The Responsible Business Initiative

The Responsible Business Initiative

 

If one counts the multitude of orange flags in all Swiss streets promoting the Responsible Business Initiative, it seems very likely that the referendum will be successful.

 

Under the Responsible Business Initiative, Swiss companies will be legally obliged to incorporate respect for human rights and the environment in all their business activities. This mandatory due diligence will also be applied to Swiss based companies’ activities abroad.

 

The mandatory due diligence instrument is based on the United Nations Guiding Principles on Business and Human Rights. According to these principles, companies must first review all their business relationships and activities with a view to identifying potential risks to people and the environment. They must then take effective measures to address the potentially negative impacts identified and report in a transparent manner on the risks identified and the measures taken.

 

However, large multinationals in Switzerland have been almost unanimous in their rejection of this initiative aimed to make companies more accountable for their actions abroad. We believe that many companies strive to reduce human rights risks and prevent harm.

 

Some board members of major Swiss multinationals have even gone so far as write an open letter urging the Swiss population to vote against the so-called “Responsible Business Initiative” on November 29. The president of the board of Swiss cement manufacturer LafargeHolcim called the initiative’s demands “a gigantic absurdity” in the newspaper Le Temps and board members of Novartis and Nestlé have both said they fear a flood of lawsuits if it is approved, which would cause them to reconsider investments in high-risk countries.

 

Florian Wettstein, a business ethics professor at the University of St Gallen says “Companies’ strong pushback on the initiative says something about their confidence – or lack thereof – in their own due diligence efforts”.

 

The Swiss populance has a strong humanist ethic and  deep-rooted tradition of respect of the environment.

 

The Swiss generally support their large multinationals when they behave ethically and there is usually a lot of goodwill toward the large multinationals. However some companies unfortunately poison the well of trust by their misbehavior, and this news of corruption, bribes and other misbehaviors that are often reported in the press, may be conflated with the Responsible Business Initiative. After all if a company can misbehave in “western” countries, what are they doing in developing countries where governance and transparency may be not so visible or policed.

 

So in a way the referendum is also a push back on company misbehavior. Some people interpret company misbehavior as an assault on Swiss national pride.

 

There are of course 2 sides of the coin:

On the one hand: “Responsible companies have nothing to fear, and indeed stand to gain from such legislation,” as expouse by Johannes Blankenbach from the Business & Human Rights Resource Centre. Other legal experts argue that companies can already be held liable for damages abroad under Swiss law and that the initiative brings more clarity to the situation. The initiative introduces objective criteria for companies to show that they did everything they could to prevent the damage but it still happened.

 

The big multinationals in Switzerland have reiterated their commitments to human rights and the environment and have policies and practices to back it up. So why are they so nervous?

 

And on the other: Companies cite unease about the fact that they could be held liable for the actions of third parties under the terms of the Responsible Business Initiative. The proposed constitutional amendment states that companies would only be held liable for abuses by entities under their “economic control” but it isn’t explicit on what that means. However it seems that the processes of keeping track of what’s happening throughout their supply chains – is abstract for some companies.

 

Yes, implementing and policing the Responsible Business Initiative will be a huge effort. However the EU is about to enact similar so that that “if Switzerland doesn’t adopt the initiative, we will already be behind.”

 

So what is the answer?

 

Some examples are obvious; companies that buy cobalt from international traders, have to assume that it comes from the Congo where there are known issues of child labour in the mines.

 

Others not so; Nestlé buys from six million farmers every day. Nestlé knows where 70% of its volume comes from, but would it be possible to ever be able to trace 100% back to the source?

 

Some companies have hundreds of thousands of suppliers and sub-supply tiers in the supply chain and trying to assess and manage all of them is a huge challenge. Even with demanding policies in place, it may be near impossible to be 100% sure of how people not under your direct control behave. Some companies argue that no matter what they do to combat risk it will never be enough.

 

But back to the essence of the referendum. The aim of the Principles proposed is to reduce human rights risks and prevent harm. One has to begin somewhere.

 

However though many Swiss companies do recognize their great responsibility for strict compliance with legal regulations and ethical standards and enforce these policies worldwide in subsidiaries and in relationships with suppliers, a study commissioned by the Swiss government in 2018 found that not all Swiss companies were really assessing their risks in this respect.

 

And the bottom line is that it is always good to promote better ethics. If there are no clear rules and sanctions, there are always companies that think they can do anything. The initiative may be a way to ensure the abuses don’t happen in the first place. If there really were a flood of lawsuits, it would mean that Swiss companies have a very big problem with human rights. Which we believe is unlikely for most.