How Swiss business contributes to sustainable development

It is undisputed that the financial industry has a great deal of leverage for positive sustainable development. It is impressive to see how much sustainable asset classes have grown in recent years. The most important financial markets have come together in the Global Sustainable Investment Alliance GSIA (an association of the seven largest member organisations for sustainable investments worldwide). In 2018, they managed sustainable investments of almost USD 31 trillion. This represents an increase of 34 percent compared to 2016. In Switzerland, the market volume for sustainable investments reached CHF 717 billion in 2018. This figure has more than tripled since 2016 (when it stood at CHF 215 billion). The Swiss Bankers Association has produced a position paper on sustainable finance that addresses the most important aspects. 

The positive effects of Swiss direct investment in developing countries can be illustrated using the example of the Swiss food manufacturer Nestlé, which has a branch in the Philippines. As part of Nestlé Philippines, the Nescafé brand now not only obtains its coffee beans from the Philippines, but also processes and sells most of its end products in the country. In addition, the majority of employees in management positions are Filipinos. Nestlé Philippines is heavily embedded in the local economy and is therefore perceived by most Filipinos as a local company. At the same time, the company is committed to global CSR standards and has developed the NESCAFÉ plan to ensure that local coffee farmers have access to higher-yielding crops and that coffee cultivation remains sustainable. Together with the Rainforest Alliance (RA) and the Common Code for the Coffee Community (4C), Nestlé ensures compliance with internationally recognised sustainability standards. Since the foundation of its first subsidiary 100 years ago, Nestlé has not only created tens of thousands of jobs in the Philippines, but has also enabled a valuable transfer of knowledge to the local private sector. This helped to build a national economic ecosystem around the production, commercialisation and consumption of coffee. Thanks to a comprehensive capacity development program for suppliers and Nestlé Global’s strict social and environmental standards, the company has been able to increase the sustainability of its local suppliers over the past several decades.

In various countries, and also in the EU, there is a move to broaden corporate responsibility and to increase the possibility of legal action against small and large companies. Specifically, it shall be possible to sue companies at their headquarters for global violations of human rights and environmental protection standards. In November 2020, Switzerland rejected the Responsible Business Initiative (RBI) in a popular vote. If approved, the Swiss government would have been mandated to propose a bill obliging companies not only to conduct vast due diligence in the area of human rights and environmental standards 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, even if only economically controlled third parties had been involved. 

Instead, the Swiss Parliament adopted changes to the company law which transpose the "Due Diligence" requirement of the UN guidelines into national law and refer to the standards of the OECD and UN. Particularly the regulation in the EU and the Netherlands served as a blueprint for the new regulatory framework. It refrains, however, from introducing new, unclear and counter effective liability provisions with a reversal of the burden of proof such as the RBI required. While avoiding a regulatory stand-alone approach, the new regulatory framework puts Switzerland in the class of the most progressive countries regarding CSR regulation worldwide. 

The RBI would not have achieved the objective it intended. The liability provisions foreseen by the RBI would have forced Swiss companies with high human rights and environmental risks to review their foreign investments in developing countries or even substantially reduce their business activities there. Human rights and environmental protection efforts in developing countries are particularly endangered if companies from countries with lower social and environmental standards jump into the gap left by Swiss companies. Thus, the possibility of taking legal action against multinational companies for violation of environmental regulations and human rights at their place of business ultimately endangers the successful model of Swiss development cooperation. 

A more effective approach is international cooperation within the framework of the OECD or the UN, that focuses on the continuous improvement of companies’ internal due diligence processes. Legal actions whose court decisions have extraterritorial effect should be avoided at all costs. These could not be enforced by Switzerland. In return, Switzerland would lose its attractiveness as a location for multinational companies and thus many highly qualified jobs.