Navigating Key Topics and Integrating Sustainability in Remuneration Systems
Environmental, Social, and Governance (ESG) considerations have become increasingly vital in shaping business strategies worldwide. Switzerland prioritizes sustainability and corporate responsibility, hence, understanding the intersection of ESG and labor law is essential for businesses. This article explores key topics and provides insights into how companies can incorporate ESG principles into their remuneration systems.
Swiss companies increasingly recognize the importance of ESG factors. Integration of ESG principles into labor practices involves promoting fair wages, diversity and inclusion, and fostering a healthy work-life balance.
For example, to promote gender equality in large public companies, minimum target gender quotas have been introduced under a "comply or explain" regime in the Swiss Code of Obligations for large, publicly traded companies on 1 January 2021. In particular, the reform provides that women should account for at least 30% of the board of directors and at least 20% of executive management for these companies. If a company does not meet these quotas, it will be required to state in its remuneration report the reasons for not achieving it, and the actions being taken to remediate the situation.
Swiss companies can enhance their ESG standing by implementing sustainable employment practices, such as flexible working arrangements, employee training and development programs as well as occupational health and safety measures. These points are also playing an increasingly important role in the award criteria for public sector procurement projects (tenders).
Integrating ESG into Remuneration Systems:
a.) Performance Metrics: Companies can align ESG goals with employee performance metrics. For example, tying executive bonuses to achievements in reducing the company's carbon footprint, promoting diversity, and ensuring ethical supply chain practices.
b.) Stakeholder Engagement: Regular engagement with stakeholders, including employees, is crucial in shaping ESG strategies. Companies can gather feedback on sustainability initiatives, ensuring that employees' voices are heard in decision-making processes.
c.) Transparency and Reporting: Transparent communication about ESG initiatives is vital. Regular reporting on progress and setbacks builds trust with stakeholders and demonstrates a commitment to continuous improvement. Companies that are required to prepare and publish a report on non-financial matters in accordance with Art. 964a et seq. of the Swiss Code of Obligations must explicitly report on employee matters.
Conclusion:
As ESG considerations continue to gain prominence in the business landscape, companies in Switzerland must integrate sustainability principles into their labor practices. From fostering diversity and inclusion to implementing fair remuneration systems aligned with ESG goals, businesses can enhance their overall performance while contributing to a more sustainable and responsible future. Balancing legal compliance with a genuine commitment to ESG principles will not only benefit employees but also position companies as responsible corporate citizens and increases the attractiveness for (young) talents.
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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
