Swiss to Vote on Tougher Responsibility Proposal for Companies

For several months, orange flags printed with “Yes!” have hung from balconies across Switzerland, encouraging the public to vote Sunday in favor of an initiative to make Swiss companies liable for human rights violations and environmental damage committed by their subsidiaries abroad.

The proposal, which has been promoted by a coalition of over 130 civil society organizations, has been opposed both by businesses and the government, which say it goes too far and could hurt Swiss companies as they struggle with a slowdown linked to the coronavirus.

The initiative, if approved, would require companies to ensure that their subsidiaries and supply chains comply with U.N. human rights guidelines and a range of international environmental standards. They would also be required to publicly report on potential risks, like suppliers being unable to verify the safety of factory buildings or the use of child labor, and what measures are being taken to address them.

The initiative would make companies based in Switzerland liable for violations that happen at entities and subsidiaries they control abroad, enabling victims to bring their cases before Swiss courts.

The law, which the latest newspaper polls suggest voters will approve, could have implications for the large number of multinational companies that have their global headquarters in Switzerland.

If voters reject the initiative, milder legislation put forward by the government will come into effect. That law would require companies to monitor their international operations more closely, and introduce a new reporting obligation, but stops short of holding the Swiss parent company liable for violations that occur abroad.

The referendum has been the source of much debate in Switzerland and is the most expensive in the country’s history, according to the Swiss newspaper Tages-Anzeiger.

The groups behind the initiative, whose campaign has used advertising depicting alleged victims of Swiss companies’ activities abroad, attracted a lot of early support across the country, including from the church.

But in the lead up to the vote, opponents have intensified their activities, with executives at a number of multinational companies speaking out against the proposal and companies taking out full-page advertisements in Swiss newspapers urging people to vote no.

The chief executive of the food and beverage giant Nestlé, Mark Schneider, told the Swiss financial newspaper Handelszeitung that the company stands for human rights and environmental protection, but did not agree with the initiative in the current format.

“We consider the way in which the initiative wants to implement these goals to be misguided and counterproductive,” Mr. Schneider said.

Andreas Missbach, the joint managing director of Public Eye, a human rights organization that is one of the backers of the initiative, said the aim was to prevent human rights violations and harm to the environment by Swiss multinational companies abroad.

Mr. Missbach says that while many Swiss multinationals were trying to do the right thing by screening their supply chains, abuses linked to the companies they own, such as unsafe working conditions and oil spills, were still occurring. He cited the commodity trading sector as one area of concern.

Switzerland is home to some of the world’s biggest commodity trading companies including Glencore, a producer and marketer of metals, minerals, coal and oil, which has been a particular target of backers of the initiative. Glencore says that the company works in line with international standards, and that allegations of abuses like the use of child labor at its Porco mine in Bolivia are false.

Mr. Missbach thinks the initiative has triggered a lot of opposition because it goes against Switzerland’s traditional hands-off approach to business.

“In Switzerland companies are traditionally free to do whatever they want without regulation, but that is simply not in line with the world we are living in today,” he said.

The campaign against the initiative has been led by the Swiss Business Federation, Economiesuisse. Erich Herzog, an executive member of the group, said a “yes” vote on Sunday would potentially result in years of legal uncertainty for companies.

“We are afraid that this will have a negative impact on Swiss businesses, but also on the countries into which Swiss businesses invest,” he said. Mr. Herzog said companies would likely retreat from some countries in order to avoid risking litigation. “Should Switzerland withdraw, the gap would most likely be filled by competitors from China or Russia,” he said.

Mr. Herzog said the government’s counterproposal would still put Switzerland among the top countries with regard to corporate social responsibility. “We are in the middle of an economic crisis so this is not the time for experiments that create uncertainty,” he said.

Thomas Beschorner, director of the Institute for Business Ethics at the University of St. Gallen, said the initiative was a reaction to problems that have arisen with globalization. “We have an extremely globalized economy, but at the same time the law is still very much linked to the territory of one country,” he said.

Mr. Beschorner said the approach to corporate social responsibility taken by Switzerland so far, and in the government counterproposal, have not been effective enough.

“There are indeed companies that are really engaged and committed in social, as well as, environmental questions, but at the same time, we should be much further than we are today,” he said.

Voters on Sunday will also decide the fate of a second initiative aiming to prevent Swiss institutions, including the Swiss National Bank and pension funds, from investing in weapons manufacturers both in Switzerland and abroad. The proposal defines a weapon manufacturer as an entity that earns more than 5 percent of its revenue from the production of war materials, meaning that companies such as Boeing would also be affected.

One of the two main organizations behind the initiative is the Group for Switzerland without an Army, which has in the past launched numerous referendums to influence the nation’s security policy.

Nadia Kuhn, secretary of the pacifist group, said this initiative was focused on the financial sector as Swiss banks manage around a quarter of the world’s transnational private assets and currently invest billions in weapons manufacturers. “We thought that here there is a real potential to change something,” Ms. Kuhn said.

The latest polls by local media outlets suggest that voters are likely to reject the anti-arms investment proposal.