RBI: what is the most important content of the counter-proposal? RBI: what is the most important content of the counter-proposal?

It is fair to state that probably a large number of members of the top management of Swiss based enterprises observed last Sunday’s vote closely and took note of the fact that despite a majority of vote, the Responsible Business Initiative (the “Initiative”) was rejected. It failed due to the “Cantonal Majority” rule. If the result had been different, the Swiss lawmaker would have had to implement legislation introducing new obligations for Swiss based enterprises.

As a result, that would have meant that Swiss based enterprises would have had to implement mandatory due diligence obligations regarding the observation of human rights and environmental topics in all their business activities not only in Switzerland but also abroad. Secondly, the Initiative would have made it possible for victims of human rights or environmental violations to submit their claims for damages against such Swiss based enterprises before Swiss courts.

However, the outcome of the vote does not mean that there is no change. To the contrary, the indirect counter-proposal adopted by the Swiss Parliament on 19 June 2020 (the “counter-proposal”) will enter into force unless Swiss citizens request a vote prior to the expiry of the referendum deadline.

The most important content of the counter-proposal is the obligation of larger enterprises to publish a report on non-financial items on a yearly basis. This means that Swiss enterprises are required to disclose certain non-financial information anyway. However, the counter-proposal does not contain a liability provision.

• Companies of a certain public interest in the sense of Art. 2 lit. c of the Audit Oversight Act (SR 221.302), which together with their subsidiaries in Switzerland and abroad
  • employ in two successive financial years at least 500 full-time positions on annual
    average, and
  • exceed at least one of the following thresholds in two successive financial years: balance sheet total of 20 million francs and sales revenues of 40 million francs.

Enterprises which are controlled by a company caught by the obligation above as well as enterprises which have to produce a comparable report pursuant to foreign law are released from the obligation to produce such a report.

The content of such report consists of non-financial items and makes enterprises account for environmental (in particular the CO2 goals) and social concerns, the respect of human rights as well as the fight against corruption. The report is to be drawn up in one of the official languages of Switzerland or in English and requires the approval and signature of the board of directors as well as the approval of the general meeting of the shareholders. In addition, such report has to be published electronically immediately upon approval and has to remain publicly available for at least ten years.

In addition, the counter-proposal will introduce due diligence and transparency obligations
regarding minerals and metals out of conflict areas and regarding child labor for enterprises that have their registered office, central administration or principal place of business in Switzerland. The counter-proposal requires such enterprise to adhere to a certain level of due diligence obligations in their supply chain if 
 

• they are engaged in the import of such minerals or metals into Switzerland or the processing
  of such minerals or metals in Switzerland; or
• offer products or services which may have been produced or rendered using child labor

The due diligence and transparency obligations in this regard require the enterprise to introduce a management system which allows the identification and valuation of risks relating to the minerals and metals as well as child labor. They have to produce a risk management plan and have to introduce measures to mitigate identified risks. The adherence to the due diligence obligations needs to be reviewed by an independent specialist as far as minerals and metals are concerned.

The board of directors has to draw up and to publish a report on the fulfillment of its due diligence obligations on a yearly basis.

Please note that a violation of the newly introduced obligations may result in a criminal fine in the amount of up to CHF 100,000.

It is fair to state that in particular large enterprises are already quite advanced when it comes to the implementation of risk management processes in the supply chain as well as the publication of sustainability reports. However, mid-sized companies in Switzerland may take Sunday’s vote as a reminder that there is some work to be done.