Multinationals Seem Too Big For Accountability. Switzerland May Change That

This Sunday, the Swiss people will vote in a landmark referendum on how their multinational companies are regulated with regards to their activities abroad. The Responsible Business Initiative (RBI) could be the start of more accountability for some of the world’s wealthiest companies headquartered in Switzerland.

Switzerland is not only a fairytale country of chocolate, scenic mountains and watches, but also home to some of the biggest and most powerful multinational companies in the world, some of which have larger revenues than the GDPs of entire countries. The wealth and power of these businesses make it difficult to hold them to account if they cause harm to people or the environment – especially when such harm takes place abroad.

The business activities of Swiss-based multinationals can have an impact all over the world. For example, Glencore, a mining company, has been linked to concerns about water pollution and labour abuses in the Democratic Republic of Congo (DRC). Despite a clear corporate responsibility to respect human rights under international law, there are no laws in Switzerland that require multinational companies like Glencore to conduct human rights and environmental due diligence and which hold them accountable for misconduct abroad. 

There are no laws in Switzerland that require multinational companies to conduct human rights and environmental due diligence and which hold them accountable for misconduct abroad

Amnesty International

However, on Sunday Swiss people may change this situation.

The RBI calls for multinational companies based in Switzerland to be required by law to conduct due diligence to ensure they do not negatively impact human rights and the environment. The RBI also demands that multinational companies should be made liable for the harm caused by them or their subsidiaries, unless they can prove that they took all due care to avoid such harm. In this way, the initiative seeks to close the accountability gap which currently exists.

Amnesty International has been working to ensure companies respect human rights for almost 25 years. Back then, there was little public understanding of the impact of globalization on corporate responsibility.

Because of this, powerful multinationals have been getting away with human rights and environmental abuses arguing that they took place outside their home jurisdictions. Amnesty International has been challenging Shell for decades about the devastating impact that pollution and environmental damage, associated with the company’s operation, have had on the human rights of people in the Niger Delta, Nigeria. Shell has, however, tried to delegate its responsibility for the damage to its Nigerian subsidiary, SPDC, making it more difficult even for victims to seek justice. Today, there is a case pending in the UK which seeks to hold the company accountable. If the Responsible Business Initiative is successful, Swiss multinationals will also have to bear responsibility for harm caused by their subsidiaries.

This Swiss initiative can pave that path that ensures ethical and fair business should not be an empty phrase, but a genuine commitment

Amnesty International

We have been working to shape and establish codes of corporate conduct, but voluntary initiatives have not had the desired effect, nor have they sufficiently changed the behavior of corporate entities. Too many communities are still victims of human rights abuses and many have no access to justice and/or compensation for the wrongs they suffer. 

In recent years, various governments have enacted legislation to ensure that multinational companies headquartered in their territories respect human rights wherever they do business and judges and courts are opening their doors to allow victims access to their legal systems.

In 2015, a group of over 1800 Zambian villagers filed a lawsuit against Vedanta Resources in the UK Supreme court to protest water pollution caused by its subsidiary’s copper mining operations. They claim that the water pollution from the Nchanga Copper Mine has damaged their lands and livelihoods. On April 10, 2019, the Supreme Court ruled that the case could be heard by the English courts.

In contrast, the Swiss government has so far taken a hands-off approach, despite the large number of multinationals headquartered in Switzerland. If enacted, the RBI would ensure that Switzerland no longer lags behind when it comes to establishing a legal framework to prevent human rights violations by multinational corporations and their subsidiaries.

The European Commission is working on a legislative proposal on mandatory due diligence for companies with regards to their human rights and environmental performance, to be introduced in 2021. Many multinational companies and and business associations have already been supportive of this approach.

Today, young people, consumers, employees and investors want to understand the real impact of global business on people and the environment. Investors are now paying much greater attention to environmental, social and governance (ESG) risks, and are looking hard at the problem of investing in companies that can have negative social and environmental impacts.

In the interconnected, global playing field of business there is a need for a legal framework operationalising the human rights responsibilities of Swiss and Swiss-based companies. All companies need to have clear rules, clear accountability mechanisms for damage and more transparency which will guarantee an equal playing field for businesses, for consumers, investors and employees. This Swiss initiative can pave that path and when Swiss citizens vote on the Responsible Business Initiative, they should know that their commitment will ensure Switzerland does not lag behind the international community. Ethical and fair business should not be an empty phrase, but a genuine commitment.