Ellen Hertz on the Swiss Corporate Social Responsibility Initiative

On November 29, citizens in Switzerland will go to the polls to vote yes or no on a corporate social responsibility initiative that would mandate that multinational corporations respect human rights and the environment.

Professor Ellen Hertz

Switzerland has the largest number of multinational corporations in the world per capita.

Polls are showing majority support for the initiative.

Under the Responsible Business Initiative, companies will be legally obliged to incorporate respect for human rights and the environment in all their business activities. 

This mandatory due diligence will also be applied to Swiss based companies’ activities abroad.

In order to ensure that all companies carry out their due diligence obligations, Swiss based firms will be liable for human rights abuses and environmental violations caused abroad by companies under their control. 

The provision will enable victims of human rights violations and environmental damage around the world to sue Swiss multinationals in courts in Switzerland.

Ellen Hertz is a Professor at the University of Neuchatel in Neuchatel, Switzerland.

She is an author of the book Business and Human Rights: The Limits of Good Intentions. She will spend much of the next two months advocating for the passage of the initiative.

“It’s a very important initiative, because what it basically says is, okay, we cannot regulate activities of other businesses in other countries – that’s beyond our jurisdiction,” Hertz told Corporate Crime Reporter in an interview last week. “However, we can say to Swiss businesses that they must do due diligence to find out if their supply chains are respecting human rights and the environment. And if they don’t, they are opening themselves up for lawsuits in Swiss courts under Swiss law.”

“It’s a civil solution, a tort law solution. It says – people who have been victims of human rights violations in other countries can sue Swiss corporations in Swiss courts, if their harm comes from the activities of Swiss businesses and their supply chains.”

“And that is a much different approach. It’s not based on the voluntary programs of transnational corporations. It’s not them saying – we’ll do the best we can and if we can’t, well there’s no consequences. It basically says there is a consequence. And the consequence is the risk of lawsuits. As you can imagine, the Swiss business community is not of one mind on this. But basically the multinationals are campaigning hard against it. Nonetheless, I think it’s a really interesting initiative and it goes in the direction of other initiatives that look at sectors.” 

What’s an example of how this may play out if this passes in Switzerland? 

“An example would be a Swiss business is sued by Chinese workers for knowingly not doing the kinds of due diligence research necessary to show human rights abuses – the enterprise didn’t do a good enough job to find all the information on all of its suppliers.”

“Workers could sue in Swiss court. Of course, this implies that they would be represented by NGOs who will help them because it’s very difficult for Chinese workers to get the money and know how to start such a lawsuit. And there are NGOs specialized in trying to represent these claims in court.”  

“Switzerland is the home to the many multinational corporations – the most multinationals per capita of any country in the world. It’s a safe place for multinationals, partly because of its very low corporate tax rates. Passing this initiative would send out a real signal.”  

“The German government is considering similar moves. And the French government has already passed a law which requires a duty of vigilance about human rights violations in supply chains. And there are various versions of this in Holland, in Belgium and in England.” 

“There is a European trend toward more hard law in regulating corporations. If Switzerland passes this initiative it’ll be a very strong signal.”

Does the United States have such a law?

“No. We know Congress is dysfunctional. But there is the Lacey Act. There are provisions governing conflict minerals. There are some sectoral agreements laws that allow for that kind of regulation. And of course, the United States, when it wants to, can be extremely forceful in imposing its jurisdictional reach on other countries. The United States single handedly killed the Swiss banking secrecy tradition.” 

“It’s not like the United States doesn’t have a tradition of interfering in corporate activities in other countries. It’s just that this particular one would sit very poorly with the corporate community in America at this point.”

“But I think that the political alignments in the States are so fluid at this point. The support for small businesses is extremely high. And that’s one of the groups that’s protected by such a law against multinationals.” 

“The support for more environmental measures and protection is extremely high. So it’s not completely unthinkable that were the Democrats to take the Congress in the fall, we could see something like this develop in the States.”

Why are you publishing your book in Switzerland and not in the United States?

“Switzerland is a place, unlike the United States, where social scientists working in universities are consulted and listened to and invited to talk on national media. So I’m publishing this book now so that we can talk about it in the next two months before the election. I hope that it will get some press and that will allow me and my co-authors to go onto the radio and television and say – look this is a necessary step for regulating corporations.” 

“I would be happy to do more about this in the United States. It’s just that it hasn’t come up yet but I’m certainly very interested in following efforts in the United States to pursue this path to regulation.” 

“It’s not like regulation that’s top down. And that’s something that’s important. It’s not saying the state should inspect all of the business transactions of all American corporations and decide what’s good and what’s not good. That would be what, perhaps, the big businesses will accuse us of, but that’s not the system.” 

“The system would be giving access to remedies for people who are victims of these violations in US courts. It’s a much less constraining system. It’s not bureaucratic either. It requires the corporations – if they want to show that they didn’t do anything wrong – they have to show that they did the due diligence examination necessary to avoid these violations.” 

“So it’s an interesting combination of corporate self governance, backed by law, and backed by civil society governance because they get to access the courts.”

[For the complete q/a format Interview with Ellen Hertz, see 34 Corporter 33 (10), August 31, 2020, print edition only.]

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