Vote on Re­spon­si­ble Busi­ness Ini­tia­tive: A No to a risky ex­per­i­ment and a Yes to mod­ern ESG reg­u­la­tion

On No­vem­ber 29th, 2020 Switzer­land has re­jected in a ref­er­en­dum the Re­spon­si­ble Busi­ness Ini­tia­tive (RBI). While the ini­tia­tive was ac­cepted by a nar­row ma­jor­ity of the pop­u­la­tion of 50.7%, it only reached a ma­jor­ity in 8 of 26 can­tons. How­ever, a pop­u­lar ini­tia­tive must reach both the pop­u­lar ma­jor­ity and a ma­jor­ity of the can­tons in order to be able to amend the con­sti­tu­tion. The RBI was mainly sup­ported in the big cities whereas the rural areas voted against it.

If ap­proved, the RBI would have man­dated the gov­ern­ment to pro­pose a bill oblig­ing com­pa­nies not only to con­duct vast due dili­gence in the area of human and en­vi­ron­men­tal rights through­out their whole sup­ply chain. It would also have in­cluded a new legal li­a­bil­ity be­fore Swiss courts and under Swiss law for the Swiss par­ent com­pany for any vi­o­la­tion abroad. The Swiss com­pany could have been held li­able even if only eco­nom­i­cally con­trolled third par­ties, i.e. busi­ness part­ners had been in­volved. The Par­lia­ment as well as the gov­ern­ment were op­posed to the ini­tia­tive. In­stead, Par­lia­ment adopted an in­di­rect coun­ter­pro­posal that took on board the broad strokes of the ini­tia­tive while lim­it­ing its scope and re­frain­ing from in­tro­duc­ing untested li­a­bil­ity pro­vi­sions. 

Adop­tion of a far reach­ing, in­ter­na­tion­ally aligned coun­ter­pro­posal

The coun­ter­pro­posal im­ple­ments the "Due Dili­gence" re­quire­ment of the UN guide­lines on na­tional level and refers to the stan­dards of the OECD and UN. Some states that go be­yond this (in par­tic­u­lar France and the Nether­lands) dif­fer in cru­cial points from the RBI: The rel­e­vant legal cat­a­logue in the Nether­lands, for ex­am­ple, refers to one spe­cific as­pect ("child labour") and not an en­tire legal cat­a­logue. And both coun­tries have in­tro­duced a "safe haven" clause in case com­pa­nies pro­vide sat­is­fac­tory risk re­port­ing. The coun­ter­pro­posal now in place gives com­pa­nies legal cer­tainty. Par­tic­u­larly the reg­u­la­tion in the EU and the Nether­lands served as a blue­print for the new reg­u­la­tory frame­work. A closer look shows its ex­tent:

1. Firstly, a broad non-fi­nan­cial re­port­ing duty in line with the EU Di­rec­tive 2014/95 on non-fi­nan­cial re­port­ing is in­tro­duced. The stan­dards have been adapted to the con­di­tions in Switzer­land.
2. Sec­ondly, a manda­tory due dili­gence re­quire­ment spe­cific to risks as­so­ci­ated with trad­ing of con­flict min­er­als in the value chain in line with the EU Reg­u­la­tion 2017/821 was in­tro­duced.
3. And thirdly, a manda­tory due dili­gence re­quire­ment spe­cific to risks as­so­ci­ated with child labour in the value chain was in­tro­duced. The Dutch Child Labour Act served as a model.

In case com­pany rep­re­sen­ta­tives do not com­ply with these new oblig­a­tions, the new law pro­vides for crim­i­nal sanc­tions.

Swiss CSR reg­u­la­tion among most pro­gres­sive world­wide 

By re­ject­ing the orig­i­nal ini­tia­tive at the bal­lot box, par­lia­ment’s amend­ment to law will enter into force im­me­di­ately. It puts Switzer­land in the class of the most pro­gres­sive coun­tries re­gard­ing CSR reg­u­la­tion world­wide.

As far as li­a­bil­ity is con­cerned, the Coun­ter­pro­posal ad­heres to the ex­ist­ing and in­ter­na­tion­ally rec­og­nizedli­a­bil­ity pro­vi­sions. It re­frains, how­ever, from in­tro­duc­ing new, un­clear and counter ef­fec­tive li­a­bil­ity pro­vi­sion with a re­ver­sal of the bur­den of proof such as the RBI re­quires. In any event, Swiss com­pa­nies that op­er­ate in a com­plex and multi­na­tional con­text should seek guid­ance as to the new rules and stan­dards that will apply, both in Switzer­land and abroad and should not un­der­es­ti­mate the risk of ex­po­sure in case of non­com­pli­ance.