Responsible Business Initiative: it’s time to ask the right questions.
Do you already have a mature non-financial reporting and risk management set-up? With only limited time to prepare, take this chance to get ahead with EY’s latest insights and responses to FAQs.
The Swiss Parliament agreed on an indirect counter-proposal for the Responsible Business Initiative (RBI). If the initiative is not adopted, the counter-proposal is automatically put in place. Therefore, in either case, many Swiss companies will be faced with some form of increased reporting and due diligence requirements.
The Responsible Business Initiative
The initiative would amend the Swiss Federal Constitution to add a new article on liability provisions of parent companies for illegal acts of controlled companies (e.g., subsidiaries and certain suppliers) abroad. Swiss companies would be required to ensure that internationally recognized human rights (e.g., UN Guiding Principles on Business and Human Rights) and environmental standards (e.g., Montreal Protocol for the protection of the ozone layer) are respected by controlled companies.
Further, companies would be obliged to carry out appropriate due diligence to identify real and potential impacts, take measures to prevent violations, cease existing violations and account for actions taken.
Swiss companies would be liable for human rights and environmental misconduct of controlled companies (including certain suppliers), unless they can prove that all due care has been taken (reversal of the burden of proof).
The indirect counter-proposal
The indirect counter-proposal foresees a reporting obligation for Public Interest Entities (PIEs) on environmental (incl. CO2-targets), social and employee matters, respect for human rights and anti-corruption matters in line with the European Union (EU) Directive 2014/95/EU on nonfinancial reporting. The reporting should include a description of the business model, policies and due diligence, outcome of policies, risks, and key performance indicators. The according nonfinancial report would need to be approved and signed by the highest management and administrative body and approved by the body responsible for annual accounts (an audit is not explicitly required). Further, the counter-proposal introduces a due diligence and reporting obligation for minerals and metals from conflict areas (based on Regulation (EU) 2017/821) and ‘child labor’ (based on the Child Labor Due Diligence Act of the Netherlands). Due diligence on minerals and metals will be subject to review by an independent third party.
Regarding liabilities, the law would remain unchanged. The Council of States had introduced the basis for this counter-proposal in response to the National Council's more stringent counter-proposal.
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98%of investors surveyed evaluate nonfinancial disclosures, either formally or informally.
What questions do I need to ask?
- How is my company impacted by the upcoming legislative changes in both scenarios?
- Would we currently be prepared to report in line with the EU’s nonfinancial reporting Directive 2014/95/EU?
- Do we or controlled companies have business operations in, or suppliers from, regions with high risk regarding child labor and/or minerals and metals?
- Do we already have fitting human rights and environmental due diligence processes in place?
- Do we have supplier agreements which include internationally recognized human rights and environmental standards?
- Do we want an external audit of our nonfinancial disclosures and due diligence processes, are we prepared for this and have we discussed it with our Board of Directors?
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What's next
The popular vote will take place on 29 November 2020. If the RBI passes, the Federal Constitution will be amended whereby specific details will still need to be clarified. If the initiative is not supported in the popular vote, the counter-proposal will become law. Changes could be expected to be effective from 2022 onwards. Either way, this implies that there will be changes to Swiss companies’ due diligence processes and the introduction of some form of legally binding nonfinancial reporting requirement in Switzerland.
Summary
In June 2020, the Swiss Parliament agreed on an indirect counter-proposal for the Responsible Business Initiative (“Konzernverantwortungsinitiative”). Thus, a public vote will take place on 29 November 2020. If the initiative is not adopted, the counter-proposal is automatically put in place. Therefore, in either case, many Swiss companies will be faced with increased reporting and due diligence requirements.
