International ESG Regulations and SMEs

International ESG (Environmental, Social, and Governance) regulations are becoming increasingly relevant for Swiss small and medium-sized enterprises (SMEs), especially those operating in international markets or integrated into global value chains. In this context, the Swiss Federal Council was mandated by Postulate 23.4062 submitted by Council of States member Josef Dittli to prepare a report, for which this study provides the empirical foundations. The core focus of the study was to analyze the direct and indirect effects of international ESG regulations on Swiss SMEs. It examined the challenges and opportunities that arise for Swiss SMEs in implementing international ESG standards and explored potential measures at the federal level to support their implementation.

Various methods were used to achieve the project’s objectives, including desk research, a quantitative online survey, and a qualitative focus group workshop.

International ESG regulations, which address issues related to the environment, social responsibility, and corporate governance, have increasingly begun to affect Swiss small and medium-sized enterprises (SMEs), particularly those integrated into international value chains. This development is driven, on the one hand, by growing interest from various stakeholders—such as investors and consumers—in responsible business practices. On the other hand, it is a result of tightening regulatory frameworks. Areas of corporate responsibility that were previously governed primarily by so-called soft law are now becoming increasingly subject to legally binding regulations at both national and international levels.

In this context, the Swiss Federal Council was mandated by Postulate 23.4062 submitted by Council of States member Josef Dittli to prepare a report examining the potential direct and indirect impacts of international ESG regulations on Swiss SMEs, as well as ways to support them in meeting ESG regulations. Against this backdrop, the State Secretariat for Economic Affairs (SECO) commissioned the University of Applied Sciences of the Grisons (FHGR) to conduct a scientifically grounded study on the effects of international ESG regulations on Swiss SMEs. In addition, the study explored potential support measures by public authorities.

The aim of the study was to examine the direct and indirect impacts of new European and international regulations in the areas of Environmental, Social, and Governance (ESG) on Swiss small and medium-sized enterprises (SMEs). The focus was placed on the following directives, regulations, and laws:

• EU Corporate Sustainability Reporting Directive (CSRD)
• EU Corporate Sustainability Due Diligence Directive (CSDDD)
• EU Deforestation Regulation (EUDR)
• EU Regulation on Forced Labour
• Germany – Act on Corporate Due Diligence in Supply Chains
• UK – Modern Slavery Act
• France – Loi relative au devoir de vigilance

The report identifies the specific challenges and opportunities that Swiss SMEs face when adopting such ESG standards and explores the options available at the federal level to support their implementation. In addition, the report examines how other countries with comparable legal systems are responding to international ESG regulations and what accompanying measures for SMEs are already in place there. Selected initiatives, both international and domestic, were analyzed in this context. The study also investigated which existing support services are currently being used by Swiss SMEs and where there may be a need for additional support. Based on these findings, recommendations were made on what further resources the Swiss federal government could provide to assist SMEs in implementing international ESG regulations.

A variety of methods were used in the course of the study. This included desk research that reviewed various relevant (online) documents and materials, some of which were provided by SECO, while others were published by authorities, associations, international organizations, and private actors from Switzerland and selected countries (Germany, Estonia, France, the United Kingdom, Italy, and the USA).

In addition, a quantitative online survey was conducted among 354 companies to assess the direct and indirect effects of international ESG regulations, identify related challenges and opportunities for Swiss SMEs, and determine which support services are already being utilized by Swiss SMEs. To capture the specific characteristics of SMEs, the survey targeted both SMEs and large enterprises headquartered in German- or French-speaking regions of Switzerland.

Furthermore, a qualitative focus group workshop with 22 participants was held to identify which tools provided by private actors are most important for Swiss SMEs and what additional support services they may require. The discussion also addressed what further offerings the federal government could provide or support – alongside private (consulting) firms, associations, international organizations, and cantonal authorities – to help SMEs tackle the key challenges they face.

The results of the study show that Swiss SMEs are affected by international ESG regulations both directly and, more importantly, indirectly, although to a lesser extent than large companies. Indirect impacts on SMEs arise mainly from changing market conditions and increasing customer demands. Customers are increasingly demanding additional information and documentation, such as proof that raw material production complies with international ESG regulations. Changing market conditions due to international ESG regulations may result from the development of new technologies or the entry of new competitors.

Financial issues, such as rising operating and investment costs, pose the greatest risks to SMEs. On the other hand, SMEs also see opportunities associated with international ESG regulations. The most commonly cited opportunities include strengthening existing sustainability practices and working more closely with suppliers.

In Switzerland, there is a wide range of support programs offered by the federal and cantonal governments, associations, international organizations and private actors. These support measures are used by both SMEs and large companies. SMEs make the most use of information services, self-assessments, guidelines and certifications. However, SMEs make significantly less use of support measures than large companies. Many SMEs lack clarity about the support available to them. Significantly fewer SMEs than large enterprises feel that the support available meets their real needs.

Concrete measures were formulated as recommendations for action. The federal government should primarily play a coordinating role and supplement existing support measures where other actors, in particular the private sector and associations, do not provide adequate solutions. In addition, the support landscape should be made more transparent and tailored more specifically to the needs and characteristics of SMEs. In order to provide targeted and practical support to SMEs, existing support measures should be complemented and new ones created. It is proposed to set up a one-stop-shop helpdesk as a central contact point to facilitate SMEs’ access to appropriate support measures. This one-stop-shop helpdesk could offer modular services to provide targeted support to SMEs.

In addition to the staff of the UAS Grisons, the following persons were also involved in the project:

• Dr. Martin Messingschlager
• Delia Nonini