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2. Due diligence and reporting requirements in relation to conflict minerals and child labor
In addition to the general non-financial reporting obligations, the new regulations introduce specific due diligence and reporting obligations in the areas of conflict minerals and child labor.
2.1. Scope of application for conflict minerals
While the aforementioned general reporting obligations are limited to large as well as FINMA-regulated companies, the scope of application for conflict minerals is broader. All commercial companies with their registered office, head office or principal place of business in Switzerland are subject to the obligations.
Such companies must comply with due diligence obligations in the supply chain and report if they transfer conflict minerals into free circulation or process them in Switzerland.
The term «conflict minerals» means minerals or metals containing tin, tantalum, tungsten or gold, and their by-products, that originate from conflict areas. This includes areas,
- in which armed conflicts are being waged,
- which are in a fragile situation following conflict,
- where governance and security are weak or non-existent and
- where widespread systematic violations of international law, including human rights abuses, are taking place.
However, companies that only import or process small quantities of conflict minerals are exempt from the due diligence and reporting obligations. The quantities that are considered as small are defined at the ordinance level and are to be looked at on a consolidated basis within the respective group.
Companies that adhere to internationally recognized equivalent regulations are exempt from the due diligence and reporting obligations. This includes, for example, the OECD Guidance on Conflict Minerals. In this case, companies cite the relevant set of rules in their report and apply them in their entirety.
2.2. Scope of application for child labor
Commercial companies with their registered office, head office or principal place of business in Switzerland are also subject to due diligence and reporting obligations under the new statutory provisions if child labor is suspected. Child labor in this context means that work is performed by persons who are below the minimum age for employment in the respective state.
In the case of obvious child labor, Swiss companies are in any case required to adhere to the due diligence and reporting obligations. Knowledge of the use of child labor must in this context be obtained from reliable, objective sources.
If, on the other hand, the use of child labor is not obvious, companies are subject to due diligence and reporting obligations if they exceed two of the following values in the two preceding business years:
- a balance sheet total of CHF 20 million
- sales revenue of CHF 40 million
- 250 full-time employees on an annual average
In this case, companies must first carry out a risk assessment and qualify the country of production of their products or services according to the indication of origin based on the "UNICEF Children's Rights in the Workplace Index". If the risk assessment reveals an "enhanced" or "heightened" risk of child labor, a suspicion investigation must be carried out.
If, on the other hand, the country of origin is classified as "basic," companies are exempt from the suspicion investigation detailed below and thus also from the due diligence and reporting obligations. However, they must document the extent to which they face a low risk in the area of child labor.
In a second step, companies must carry out a suspicion investigation. A reasonable suspicion of child labor exists if it is based on concrete internal or external indications. Such indications, concrete perceptions and suspicions can arise from internal (e.g., on-site inspections) or external sources (media reports, communications from authorities). If the investigation does not reveal any justified suspicion of child labor, the company is exempt from the due diligence and reporting obligations in the area of child labor. This finding must be documented in a clear and substantiated manner.
If, on the other hand, there is a reasonable suspicion of child labor, the companies are subject to due diligence and reporting obligations.
However, also within the scope of application for child labor, it should be noted that companies that adhere to internationally recognized standards are exempt from due diligence and reporting obligations. These include the ILO Conventions 138 and 182 and the ILO-IOE Child Labor Guidance Tool for Business. In this case, companies must prepare a report in which they cite the set of rules and apply them in their entirety.
2.3. Due diligence and reporting obligations
The due diligence obligations consist of establishing and implementing an adequate management system. This is divided into the following phases: