A snapshot of the state of Swiss companies’ climate action

Integrating an understanding of the impacts of climate change into a company’s risk assessment acknowledges the climate-related risks and opportunities businesses are facing and could face in the future. To do so, companies employ climate scenario analysis, a science-based, methodical process of analyzing potential financial impacts that may arise within different plausible future scenarios. This way, companies can better understand the risks and opportunities that may materialize as a result of various future climate trajectories. Organizations like the Intergovernmental Panel on Climate Change (IPCC), International Energy Agency (IEA) and the Network for Greening the Financial Systems (NGFS) have developed a range of climate scenarios that companies may use for their own assessment.

Climate risks are complex as they stem from interrelated and dynamic physical, societal, economic and regulatory changes related to climate change and often stretch beyond traditional corporate time horizons. Conducting scenario analysis is a useful way to identify these risks. Its value as a tool has been recognized by its integration into the TCFD and IFRS S2 frameworks and European standards like ESRS E1. 

In the Swiss market, companies are progressing well in conducting scenario analysis, though quantitative analysis of financial impact is generally less mature. Among companies analyzed, all disclosed that they conducted climate scenario analysis, which is higher than the global average and a natural outcome of the mandatory status of the Ordinance on Climate Disclosures and its linkage to the TCFD. In comparison, the EY Global Climate Action Barometer showed that 67% of companies had conducted scenario analysis in 2024, 71% of whom did so in a quantitative way. At the same time, there is room for improvement in the quality of Swiss companies’ scenario analysis, as 47% still disclosed their results qualitatively. Quantitative modeling can further fortify companies’ risk assessments. Increasing understanding of physical and transition risks and leveraging opportunities for new products and services may mean shifting the way a business delivers on its value proposition. Thus, ensuring results of a scenario analysis are robust can better inform companies’ transition plans, leading to a more resilient business model.  

As companies advance in the development of their transition plans, they may begin to better understand the investment that climate change action and adaptation takes, planning for these costs in the future. 31% (4 of 13) of analyzed Swiss companies with transition plans disclosed capital expenditure (CAPEX) or operational expenses (OPEX) required to implement climate mitigation and adaptation actions. The low levels of disclosure are comparable to the global findings in the EY Global Climate Action Barometer which found that only 17% of companies report CAPEX and 4% report OPEX investment in support of transition planning.

A well-developed transition plan can become a core tool for building a resilient business model that delivers value for the environment and society. Swiss companies need to further refine their transition plans, doing so in a methodical and iterative way that responds to the evolving nature of sustainability challenges.

Setting emissions reductions targets and measuring progress creates a way to monitor accountability for delivering on climate mitigation actions. The practice of target-setting and measuring progress on emissions reductions through metrics is required as part of the TCFD, IFRS S2 and ESRS E1. Beyond compliance, measuring emissions across Scopes 1, 2 and 3 reveals hotspots where a company's decarbonization actions could be most effective. Internally, targets and metrics are a tool for harmonizing understanding and efforts across company functions and providing a progress dashboard for internal stakeholders. Ultimately, companies can use metrics to evaluate whether they are on track in their transition to a low-carbon economy, thus providing useful information for a wide range of stakeholders, including investors. 

93% (14 of 15) of analyzed Swiss companies disclose that they have set some type of emissions target, disclosing targets per scope and time horizon. Setting targets across the value chain ensures that companies are viewing their contributions to global emissions holistically and signals expectations around achieving reduction goals for their suppliers. 

Almost all sampled companies disclosed both near-term and long-term targets across Scopes 1, 2 and 3, with the majority setting both near-term and long-term targets in alignment with the Paris Agreement’s target of limiting global temperature increase to 1.5 degrees. 67% of Swiss companies analyzed had both near-term and long-term targets validated by the Science Based Targets Initiative (SBTi) compared to 24% of global companies included in the EY Global Climate Action Barometer. When it comes to reporting on progress toward targets, the companies analyzed show high maturity in disclosing across Scopes 1, 2 and 3. In addition to reporting on Scopes 1 and 2, 87% of companies reported on Scope 3 at a disaggregated level.

However, only 27% (4 of 15) of analyzed companies explicitly reported that their transition plans were in alignment with Switzerland’s goal of reaching net-zero by 2050. While the Ordinance on Climate Disclosures that came into effect in January 2024 required alignment with “Swiss climate goals”, the recent proposal to clarify provisions of the Ordinance on Climate Disclosures makes an explicit connection to the Swiss Climate and Innovation Act which states that all companies must provide a roadmap to be net-zero by 2050. Lower alignment on this point is understandable as this additional provision is relatively unique to the Swiss context and companies may face uncertainty on how best to comply with this requirement. Further, financial sector companies face slightly different requirements from those in the real economy⁴.

Overall, we found that the Swiss companies analyzed showed high maturity in the foundations of climate reporting: scenario analysis, emerging transition plans, target-setting and metrics. At the same time, it is not clear that Swiss companies are leveraging the full potential of these foundational elements. As more rigor and detail are introduced into scenario analysis, and transition plans become more reflective of needed business model adaptation, the full value of these tools can be recognized. The explicit reference to IFRS S2 and ESRS E1 in the proposed revised Ordinance on Climate Disclosures may indicate greater future harmonization of reporting on climate matters in Switzerland. As the Omnibus Simplification Package is reshaping European reporting requirements, there is an opportunity to focus on closing the gap between climate reporting and climate action in Switzerland and beyond. Companies must go beyond treating the provisions as solely reporting requirements in order to really benefit from the exercise – and to ensure that we successfully transition to a low-carbon economy. A focus on transition planning, clear alignment with Switzerland’s net-zero target, and operationalizing climate ambition remains imperative.

Summary

The Swiss market is moving in the right direction with the Swiss Ordinance on Climate Disclosures but is not realizing the full value of reporting on climate risk yet. Strengthening climate scenario analysis through quantitative modeling and quantifying mitigation actions can push companies from compliance to action. 

Acknowledgment

We thank Carolina Hock, Sofia Luz, and Darja Mihailova who contributed to this article.