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Switzerland: moving towards the adoption of a human rights due diligence law

20 Oct 11:00 by Angela Floydd

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Next month the Swiss electorate will vote on the adoption of a human rights due diligence law that will have implications for all Swiss headquartered companies.  Juliette Herault, lawyer and consultant at GoodCorporation discusses this forthcoming referendum and its implications with Angela Floydd, Managing Director Europe at Laurence Simons Search, as part of our Talking Head series.

Based in London, Juliette undertakes human rights, business ethics and anti-bribery and corruption assessments.  Prior to joining GoodCorporation in March 2020, she worked for three years as a consultant at the World Bank Group’s headquarters in Washington (USA), dealing with local communities’ grievances and improving business ethics policies in various sectors.

Angela Floydd (AF): Please tell us a bit of background about the proposed human rights due diligence law?

Juliette Herault (JH):  On 29 November, a referendum will ask the Swiss electorate to decide whether Swiss companies should be subject to mandatory human rights due diligence. If passed, this would represent a significant strengthening of existing legislation; a move that chimes with rising expectations on multinational companies across the globe.

It would also make Switzerland the latest country to amend its human rights legislation in response to the United Nations Guiding Principles on Busines and Human Rights (UNGPs), published in 2011. Based on the ‘Protect, Respect and Remedy Framework’ developed by the then-UN Special Representative John Ruggie, the Principles find that States have a duty to protect all those in their jurisdiction from human rights abuses committed by third parties, including businesses. According to the UN, this should be achieved by implementing effective laws and regulations to prevent and address business-related human rights abuses.

The UNGPs also make specific recommendations for businesses, in particular that they carry out human rights due diligence to identify, prevent, mitigate and account for any adverse human rights impacts their enterprises may cause, contribute or be linked to.

Not surprisingly, the UNGPs were welcomed by human rights groups across the world who have put pressure on businesses and States to put effective changes in place. The proposal coming before the Swiss electorate in November is a result of such action.

Under the Swiss system of direct democracy, civil society groups can bring about proposals to amend their constitution. These requests are known as ‘initiatives’ and must collect 100,000 signatures in order to be considered by Parliament. If Parliament disagrees with a proposal, counterproposals can be formulated. If the group bringing the initiative finds the counterproposal acceptable, then Parliament can vote to accept the change. However, if a counterproposal is rejected, a referendum will be held. Under the terms of the referendum, If the majority of the electorate and the majority of cantons (a ‘double majority’) vote in favour, the proposal to amend the constitution will pass.

The initiative that is the subject of the November referendum was launched in 2016 and is known as the Responsible Business Initiative (RBI). It was brought about by the Swiss Coalition for Corporate Justice which represents over 80 non-governmental organisations in Switzerland.

AF: Why is it important?

JH: The proposed new law is far-reaching and ambitious. If passed, it would put Switzerland at the forefront of global change on human rights legislation. It would also reinforce the increasingly widely held view that enforcing mandatory human rights due diligence for businesses will be critical to making human rights law more effective. Such changes are already being talked about elsewhere in Europe, so this vote comes at a pivotal time in the development of human rights regulation internationally.

It is also worth reflecting on the fact that not only has this proposed change been brought about by civil action, it will be decided by a public vote. If passed, this will be seen as a barometer of public opinion on the duties of both States and companies to manage human rights impacts.

AF: How is this going to affect businesses across Switzerland?

JH: The proposed law applies to companies of all sizes headquartered or incorporated in Switzerland. Specifically, it applies to multinationals and SMEs involved in high-risk sectors such as mining and those companies trading raw materials like copper, gold, diamonds, or tropical wood.

Companies bound by the proposed legislation would be required to respect human rights and international environmental standards throughout their operations. This would include all overseas subsidiaries, extending to any entity under the control of the Swiss company, including parts of the supply chain. Specifically, the proposal would make it mandatory for Swiss companies to conduct human rights and environmental due diligence. This would represent a significant change for a large number of organisations.

In addition, it would introduce direct liability on Swiss companies for violations of human rights and environmental standards, such that regardless of where the harm occurs, victims could seek redress and damages before Swiss courts.

Lastly, the proposed law has been designed to partly shift the burden of proof from the plaintiff to the defendant. To avoid liability, companies would be required to prove that the requisite care had been taken to prevent any violations or that the damage would have occurred even if all due care had been taken, so removing the challenge of evidence-gathering from the plaintiff.

AF: Do you see it as a positive change?

JH: Yes. Mitigating adverse human rights impacts should be a primary concern for any organisation. Any regulatory or legislative changes that will help ensure appropriate systems and resources are devoted to protecting human rights and environmental standards should be welcomed.

While the requirements of the proposed law may seem challenging, if passed, it is likely to give Swiss companies a head start. France has already introduced mandatory human rights due diligence and it is widely expected that this will become established best practice. Implementing robust human rights policies and practices can constitute a powerful competitive advantage for businesses as scandals and reputational damage can be avoided and positive business synergies created. 

AF: Will it affect companies abroad that are owned by a Swiss company?

JH: If these companies abroad are owned by a company headquartered or incorporated in Switzerland, then yes.

AF: How can companies engage with stakeholders to help them understand and address human rights risks? 

JH: Meaningful engagement with all stakeholders is critical to the successful mitigation of human rights risks. Companies need to seek the views of all potentially affected stakeholders including workers, communities, and civil society organisations, paying particular attention to any groups identified as vulnerable to risk.

This would usually involve face-to-face interviews with representatives from these groups to hear how systems work on the ground and learn of any concerns. However, the current travel restrictions operating in many countries may make this more challenging. Consequently, steps should be taken to conduct interviews via video conferencing platforms or by training local staff or consultants to carry this out.

Capacity building is an important part of stakeholder engagement. By sharing knowledge, building human rights expertise, and embedding best practice, companies can successfully raise awareness of these issues and mitigate harm.

AF: What challenges, if any, will it bring?

JH: Inevitably, legislation that requires companies to strengthen systems or implement new ones places pressure on resources and organisational structures. There is also a risk that it could bring about legal challenges which would be time-consuming to address. However, we know that effective human rights management can protect organisations as it helps identify, anticipate, and mitigate risks. It also strengthens reputation and increasingly, contributes to positive ESG scores which can significantly enhance the company’s ability to access capital. All of which are positive benefits that should outweigh the challenges.

AF: What does Switzerland's vote on mandatory due diligence mean globally?

JH: On the global stage, a number of countries are considering legislation that incorporates human rights due diligence, following the example set by France with its Corporate Duty of Vigilance law, passed in 2017. The Netherlands has recently adopted a child labour due diligence law and Germany is in the process of drafting a law on mandatory human rights due diligence for German companies.

At the wider EU level, the Commission is seeking to introduce a legal duty to conduct human rights due diligence, impose sanctions for non-compliance and potentially allow victims of corporate abuse the right to obtain remedies.

If Switzerland votes in favour of the proposed new laws on November 29, it will join France as a pioneer in the development of effective human rights legislation and as a champion of good business practice that takes account of the adverse impacts on human rights.

AF: Are there any negative aspects of the adoption of the human rights due diligence law?

JH: Critics of the legislation argue that it is burdensome, imposing yet more bureaucracy on companies. It has also been argued that it could lead to a flood of legal cases which would deviate management time and resources away from the core operations of those companies that find themselves accused.

AF: How does a company know what negative impacts it may have on people’s human rights?

JH: Companies can only understand the negative impacts they may have on human rights if they have carried out a company-wide risk assessment to ensure that all their salient risks are properly and carefully identified. This is quite a complex process and many organisations struggle to get this right. Where necessary, this should include a risk-map of the supply chain to ensure that all high-risk suppliers are also identified.

Once the salient risks are properly understood, a due diligence programme should be devised to carry out the necessary checks on all high-risk areas and ensure that best practice can then be implemented. This may include site visits to evaluate how human rights impacts are managed in all operations but will also include the development of policies and procedures to address human rights impacts, developing evaluation questionnaires for affiliates and suppliers as well as designing communications programmes and training materials.

Stakeholder interviews should also be carried out to test how the systems are working on the ground and establish whether there are any concerns.

AF: Thank you Juliette for your time today, and for sharing your knowledge and insight.