limit the extent of information that in-scope companies may request from smaller companies — defined as those with fewer than 1,000 FTEs for sustainability reporting purposes and fewer than 5,000 FTEs for due diligence obligations.
5) Liability and Supervision
Under current legislation, article 325ter of the Criminal Code (CC) stipulates that making false or misleading statements in due diligence and sustainability reports, or failing to document and retain such reports, is punishable by a criminal fine of up to CHF 100,000 (or up to CHF 50,000 in cases of negligence). This fine is imposed on the responsible individuals (e.g., board members or the sustainability officer) and is not a company fine. The Draft SCGA retains this provision; however, negligence shall no longer be punishable.
Currently, the law does not expressly address civil liability for violations of due diligence (and reporting) obligations, thus tacitly deferring the question to general rules of (extra-contractual) civil liability and criminal enforcement under article 325ter CC. The Draft SCGA proposes to introduce a special civil liability regime and outlines two potential approaches. Under the first variant, civil liability would be determined according to the general rules under the CO, complemented by a broadly framed lex specialis provision in the Draft SCGA (article 16). While companies would not be held liable for the actions of their business partners, they would bear liability for damages caused abroad if they intentionally or negligently breached their due diligence obligations. The second variant, by contrast, does not include a specific provision establishing civil liability for such breaches, thereby omitting explicit rules in this regard, while still excluding liability for the actions or omissions of business partners. The Explanatory Report to the Draft SCGA states that the second variant would leave room for liability under general provisions of extra-contractual liability, in particular articles 41, 55 and 722 CO.
In addition to the criminal and civil enforcement regimes outlined above, the Draft SCGA proposes the creation of a new supervisory authority to oversee whether companies comply with their sustainability reporting and due diligence obligations. The Federal Council has proposed assigning this responsibility to the Federal Audit Oversight Authority (FAOA), which would be renamed the Federal Audit and Sustainability Oversight Authority (FASOA). The FASOA would be granted extensive powers, including the ability to accept complaints, audit companies using a risk-based approach, and collaborate with other authorities, both domestic and foreign. It would also have the authority to impose sanctions where appropriate. In less severe cases, the FASOA could issue reprimands, while in more serious instances, it could prohibit unlawful conduct or require companies to take corrective measures. Further enforcement measures available to the FASOA would include ordering the disgorgement of profits and imposing exclusion from public tenders for up to five years. Additionally, the FASOA would have the authority to levy pecuniary administrative sanctions of up to 3% of a company‘s worldwide turnover.
6) Conclusion and Outlook
With the introduction of the Draft SCGA in 2026, the Federal Council has taken a step toward aligning Switzerland‘s sustainability framework with that of the EU, aiming to create a level playing field while avoiding a Swiss finish. The Draft SCGA proposes significant amendments to current legislation, including mandatory sustainability due diligence requirements, enhanced sustainability reporting obligations, and a new liability and supervisory regime. As discussions surrounding the Draft SCGA evolve and public consultations contribute to shaping its final version, the proposal seeks to establish a regulatory framework that aligns with emerging sustainability standards while addressing business expectations.
Based on the feedback received from the consultation, the Federal Council will produce a final draft in the coming months. Provided that the initiative is not withdrawn by the initiators, the vote on RBCI 2.0 and its counter-proposal is currently anticipated to take place in 2028.
Andreas Hösli (andreas.hoesli@kellerhals-carrard.ch)