When Dutch subsidiaries take the lead

Opponents of the Responsible Business Initiative accuse the initiators of dogmatism. The question is: Whose ideas end up in the junk-room of history? Photo: Dnipro in Eastern Ukraine (July 2016).
Article as analysis
When it comes to human rights, Economiesuisse is set for confrontation. Swiss companies abroad are more aware of their responsibility.

All too often the talk is of «the business sector». The discussion about corporate responsibility typifies just how strongly opinions diverge in the globalized private sector. While Economiesuisse –the umbrella organization of the Swiss business sector which also represents Switzerland's Nestlé Corporation among others – clings to its uncompromising rejection of the Responsible Business Initiative, the CEO of Nestlé Netherlands espouses an entirely different position.

In the Netherlands, business giants, inter alia, from the cocoa industry have taken the initiative to help secure the passage of a law passed that would stipulate due diligence with regard to child labour in their own companies, including upstream in their value chains. Besides the Dutch multinational Heineken and the Cargill agribusiness corporation, signatories to a letter to Dutch parliamentarians also include the CEOs of Nestlé Netherlands and of Barry Callebaut with headquarters, respectively, in Vevey and Zurich (Switzerland). Barry Callebaut is a company less well known to the general public but is number one in cocoa production and processing, with operations in 30 countries including the developing countries where cocoa is grown.

A reading of the letter is enlightening; the signatories call for binding legislation that goes beyond voluntary initiatives and self-regulation. They admit that in the face of a genuine, real-life problem, enterprises and government must shoulder their responsibility. Regulations on child labour would reward the efforts of those companies and remove the competitive disadvantages of others that are today's willing pioneers in this trend, and show that financially, it is entirely possible to fulfil one's duty of due diligence. Lastly, the signatories recognize that the Netherlands is among the leading group of countries that are creating a legal framework to prevent unfair competition and seriously address the problem of human rights violations throughout the production chain.

It should not be forgotten that the same companies that have signed the letter have also committed to voluntary initiatives to combat child labour. They are therefore convinced that legislative and voluntary measures are not mutually exclusive, but on the contrary, are perfectly complementary.

Missing the signs of the times

«Of course we also support the protection of human rights and compliance with environmental standards», the business associations Economiesuisse and Swiss Holdings never tire of repeating. With one small, decisive caveat, however: strictly on a voluntary basis. When the Responsible Business Initiative was submitted to the Federal Council and the Parliament in October 2016, Economiesuisse came out all guns blazing against the popular initiative. It would lead to a «counter-productive juridification» of the discussion on human rights and environmental protection and «to far-reaching legal, political as well as economic problems». The interesting thing is that in September 2017 in its dispatch regarding the Initiative, the Federal Council stated that the thinking of Economiesuisse was wrong in key aspects. The government pointed out that the civil liability proposed under the Initiative extended only to human rights violations committed by a company with headquarters in Switzerland or a subsidiary, but did not encompass subcontracting firms. The Federal Council also underlined that the initiative did not concern small and medium enterprises (SMEs).

Meanwhile, there have been surprising developments. On 3 November 2017, the Legal Affairs Committee of the Council of States (LAC-S) voted by 8 to 1 in favour of an indirect counter-proposal by Parliament to the Initiative, which would embody key elements of it.

In the immediate run-up, several large enterprises had set aside their reluctance and come out openly in favour of a counter-proposal, including names like Migros, IKEA and Mercuria, the little-known Geneva-based commodities trading firm which in August 2017 was regarded as Switzerland's fifth largest company. But that is not all: the Groupement des Entreprises Multinationales (GEM), with over 90 members and roughly 35,000 employees in the booming Lake Geneva region, turned to the Legal Affairs Committee of the National Council (LAC-N) on the matter. Unlike Economiesuisse, the GEM has obviously read the signs of the times: it wants the LAC-N to make common cause with its sister committee in the Council of States and also support a counter-proposal to the initiative. Represented in the GEM are not only subsidiaries of international corporations like Procter & Gamble, Cargill or DuPont, but also global Swiss commodity trading firms like Vitol or Louis Dreyfus. The UBS logo is also present on the GEM website.

Given these clear signs of openness on the part of big-name players, it is all the more puzzling that Economiesuisse continues to cling to its rejection of dialogue. The Zurich-based umbrella organization lobbied members of the LAC-N to oppose a counter proposal; it constantly wielded the same argument, to the effect that this was «the wrong path» and «counter-productive». This approach is even more incomprehensible considering that the promoters of the Initiative were open to compromise. For them, the withdrawal of the initiative would be perfectly conceivable in the event of constructive discussion respectively a solid legislative process in Parliament.

One may also wonder at the dogmatism of Economiesuisse in the light of the latest developments in Europe. It is worth recalling that in March 2017 the French National Assembly adopted a law on corporate due diligence that will also impact subsidiaries of Swiss enterprises in France. There has been no storm of protest from their Swiss headquarters, however.

Business does take varying forms. The coming weeks and months will show whether there will be constructive dialogue between non-governmental organizations and business organizations here in Switzerland. It could pave the way for a legislative proposal with which both sides could live. The Federal Parliament is expected to discuss the Responsible Business Initiative in the summer session.