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Swiss debate on corporate liability comes to a head

Some of the world’s biggest companies, from Nestlé to Glencore, face the prospect of tougher ethical regulations in Switzerland, as a four-year debate over business practices comes to a head in parliament this week. 

From Tuesday, MPs will have less than three weeks to thrash out a compromise to a proposed change to the law brought by the Responsible Business Initiative (KVI). 

The proposal will make businesses in Switzerland legally liable and “guilty until proven innocent” for abuses of human and environmental rights anywhere in their supply chains around the world — whether at subsidiaries or third-party companies.  

The KVI emerged in 2016 as a result of Switzerland’s direct democratic process garnering the support of more than 100,000 citizens, the threshold for triggering a referendum.  

Under Switzerland’s constitution, the country’s lawmakers have the right to formulate an alternative to the popular proposal. If the initiative’s sponsors agree to the parliamentary compromise, the proposal becomes law. If the initiative’s sponsors do not, then their original proposal is submitted for a popular referendum. 

So far, however, factions within parliament have not even been able to agree themselves, meaning the stage is now set for a high-stakes nationwide vote on the most radical formulation of the law. 

“It’s an extremely hot issue,” said Mark Pieth, a legal professor at the University of Basel and founder of the Basel Institute on Governance. “It’s at a tipping point and if industry were sensible they would push for a compromise [in parliament] next week.” 

Critics say the proposed legal changes would impose crippling legal liabilities on businesses for abuses far beyond their control, and turn Switzerland into a centre for activists trying to “blackmail” some of the world’s biggest multinationals.  

Supporters meanwhile argue the move will put Switzerland at the forefront of a global change. It will force businesses to account for their conduct, and prevent the Alpine country from becoming an international pariah as investors and other developed nations alter their ideas about good business practice.  

Countries across the developed world have begun to put in place wide-ranging laws to enforce greater corporate, social and ethical responsibility. Switzerland has so far resisted greater legislation, in part because the introduction of such rules could have serious implications for businesses around the world. 

Switzerland is a global hub for the trading of commodities and home to some of the world’s biggest multinationals in industries from finance to pharmaceuticals and foodstuffs to fashion. Swiss companies such as Nestlé, Roche, Glencore, Credit Suisse, Richemont and Syngenta, with subsidiaries across the globe, will all be caught by whatever option Bern chooses. 

“Switzerland will be left behind if it does not legislate on this,” said Vincent Kaufmann, chief executive of the Ethos Foundation, a leading Swiss ethical investment adviser. “You have regulation like this going on everywhere — such as the modern slavery act in the UK. We are already late in Switzerland. If we adopt nothing we will be lagging. The proposals now will certainly put us ahead of other countries, but this is the direction of the trend. And since Switzerland was the host country for the universal declaration of human rights, I think we can afford to be ahead of the pack.” 

Polling indicates that support in Switzerland for the original, hardline text of the KVI is high: an independent survey conducted last month found that 78 per cent of respondents were supportive of enforcing the new requirements on big business.  

“It is not a left-right struggle as you might think,” said Pieth. “There are already 120 Swiss NGOs which have come out in support of it, including all of the country’s churches. People generally seem to be in favour. The attitude among a lot of ordinary Swiss is that ‘we are fed up of our territory being misused by these big anonymous international businesses like Glencore. We don’t need that money’.”  

Copyright The Financial Times Limited 2020