The FH against the "Responsible Business" initiative

Parliament approves the idea, but prefers a counter-proposal that is less economically problematic, while the FH also rejects the initiative.

Are Swiss companies obliged to respect human rights and the environment in their foreign operations? Of course they must! No one disputes the central concern of the “Responsible Business” initiative. However, the Swiss Parliament rejects this proposal on the grounds of being economically risky and has come up with a demanding counter-suggestion.

The initiative demands two things: first, companies must examine their entire supply chain and ensure that the firms over which they exercise “economic power” – this goes beyond legal control – respect human rights and environmental standards. To achieve this, the necessary due diligence must be done: studying risks, taking steps to avoid them, and publishing a report. Monitoring must cover not only subsidiaries, but all business relationships, including suppliers and subcontractors, representing a challenge in itself.

The second instrument is much more problematic. A Swiss company can be held civilly liable for issues in its supply chain. Thus, in terms of the initiative, a company would have to compensate plaintiffs for acts committed abroad by suppliers or subcontractors. It would therefore be punished for errors committed by third parties and could only be absolved from a complaint by demonstrating that nothing had escaped it in the analysis of its economic relations. The burden of proof would thus be reversed.

Let’s illustrate the mechanism: a Swiss watch company buys part of the material it needs from a foreign supplier. In this way, it exercises economic power over the supplier. The initiative therefore requires it to control all the risks that the latter may cause. If the supplier pollutes a river in their country by discharging a toxic substance into it, the Swiss watch company can be taken to court in Switzerland to pay for the damage. This is what the initiative envisages, which would therefore be a veritable sword of Damocles hanging over Swiss companies. No other country has a civil liability with a reverse onus of proof mechanism of this kind.

Social, political and economic problems
In addition to the obvious legal issues, the initiative poses other social, political and economic problems. First of all, it is tinged with a neo-colonialist vision of the world according to which other countries are not capable of administering themselves. It would therefore be up to Switzerland to impose rules of behaviour on them through its businesses. This appears somewhat pretentious, even given the reality that institutions in some countries are dysfunctional.

The initiative also makes false promises, inapplicable in many cases, since it would be up to the Swiss courts to decide on facts that have occurred abroad, thousands of miles away. How will they hear such cases? How will the states concerned react to requests for mutual legal assistance that also appear to be a form of interference?

Economically, the initiative will do more harm than good in the countries most in need of business, investment and jobs. One cannot rule out the possibility that certain Swiss firms will have to give up working in some of these countries if the risks are too great. They will be replaced by competitors who are probably less scrupulous. Will this be to the advantage of the local population and workers?

Economic relations – or legal letters
Even from a moral standpoint, the initiative is not the right answer to the problems it is setting out to resolve. By instituting a judicialization of economic relations, it will ruin collaborative efforts. Constructive joint endeavours with local NGOs or with the authorities will serve no purpose, as they will not provide legal security against complaints being filed and firms being attacked in the media.

Any company wishing to protect itself from these new risks will understandably tend to pass them on to other players in the chain. This will put significant pressure on suppliers or subcontractors, naturally including in Switzerland itself.

Finally, the risk of the right of compliance being misused should not be underestimated. Swiss companies will always be under suspicion and their reputation will always be threatened. Law firms will not hesitate to launch complaints or to use the threat of a court case as a form of blackmail. It is inadvisable for our country to open the door to an Americanization of its judicial system in this way.

A counter-proposal that makes Switzerland a model state
Parliament’s response is substantial. On the one hand, companies will have to be transparent on environmental (including CO2 targets), social, human rights and anti-corruption issues. On the other hand, two duties of diligence will be added with regard to child labour and minerals from conflict zones (gold in particular). Expectations are high: companies will have to examine all risks and ensure the traceability of their supply chain. Their reports will be made public and must be available for ten years. They will be reviewed by an independent auditor. Fines of up to CHF 100,000 can be levied for false statements.

With this counter-proposal, Swiss companies will be confronted with a demanding framework, comparable to what is done in the most advanced countries. WIthin this “harmonised” framework they will once again be able to demonstrate that they are exemplary. By rejecting the initiative, we will avoid causing problems for the 99.9% of Swiss companies that behave well, and we will put an end to several years of accusations, sometimes gratuitous, that tarnish the reputation of our entire economy. The counter-proposal will automatically come into effect if the initiative is rejected.

The FH therefore recommends that everyone reject the initiative and thus make way for the counter-proposal.

October 15, 2020