Know-How Re' Summit

Doing Business More Ethically

The Corporate Responsibility Initiative aims to ensure that Swiss companies also comply with minimum ethical and environmental standards in their foreign operations. The first attempt in this regard ended in rather tame regulation, but now the EU is making headway.

It should really go without saying that companies are responsible for what they do (or fail to do) and can be held accountable if necessary. This should not only apply to the end products, but to the entire value chain, including the extraction of raw materials, as well as the production of intermediate products. Essentially, the idea is that globally active companies guarantee to comply with a minimum level of ethical and ecological standards, including their subsidiaries and their suppliers. Unfortunately, there are numerous examples showing that this is not always the case, such as cobalt and coltan extraction under inhumane conditions, or textile production in Asia, which is reminiscent of slave or serf structures. The allegation here is that companies deliberately forego the enforcement of standards, primarily in countries of the global south, in order to maximise their profits, which then flow to their headquarters in industrialised countries. The situation is particularly volatile in the textile, raw materials, agricultural and financial sectors, which is why the OECD defines these as "risk sectors".


In view of this deplorable situation, the Corporate Responsibility Initiative was founded in April 2015, which is now backed by more than 80 organisations from Swiss civil society, including trade unions, shareholder associations and large companies. The initiative advocates that corporations conduct thorough due diligence on all business activities with regard to human rights violations and environmental damage, and be transparent in their reporting. The UN Guiding Principles on Business and Human Rights, which were adopted in 2011, provide the basis for this. According to the initiative, Swiss companies should respect these minimum standards in all their operations and actively work to ensure compliance on site – otherwise, they will be subject to heavy fines and legal proceedings under Swiss law. Moreover, the burden of proof will be transferred to the companies.


However, in 2016, the Federal Council rejected an initial proposal by the initiative, backed by 120,000 signatures, to address the issue. In 2019, the Council of States rejected its own proposal by the Committee of States for Legal Affairs, which was supported by a group of large Swiss companies and the National Council. At the same time, it adopted a government draft that the Corporate Responsibility Initiative had criticised as completely inadequate as it only addressed a few of the issues and didn’t include liability regulations. This draft was finally approved by both the Council of States and the National Council in June 2020. The Corporate Responsibility Initiative then submitted a referendum in November 2020, which failed to achieve a majority of the cantons despite the fact that 50.7% of citizens voted in favour. Since the beginning of 2022, these rules have been in force according to the regulations of the Federal Council. They apply to publicly listed companies and non-public financial service providers with more than 500 employees.


At the same time, the EU also addressed the issue and developed guidelines that EU companies with 250 or more employees will have to comply with in phases starting in 2024 or 2026. These include clear, sanction-based reporting obligations on environmental and human rights aspects, as well as information on how the Paris climate goals are to be achieved at the corporate level. A controversial point here is that from 2028, the rules will also apply to companies from third countries, including Switzerland, if their annual turnover in the EU exceeds 150 million euros. However, if they have operations in a risk sector, the rules will apply from an EU annual turnover of 40 million euros and above. This category includes up to 250 Swiss companies who will then have to comply with the EU directives, which are more far-reaching than Swiss law. However, the EU regulations provide for more exceptions for SMEs and leave it up to the member states to decide whether the burden of proof lies with the plaintiffs or the defendants. It is also up to the individual states to create supervisory authorities at a national level that can issue fines. This is precisely where the EU actually goes beyond the requirements of the Corporate Responsibility Initiative.


At first glance, the Corporate Responsibility Initiative seems to have failed – but it continues with a petition to the Federal Council to develop an internationally coordinated regulation. In other words, exactly what was promised in the 2020 referendum. Instead of the necessary 100,000, the “Coalition for Corporate Responsibility” managed to submit more than 217,000 signatures in just three months. The pressure is also still on for a different deal. By mid-2024, the Federal Council now wants to present a proposal for adjustments to the EU reporting requirement. Until then, it remains uncertain for companies in Switzerland which scenario will apply in the future.

Related topics (1)