Switzerland is lagging behind: EU tightens regulations for companies

The referendum campaign on the KVI is one of the most formative political events of recent years. The mobilization was enormous, the orange flags fluttered up and down the country from the balconies of the houses. But the voting campaign was also hateful, as is rarely the case in this country. Both camps accused each other of lying campaigns, there was talk of a culture of “Trumpism” that had infected Switzerland.

People said yes, but a no came out

Nearly 50.7 percent of voters said yes to the referendum in November 2020. But the request failed because of the tribune. On 1 January 2022, an indirect counter-proposal from Parliament entered into force. The Responsible Business Initiative is the latest constitutional proposal to fail.

Switzerland’s role in the international context was one of the main arguments in the referendum campaign on the KVI. The proponents wanted Switzerland to play a pioneering role. The Bundesrat, which rejected the initiative, warned against going it alone.

EU goes further than the initiative intends

Two and a half years after the vote in Switzerland, the EU parliament has now voted to tighten up the so-called supply chain law. A majority of MEPs in Brussels voted in favor of rules that make companies responsible for tackling child labour, exploitation and pollution in their global supply chains.

Some decisions correspond to the requirements of the KVI of 2020. The planned EU directives go even further on some points, for example with climate obligations, supervision and liability for suppliers:

• Large companies must ensure that their business activities do not violate human rights or harm the environment.
• The corporations must find a reduction path for their CO₂-Define emissions in accordance with the Paris Climate Agreement.
• Corporations should be liable for damage that they have (partly) caused due to carelessness, for example through their subsidiaries and suppliers.
• A supervisor checks whether the obligations are being complied with and can impose sales-related fines in the event of violations.
• They must also monitor compliance with environmental and social standards at their partner companies in the value chain. This includes suppliers, sales partners, transport companies, storage service providers and waste management.

EU-based companies with more than 250 employees and an annual turnover of more than €40 million worldwide are covered by the new supply chain law. Companies located outside the EU must also comply with the new regulations if they have a turnover of more than 150 million euros, of which at least 40 million euros are in the EU.

Swiss companies only have to “register”

“Switzerland must now start a legislative process so that it will not soon be the only country without corporate social responsibility,” said Chantal Peyer, who is on the board of the coalition for corporate social responsibility for aid organization Heks. This is an exaggeration, as the Federal Council’s counter-proposal to the KVI also implemented guidelines for compliance with basic rules along the supply chains of Swiss companies. However, these are far behind the law now passed by the EU. “Watson” called the counterproposal “soft as a diaper”.

The counter-proposal entered into force on 1 January 2022 in the form of new provisions in the Swiss Code of Obligations. The main difference from EU law: it only obliges companies to report on their human rights and environmental protection efforts (“reporting”). The corporations just need to take action on child labor and conflict minerals. And: There are no penalties for violations.

Criticism of the Bundesrat

That is why action is now required. “Since about 60 percent of Swiss exports go to the EU, the Swiss economy will be strongly affected by this (new) EU directive,” the Federal Office of Justice writes. The Federal Council therefore assumes that Swiss regulations will need to be adjusted and wants to analyze the effects of the future EU directive in the field of due diligence “thoroughly” by the end of 2023. He also wants to draw up a consultation draft by July 2024 – but only in the area of ​​reporting.

Peyer of the KVI is disappointed. “Instead of continuing to rely on ‘reporting’, the Bundesrat should finally come up with a law on corporate social responsibility,” she says. “But while the Federal Council promised in the referendum campaign to campaign for an ‘internationally coordinated’ law and ‘level playing field’ for companies in Switzerland and the EU, the Federal Council has no plans to enact a corporate social responsibility law in Switzerland. feed.”

European economy reacts critically to EU tightening

Individual companies have already reacted to the EU Parliament’s decision. PricewaterhouseCoopers’ auditors recommend that Swiss companies proactively adapt to EU directives to stand out from the crowd. “If you only comply with the more lax Swiss regulations, you risk losing some competitive advantage.”

The reactions in other European countries to the decision of the EU parliament are now comparable to those of the Swiss opponents of the KVI during the referendum campaign in Switzerland. According to the “Spiegel”, German business representatives warn of “excessive bureaucracy and a weakening of European companies on the world market”.

Swiss companies in the picture

Meanwhile, the Swiss Coalition for Corporate Social Responsibility refers to human rights violations and environmental destruction by Swiss companies that became known after the 2020 vote. For example, the alleged UBS funding of Brazilian companies involved in illegal deforestation. As an extensive SRF investigation shows, the Geneva shipping group MSC scraps its ships under poor conditions on Indian beaches. The Guardian reports how Syngenta hid the dangers of its pesticide paraquat.

The final details between the EU institutions will be clarified over the summer. The EU member states then have two years to transpose the directives into national laws. 366 MEPs said yes to the planned EU supply chain law, while 225 MEPs opposed it with 38 abstentions.