Swiss public vote on a proposal for a Responsible Business Initiative

This Sunday see’s the Swiss public vote on a proposal for a Responsible Business Initiative. If successful, the Swiss government would render Swiss-based companies liable for their own human rights and environmental abuses and those of their controlled companies when acting abroad. With particular attention to #ESG practices.

Any initiative aimed at improving responsible business standards is, more often than not, met with open arms. And so it should. The erosion of our ecosystem and the exploitation of some of our fellow people are widely documented and out there for all to see. But the solutions to such problems are far more nuanced than they first seem—as we are seeing with the Responsible Business Initiative in Switzerland, launched by a coalition of Swiss civil society organisations, which will be voted this Sunday 29th of November through a national referendum.

Take the PETA Asia eyewitness investigation into the rampant abuse on South African mohair farms in 2018. A near industry-wide dismissal of the mohair industry could have upended the livelihoods of 30,000 local workers. Instead, Mohair South Africa and the Textile Exchange established the Responsible Mohair Standard with increased regulations to safeguard the welfare of the Angora goats that provide the fibre - protecting not just the goats but the livelihoods of the workers as well.

Where industry meets social, animal or environmental exploitation, the first answer is usually one of withdrawal and distancing. This is often a valid immediate reaction, but we need to consider the long term effects to reach any truly responsible decision.

Take the Responsible Business Initiative—a proposal to amend the Swiss Federal Constitution to add a new article on liability provisions. This would then hold Swiss parent companies legally liable for human rights and environmental abuses carried out by the companies they control, including subsidiaries and third-parties in their supply chains. Whilst seemingly a no-brainer, this new proposal is dividing both politics and business across Switzerland and—regardless of the public decision on November 29–is a sure indicator of a growing trend to tighten ESG reporting and regulations.

Opponents argue increased legislation could hurt the Swiss economy and employment, weakening Switzerland’s competitive edge in an already fragile global economy and potentially driving company headquarters (and jobs) elsewhere in a bid to avoid additional regulation. But the most important consideration is for the developing countries this may affect. 

Additional liability may cause companies to reduce investment in the infrastructure of the emerging and developing countries they operate in if those countries are deemed to be high risk. At best, investment is delayed until due diligence is done; at worst, it’s moved entirely.

The best option for all involved is to remain in emerging and developing countries but find a way to eliminate or reduce risk, in much the same way Mohair South Africa and the Textile Exchange have with the Responsible Mohair Standard. This allows local industry to benefit and grow and, with it, the wider economy. This starts with transparency but, as we’ve seen, transparency isn’t enough. One of the main drivers for the Responsible Business Initiative is an attempt to introduce more accountability, but there are various other tools available that help to achieve this —one of which being the irrefutable traceability of products and raw materials back to known safe areas.

If the public do not vote in favour of the Responsible Business Initiative, the Swiss government will fall back on a pre-agreed, indirect counter proposal. This will see Public Interest Entities (PIEs) obligated to report on environmental, social and employee matters, respect for human rights, and anti-corruption matters in line with the EU Directive 2014/95/EU on nonfinancial reporting—as well as reporting on the sourcing of minerals and metals from conflict areas, and the presence of ‘child labour’ in supply chains.

 Whichever way the vote falls, the required reporting could see companies scrambling to find ways to prove their due diligence, with traceability likely to be a prerequisite to underpinning other checks.

How does this impact you? Unless you or your parent company are Swiss-based, or you’re a supplier working into a Swiss-controlled supply chain, it doesn’t… directly. But it certainly speaks to a wider industry trend that shows an increased demand for reporting and regulation around ESG: the stick to the 2030 Sustainable Development Goals carrot.

The 29th will make for interesting viewing—Switzerland has long since been the barometer of ESG standards and the outcome of Sunday’s vote could prove an early indicator of things to come.

The Swiss may be voting on their own national policy, but those votes could have a domino effect across the globe. Hope this blog helped you to get up to speed. Keep an eye on my page for my review of the result on Monday.

 Thanks,

Marwa Zamaray