Sustainable Corporate Governance – The Preliminary Draft NUFG

With the Federal Act on Sustainable Corporate Governance (NUFG), the Federal Council is departing from the practice of amending the Swiss Code of Obligations (CO) on a piecemeal basis. What is today set out in individual sections of accounting law will form the core of a separate act that goes considerably further, providing for liability for damage caused abroad, supervision backed by the power to impose sanctions and a special set of procedural rules. According to the Federal Council’s estimate, some 30 large companies would be subject to the extended due diligence duties – the number affected is considerably higher.

From the Code of Obligations to a Special Act

After the first Responsible Business Initiative failed to secure the required majority of the cantons in 2020, its proponents submitted a second proposal in May 2025. The Federal Council recommends rejecting the initiative and has put forward the NUFG as an indirect counter-proposal. The principal benchmark is, however, less the initiative itself than European Union law. The draft follows the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD), as amended by the Omnibus Directive of February 2026, which regulate standardised sustainability reporting and corporate due diligence obligations throughout the supply chain. In particular, the preliminary draft adopts the relevant numerical thresholds without modification. The consultation procedure ran from 2 April to 9 July 2026.

The current provisions on non-financial reporting (Arts. 964a–964c CO) and on minerals and metals from conflict-affected areas and child labour (Arts. 964j–964l CO) will be repealed and incorporated into the NUFG in an expanded form, as will the criminal provision of Art. 325^ter SCC. Politically, the bill remains linked to the initiative, as it will only be published following the withdrawal or rejection of the initiative (Art. 46 para. 2 NUFG). The existing law will continue to apply to ongoing financial years and to financial years commencing within two years after the NUFG enters into force (Art. 45 NUFG).

The Companies Concerned

The extended due diligence duties apply to companies which, together with their controlled entities, exceed 5,000 full-time equivalents and a worldwide net revenue of more than CHF 1.5 billion in two consecutive financial years (Art. 4 para. 1 lit. a NUFG). They must identify adverse impacts on human rights and the environment on a risk basis, prevent such impacts and remedy those that have materialised (Art. 6 NUFG). What is required, therefore, are not declarations but demonstrable processes such as a code of conduct, prevention and corrective action plans, a complaints procedure and monitoring of effectiveness, on which they must also report annually (Art. 7 NUFG).

The sustainability reporting obligation reaches further. It applies from 1,000 full-time equivalents and CHF 450 million in net revenue (Art. 9 para. 1 NUFG) and is likely to capture around 100 companies. The emphasis here lies on verification, since the report must in future be reviewed by an approved audit firm with limited assurance (Art. 13 NUFG). Companies domiciled abroad are also caught where they generate the relevant revenue on the Swiss market (Art. 4 para. 2 and Art. 9 para. 2 NUFG). They must additionally appoint an authorised representative in Switzerland.

The Indirect Effect on SMEs

For small and medium-sized enterprises, what is decisive is not the scope of the act but the contractual practice of those bound by it. The latter must ensure that their business partners comply with the code of conduct (Art. 6 para. 3 lit. c NUFG) and may request information from them, subject to the protection of manufacturing and trade secrets (Art. 6 para. 5 NUFG). The draft, however, deliberately limits this burden of enquiry. Information may be requested from business partners with fewer than 5,000 full-time equivalents only where it is not otherwise obtainable (Art. 6 para. 4 NUFG), and a corresponding value-chain cap applies to reporting (Art. 12 para. 4 NUFG).

A duty set out in the annex to the draft has a broader reach. The notes to the annual accounts must in future state whether the thresholds are met (Art. 959c para. 2 no. 2bis CO), and companies falling within the scope of the act must notify the supervisory authority of their own accord (Art. 8 para. 1 NUFG). Assessing one’s own status thus becomes a statutory duty irrespective of the outcome of that assessment.

Liability as the Centrepiece

It is the third chapter that has generated the most debate. The main proposal establishes a specific fault-based liability modelled on Art. 41 CO. A company that intentionally or negligently breaches its due diligence duties is liable for damage caused abroad, exclusively under that provision (Art. 16 NUFG) and jointly and severally with the other companies liable in damages (Art. 17 NUFG). According to the explanatory report, there is no concurrence of claims with Art. 41 and 55 CO, which spares injured parties the task of attributing the conduct within the group while at the same time depriving them of the general bases of liability. The alternative variant put up for discussion dispenses with a separate provision and leaves the matter to the Code of Obligations.

Both variants exclude liability for the conduct of business partners (Art. 15 para. 2 NUFG). Therein lies a discontinuity, as the due diligence duties extend across the entire chain of activities whereas civil responsibility stops at the boundary of the group. Failures within the supply chain thus remain open to supervisory sanction without giving rise to liability.

Procedurally, too, the draft goes further. The claimant may request the disclosure of evidence, provided it shows the claim as well as the necessity and relevance of that evidence to be credible (Art. 19 NUFG). The limitation periods of five and twenty years respectively (Art. 18 NUFG) are considerably longer than those under Art. 60 para. 1 CO. By virtue of a new conflict-of-laws rule, claims are governed by Swiss law (Art. 139a draft PILA), must first be submitted to a special cantonal conciliation authority (Art. 212a et seq. draft CPC) and are adjudicated by a single cantonal instance (Art. 5 para. 1 lit. j draft CPC).

Supervision and Sanctions

Supervision is entrusted to the Federal Audit Oversight Authority, expanded into the Federal Audit and Sustainability Oversight Authority (Art. 20 NUFG). It maintains a public register of supervised companies (Art. 21 NUFG), receives reports of suspected breaches (Art. 22 NUFG) and reviews compliance on a risk basis, if necessary even on site (Art. 23 NUFG). Its toolkit ranges from a reprimand through substitute performance, the transfer of corporate-body powers to third parties and the disgorgement of profits to exclusion from public procurement for up to five years (Art. 30 NUFG) and the publication of final decisions (Art. 32 NUFG). The final step is an administrative sanction of up to three per cent of worldwide net revenue (Art. 31 NUFG).

Conclusion Whether the NUFG will become law in this form remains open. Business associations are calling for tangible relaxations, whereas the initiators are pressing in the opposite direction. Regardless of the outcome, a sober stocktaking is advisable already now as regards the thresholds on a consolidated basis, the eligibility of existing CSDDD and CSRD processes for the exemption under Art. 5 NUFG, the information and code-of-conduct clauses in supplier contracts, and the auditability of the data collected. The transitional regime of Art. 45 NUFG allows some two years for this, which should be borne in mind when establishing robust processes along the supply chain.