‘No equivalent anywhere in the world’: industry body slams Swiss due diligence and disclosure plans
Government proposal would bring scope in line with latest CSRD and CS3D but add liability at group level
Switzerland’s largest trade association has expressed frustration at plans to introduce a new sustainability due diligence and disclosure law.
The government is currently consulting on a draft Federal Act on Sustainable Corporate Governance (CSA), which promises to bring Swiss requirements in line with those of the European Union.
The proposal is the result of a lengthy tug-of-war between lawmakers and civil society over the environmental and social duties of companies.
Many businesses in Switzerland are already covered by climate and sustainability disclosure rules, and those operating in high-risk areas for conflict minerals and child labour must undertake due diligence.
Backed by the popular vote, the Responsible Business Initiative has been pushing for tougher rules over the past five years, including the establishment of a new national supervisor to oversee sanctions.
On April 1st, the government revealed the CSA as its latest compromise.
It would create requirements similar to those outlined in the EU’s Corporate Sustainability Due Diligence Directive (CS3D), and Corporate Sustainability Reporting Directive (CSRD).
Specifically, it would mean businesses with more than 1,000 employees and turnover above CHF 450m – of which there are estimated to be around 100 – would have to undertake reporting in line with the European Sustainability Reporting Standards or equivalent.
Those with more than 5,000 employees and CHF 1.5bn in turnover – of which there are estimated to be around 30 – will also be subject to new human rights and environmental due diligence obligations.
The government suggests two possible options when it comes to civil liability, one of which includes holding parent companies liable for human rights and environmental breaches by overseas subsidiaries.
Anyone who intentionally makes false statements or doesn’t compile the reports properly would be subject to a fine of up to CHF 100,000.
Enforcement would be overseen by a new Federal Audit and Sustainability Supervisory Authority (FASSA), which could fine a business up to 3% of its global turnover, confiscate profits or ban it from securing public contracts.
The proposal has been on hold while the EU confirmed cuts to the scope and ambition of CS3D and CSRD, via its ‘Omnibus I’ package, and the changes to scope are reflected in the Swiss proposal.
However, Erich Herzog, general counsel for EconomieSuisse, said the plans would still put more burden and legal liability on Swiss firms than EU peers face.
EconomieSuisse claims to represent around 100,000 businesses through 100 industry associations and 20 regional Swiss chambers of commerce.
It also counts numerous individual issuers as members.
“Our core concern is this: the draft contains elements that have no equivalent anywhere in the world,” Herzog told Real Economy Progress.
“Articles 16–19 create de facto group liability for supply chain breaches – a construct the EU itself rejected, including in the Omnibus revision to the CS3D.”
He said the current plans for FASSA would vest it with “vast intervention powers reaching deep into ordinary business operations”.
“Switzerland would not be aligning with global standards; it would be unilaterally exceeding them, at direct cost to the competitiveness of Swiss-based companies,” argued Herzog.
“Gold-plating of this kind generates legal uncertainty and regulatory arbitrage, without producing better sustainability outcomes.”
Due diligence developments elsewhere
This week, a report on sustainability due diligence, funded by the Swiss government, was published by UK body ISEAL.
It explained how existing initiatives and associations can enable effective corporate due diligence.
The OECD has also just published a report comparing 21 existing due diligence requirements from around the world, and will soon launch an online tool for exploring current binding and non-binding measures.
It said governments were keen to identify “opportunities for greater co-operation and coherence across mandatory measures to avoid unnecessary costs and complexity for companies, suppliers and enforcement authorities”.
Given how nascent many due diligence laws are, the OECD noted that there was room for lawmakers to harmonise their expectations through upcoming implementing laws and official guidance.
“Upcoming guidance is also an opportunity to mitigate perceived differences and explain the relationship between different pieces of legislation to support more co-ordinated and coherent approaches across jurisdictions,” said the report.
Meanwhile, the UK Government has been told to tighten its labour rights due diligence rules.
The Department of Work & Trade launched its Fair Work Agency this week, which will be responsible for tackling modern slavery and workers’ rights abuses.
To mark the launch, the government published research it had commissioned from academics at the University of Lancaster, which included a recommendation to “work with investors and sector bodies to strengthen due diligence and supply chain governance, aligning commercial incentives with decent work outcomes”.
It noted that the cost of non-compliance with labour standards was often perceived as lower than the benefits derived from exploiting workers.