The rejection of the Responsible Business Initiative has only established some degree of clarity regarding the new due diligence and reporting obligations that companies will need to meet in future. There are still questions relating to the implementation of the counterproposal that need to be answered. Far-sighted and responsible management teams can and must address these questions now. Read on to find out how.
Since the rejection of the Responsible Business Initiative (RBI) on 29 November 2020, it has become clear that the indirect counterproposal approved by the Swiss Parliament will be implemented. Unlike the RBI, this counterproposal does not contain liability regulations for companies, but does stipulate a reporting obligation for listed companies and financial institutions, as well as a due diligence obligation for companies regarding conflict minerals and child labour.
The main provisions of the indirect counterproposal (Source: FDJP)
Although the rules are very clearly laid out, for many companies, it still remains unclear if the rules apply to them and, if so, exactly how they should be implemented. The Swiss Federal Council now needs to outline an implementation directive for due diligence obligations. This will then go through the consultation process. Until this has been completed, it will remain unclear which companies will be subject to the new regulations. For companies that do not operate in the commodities industry, the main concern is the set of regulations regarding child labour. One thing that remains unclear is how broad the Swiss Federal Council’s definition of the due diligence obligation will be. Depending on the definition, companies with complex supply chains could end up facing risks that would require an in-depth analysis.
The new rules will not enter into force immediately. A referendum against the indirect counterproposal is theoretically possible, but it appears increasingly unlikely. At the moment, it seems like the implementation will very much depend on how quickly the Swiss Federal Council works and how they set their priorities once the result of the vote has been officially confirmed and the deadline for a referendum has passed. It remains to be seen whether or not the regulations for the reporting obligations for listed companies and financial institutions will come into force before the implementation directive for due diligence obligations has been issued.
The long road to the entry into force (Source: Farner)
Companies should now conduct a risk assessment
Forward-thinking managers cannot rely on a wait-and-see approach. International companies in particular have to carry out a regulatory risk assessment to evaluate if and to what extent they will be affected by the new, as yet not fully defined, rules. They also need to check whether new due diligence processes need to be implemented. These companies will also have the opportunity to make suggestions as part of the consultation process for the implementation directive, which is expected to start in 2021.
A look at what’s happening outside Switzerland might be useful for long-term planning. The EU and individual member states such as France, Germany, the Netherlands, Finland and the UK have all introduced stricter rules in recent years. If this trend continues, it will certainly have an effect on Switzerland. The Swiss Federal Council has made its intention to introduce stricter regulations that are more in line with international developments clear on numerous occasions.
If you have any questions, please don’t hesitate to get in touch. We can help you assess how you will be affected and the regulatory risks you will face, provide advice during the consultation process and help you anticipate international developments:
Farner Consulting AG
Danial Naghizadeh, Consultant Public Affairs
Ivan Jäggi, Senior Consultant Public Affairs