Following the rejection of the Responsible Business Initiative in November 2020, the Swiss Federal Council has been working on implementing the indirect counter-project adopted by the Swiss parliament. As the open consultation on a draft ordinance on the duties of diligence and transparency in the fields of minerals and metals from conflict zones and child labor (ODiTr) comes to an end, the Ethos Foundation regrets the lack of ambition of the new bill.
In November 2020, although 50.7% of the Swiss had voted "Yes", the Responsible Business Initiative did not obtain the majority of cantons necessary for its acceptance. Since then, the Federal Council has worked to implement the indirect counter-project adopted by parliament with the aim of ensuring that companies based in Switzerland respect human rights and the environment everywhere in the world.
According to the Federal Council, the new provisions of the Code of Obligations are a source of improvements on two points. On the one hand, large companies will have to account for the risks generated by their activity and issue a report on environmental issues, social issues, personnel issues, respect for human rights and the fight against corruption. They will also have to present the measures they have adopted in these areas. On the other hand, the companies whose activity presents risks will have to comply with extensive due diligence duties in the sensitive areas of child labor and minerals and metals from conflict zones.
On 14 April 2021, a consultation on the implementation arrangements for the counter-project was opened. In a public position statement (in French or in German), Ethos regrets the lack of ambition of the new law and fears that Switzerland will be falling behind in terms of legislation while at the same time, six European countries have already introduced or are in the process of developing more ambitious legislations on due diligence.
Ethos particularly regrets that the proposed provisions only deal with the issue of child labor and the minerals sector from conflict zones. While these issues are eminently important, other serious human rights violations, such as modern forms of slavery that affect 40 million people around the world according to estimates by the International Labor Organization, do not appear in the new Swiss legislation.
A risk for the competitiveness of the Swiss financial center
In its position paper, Ethos calls for the Federal Council to revise its ordinance and to adopt a new version more in line with recent international developments. These include adding cobalt and recycled metals in the list of minerals and metals subject to due diligence, introducing a control and sanction mechanism, and not granting exceptions for due diligence and reporting obligations in the area of child labor to SMEs that present a significant risk in this area.
For the Ethos Foundation, human rights due diligence is a central element of responsible investing and the environmental, social and governance (ESG) criteria that investors must take into account in their investment decisions. A clear legislative framework including concrete requirements applicable to as many market players as possible helps to create a level playing field and is an important step in this direction.
With the new bill and such a minimalist ordinance, Switzerland is lagging behind international developments, which could be harmful to the competitiveness of its financial center. Indeed, international investors expect more restrictive regulatory frameworks in this area to reduce the ESG risks of their investments.