Switzerland is generally a well-run place, with a healthy respect both for the preservation of capital and for the way that its referendums help ensure that Swiss democracy is genuinely bottom-up as well as top-down.
But, judging by this Financial Times report, these two qualities may be about to come crashing into each other:
Some of the world’s biggest companies, from Nestlé to Glencore, face the prospect of tougher ethical regulations in Switzerland, as a four-year debate over business practices comes to a head in parliament this week.
From Tuesday, MPs will have less than three weeks to thrash out a compromise to a proposed change to the law brought by the Responsible Business Initiative (KVI) .
The proposal will make businesses in Switzerland legally liable and “guilty until proven innocent” for abuses of human and environmental rights anywhere in their supply chains around the world — whether at subsidiaries or third-party companies.
The Responsible Business Initiative emerged in 2016 as a result of Switzerland’s direct democratic process garnering the support of more than 100,000 citizens, the threshold for triggering a referendum.
Under Switzerland’s constitution, the country’s lawmakers have the right to formulate an alternative to the popular proposal. If the initiative’s sponsors agree to the parliamentary compromise, the proposal becomes law. If the initiative’s sponsors do not, then their original proposal is submitted for a popular referendum.
This looks like a recipe for perpetual lawfare against Swiss companies, with the meaning of “abuse” and both “human and environmental rights” opening up the possibility for endless and expensive debate. Egregious cases are easy enough to identify — and in principle few well-run companies should have any problem in avoiding them, although it’s easy to see how policing their supply chains could be a different matter.
The real problem will come in cases that fall closer to that point where reasonable people could disagree over whether there has been any “abuse” of, for that matter, how far those “human and environmental rights” actually go.
The Financial Times:
Critics say the proposed legal changes would impose crippling legal liabilities on businesses for abuses far beyond their control, and turn Switzerland into a centre for activists trying to “blackmail” some of the world’s biggest multinationals.
Critics are right.
The Financial Times:
Supporters meanwhile argue the move will put Switzerland at the forefront of a global change. It will force businesses to account for their conduct, and prevent the Alpine country from becoming an international pariah as investors and other developed nations alter their ideas about good business practice.
The words “at the forefront of a global change” ought to be enough to fill anyone with gloom, but it’s interesting to read the argument-by-momentum that “supporters” are trying to create, unaware, perhaps, that being a “pariah” can be, as the Swiss used to understand when it came to banking secrecy, not the disadvantage that the Gutmenschen seem to assume.
Nevertheless, arguments-by-momentum should not be underestimated. The FT report quotes Vincent Kaufmann, chief executive of the Ethos Foundation, “a leading Swiss ethical investment adviser,” and an early inhabitant of the eco-system that is flourishing as interest grows in “socially responsible” investment (often nowadays defined by reference to the extent to which companies measure up to often ill-defined environmental [‘E’], social [‘S’] and, less controversially, governance [‘G’] standards). Naturally enough, Kaufmann plays the momentum card:
We are already late in Switzerland. If we adopt nothing we will be lagging. The proposals now will certainly put us ahead of other countries, but this is the direction of the trend. And since Switzerland was the host country for the universal declaration of human rights, I think we can afford to be ahead of the pack.
No, no, you are right about that last sentence: Its logic is . . . elusive
ESG , of course, can also be a good business. Ethos offers a range of funds which only invest in companies with an above average ESG rating — and there is nothing wrong with that. Investors who wish to take account of such considerations should have the opportunity to put their money in funds that do just that (the problem is when the element of investor choice is removed). Additionally, the firm “offers a full range of advisory services to foster socially responsible investment,” such as “portfolio and funds sustainability screenings.”
Politics in Switzerland these days comes with a green tinge and the FT reports that:
Polling indicates that support . . . for the original, hardline text of the KVI is high: an independent survey conducted last month found that 78 per cent of respondents were supportive of enforcing the new requirements on big business.
According to Mark Pieth, a legal professor at the University of Basel and founder of the Basel Institute on Governance:
“It is not a left-right struggle as you might think . . . There are already 120 Swiss NGOs which have come out in support of it, including all of the country’s churches.”
Churches and NGOs are, of course, famously above the left/right divide.
Could Liechtenstein’s big opportunity lie just ahead?