"The Responsible Business Initiative will affect all companies."
Approval of the Responsible Business Initiative would impose a substantial burden on many Swiss businesses – not just on corporations, as the Initiative's German name (Konzernverantwortungsinitiative) would suggest. Small and medium-sized enterprises in particular would feel the effect. Manuel Rybach, Global Head of Public Affairs and Policy at Credit Suisse, explains why.
The Responsible Business Initiative is designed to protect people and the environment by establishing binding rules for businesses. Doesn't that sound like a good idea?
I'm happy to discuss the substance of the Initiative, but first I'd like to point out that its German title is misleading.
By using the word "Konzern," the name suggests that the Initiative only applies to large companies or corporations. But that is clearly not the case. On the contrary, small and medium-sized enterprises would be particularly affected by its implementation. Since the Initiative has implications for all companies as well as the overall economy, the word "Konzern" should be replaced by "Unternehmen" so as to reflect the Initiative's true impact.
You're saying that it would also have an impact on Switzerland's many SMEs. Proponents, however, insist that SMEs would not be affected unless they are involved in "risk sectors," such as commodity trading. What is the truth?
Every company would be affected. While the text of the Initiative suggests that the needs of small and medium-sized enterprises are being taken into account, in practice it is impossible to exempt them. The duty to exercise due diligence is expressed in such broad terms that small companies could not afford to risk applying a less strict liability standard than large enterprises. The latter are already in good shape and have teams in place to deal with these issues. Smaller businesses would first have to spend a great deal of money hiring new staff to do the same. Moreover, large companies would put in place contracts that shifted responsibility for protecting human rights and the environment onto their suppliers, and this would place enormous financial and administrative burdens on SMEs.
Many Swiss companies have subsidiaries in other countries. What effect would the Initiative have on them?
Such companies would be particularly affected, as conducting the necessary reviews would result in substantial administrative and financial costs. And the obligation to exercise due diligence would extend not only to subsidiaries, but also to suppliers; in fact, it would affect the entire value chain. The costs would obviously be enormous. The Initiative would require companies to constantly justify their actions. It would reverse the burden of proof – in clear violation of Switzerland's legal principles.
But the purpose of the Initiative is to prevent abuses that no one would ever defend – child labor, abusive working conditions, and environmental damage. Doesn't a basic legal framework make sense?
Respect for human rights and environmental protection are fundamental concerns for Swiss businesses. That's why a great deal has already been accomplished in those areas. First of all, Switzerland is an active participant in the OECD Global Forum on Responsible Business Conduct. The Swiss National Contact Point (NCP), which was established to implement the OECD Guidelines for Multinational Enterprises, serves as a platform for dialogue and an informal mediator in the event of possible violations. Its goal is to solve problems and help parties reach agreement.
So effective instruments are already in place?
We have created instruments and measures that provide a way for business and society to work together. But the Initiative, with its extensive verification requirements and an approach to liability found nowhere else in the world, would lead to a rigid "juridification" – an excessive reliance on laws. This could jeopardize existing cooperation and thus unnecessarily impede efforts to achieve further improvement. It would also reduce corporate responsibility to a mere formalistic, legal matter.
In what respect does the Initiative's treatment of liability and due diligence go too far, in your opinion?
The Initiative imposes comprehensive due-diligence requirements on all business relationships along the entire supply chain. The Federal Council agrees that this goes too far, pointing out that in practice, implementation would be problematic. Remember that there are already standards in place at international, national and company level, many of them introduced during the past few years, and they are continually being updated and optimized. These include the UN Guiding Principles on Business and Human Rights and the associated Swiss National Action Plan, as well as the Swiss Action Plan for Corporate Social Responsibility (CSR) and various voluntary certifications and industry standards. I also believe that the new liability rules and the reversal of the burden of proof go much too far. Such rules are found nowhere else in the world, and they would make companies liable for conditions and entities abroad that they would be unable to control at a reasonable cost. The result would be liability without fault. And we mustn't forget one more thing: The Initiative would threaten Switzerland's ability to compete. Many companies would think twice before taking on an additional burden of this kind. Swiss SMEs might find it difficult to win contracts with large companies that are flexible in the choice of their locations.
How high would the costs of the proposed due-diligence requirements be?
Costs would have to be quantified on an individual basis. In any event, however, it is clear that the need for extensive reviews and verifications would impose an enormous burden on companies, also in the form of travel expenses and personnel costs. Businesses would be required to provide more evidence of compliance, but they would still be vulnerable to civil lawsuits. They could expect to have their compliance with the new requirements more closely monitored by contracting parties and customers. The situation would be further exacerbated by the Initiative's reversal of the burden of proof.
By approving the Initiative, Switzerland would go further than any other country has to date – making it a model of corporate responsibility. Couldn't that be an advantage?
Switzerland is already a model. Existing law requires the governing bodies of Swiss companies to protect human rights and the environment. Our legal system already contains far-reaching due-diligence requirements. As I pointed out before, Switzerland's current efforts and its ongoing improvements in the area of CSR have made it a leader in the world. Not only would this Initiative jeopardize those efforts; it would reduce the ability of Swiss companies to compete, causing damage to the overall Swiss economy. And, if we follow this train of thought, it becomes obvious that the Initiative would threaten jobs, particularly with suppliers.
In other words, if the Initiative were to be approved, it would harm precisely those it seeks to protect…
Exactly. The best way to uphold human rights and environmental standards is to continue to do what we are doing. The Initiative takes the wrong approach. It would also raise sensitive issues in our relations with other countries. Under the new regime, Swiss law would effectively take precedence, even abroad. It would require the extraterritorial application of Swiss law, a serious violation of other countries' sovereignty. Significant practical problems would arise as well, for example if Swiss courts were collecting evidence in other countries.
The Federal Government, too, has indicated that the Initiative goes too far, particularly with regard to issues of liability. The Federal Council favors an internationally coordinated approach and the use of existing instruments, specifically the recently approved action plans. How far-reaching are those instruments? Can they actually achieve the desired effects?
In terms of content, the action plans are just as far-reaching as the Initiative, but they are based on cooperation rather than confrontation. The National Action Plan on Business and Human Rights puts into practice the globally recognized UN Guiding Principles on Business and Human Rights and spells out what the Federal Council expects of companies. The Action Plan for CSR refers to various national and international initiatives and industry standards that are already working and showing practical results. Many of these initiatives have been successful because they promote solution-oriented cooperation among companies, NGOs and government agencies. By provoking confrontation and relying excessively on laws, the Initiative puts these cooperative efforts at risk.