"Ethos calls for strengthened corporate due diligence in Switzerland"

The Ethos Foundation and 21 investors [...], representing CHF 459 billion in assets under management, sent a letter yesterday to the members of the National Council's Legal Affairs Committee asking them to adopt a comprehensive legislation for companies to respect human rights and the environment. The members of the committee are due to discuss on Thursday 23 March in Bern the possibility of extending the duty of care for companies based in Switzerland.

For Ethos and the co-signatories, it is essential for Switzerland to adapt its legislation, especially in view of international regulatory developments. In particular, the European Commission has drafted a new directive introducing an extended due diligence on the part of companies with regard to sustainability.

The European text is fully in line with the demands of the Responsible Business initiative that was voted in November 2020. This initiative had been supported by a majority of the Swiss population, but was ultimately rejected as it did not have the majority support of the cantons. The counterproposal to the initiative thus came into force, leading to the integration of new provisions in the Swiss Code of Obligations concerning the respect of human rights and the environment by companies. However, these new provisions are limited to child labour and to minerals and metals from conflict zones, which ultimately concerns a very small number of companies.

Three main requirements

However, the Federal Council has repeatedly stated since 2020 that it wishes to harmonise Swiss legislation with those of its neighbours. Ethos and the co-signatories call for the elaboration of a comprehensive legislation on corporate environmental and human rights due diligence. Their request is based on three requirements:

• The need for Switzerland to comply with international standards (UN guiding principles, OECD guidelines) and to ensure that corporate due diligence covers the entire value chain, is risk-based and ongoing;
• The setup of an independent supervisory authority with wide-ranging powers (along the lines of the draft EU Directive) to monitor and, where necessary, impose effective but proportionate sanctions on companies, including fines and compliance orders;
• The introduction of civil liability adapted to Swiss law for human rights or environmental damage that could have been avoided if the company had adopted appropriate due diligence. Companies should thus be held liable for damage caused by their subsidiaries and suppliers, regardless of where in the world they are located, but according to their degree of involvement in the damage caused.

“Reputational damage and operational difficulties caused by human rights abuses and environmental pollution in supply chains can have a significant negative financial impact on companies included in the investment portfolios of Swiss pension funds,” says Vincent Kaufmann, CEO of Ethos. “Comprehensive due diligence requirements are therefore not only good for companies, but also for investors and the whole economy.” 

For Ethos and the co-signatories, if Switzerland does not adapt its legislation quickly, it could create a competitive disadvantage for its financial centre as international investors now expect companies to respect the highest standards in the field of human rights and the environment.