Booting the system fails when switching root with "Failed to execute /bin/sh, giving up: No such file or directory"

Issue

• When booting the system, it randomly fails while switching root, as seen below

  [  OK  ] Reached target Switch Root.
           Starting Switch Root...
  [    1.888507] systemd-journald[116]: Received SIGTERM from PID 1 (systemd).
  [    1.892990] systemd[1]: No /sbin/init, trying fallback
  [    1.893688] systemd[1]: Failed to execute /bin/sh, giving up: No such file or directory
  

• Alternatively the system enters early Emergency prompt after printing the following messages

  [...] systemd[1]: Starting Switch Root... 
  [...] systemctl[XXX]: Failed to switch root: Specified switch root path '/sysroot' does not seem to be an OS tree. os-release file is missing.
  [...] systemd[1]: initrd-switch-root.service: Main process exited, code=exited, status=1/FAILURE
  [...] systemd[1]: initrd-switch-root.service: Failed with result 'exit-code'.
  [...] systemd[1]: Failed to start Switch Root.
  [...] systemd[1]: initrd-switch-root.service: Triggering OnFailure= dependencies.