Switzerland Could Soon Be the First Country to Hold Corporations Responsible for Supply Chain Injustices

Update: Although Switzerland's effort to hold companies responsible for human and environmental impacts in supply chain won majority popular support, a national vote rejected the proposal due to regional differences on Sunday, Nov. 29. 

Switzerland is close to setting a new precedent for responsible business. On Nov. 29, in a first-of-its-kind decision, the country's parliament will vote on a referendum that holds all companies headquartered in Switzerland legally responsible for human rights abuses and environmental exploitation in their supply chains. If passed, victims of unethical economic activity anywhere in the world will be able to seek retribution from the companies at the top.

“For too long, multinational corporations have been able to hide their abuses behind a veneer of respectability, using plausible deniability whenever bad behavior is highlighted,” Valter Sanches, general secretary of Swiss global union federation IndustriALL, said in a press statement. “[This proposed legislation] is part of a global movement by unions and civil society organizations to hold companies responsible for their behavior. Our message is this: We are coming for you. There is nowhere to hide. We will hold you accountable.”

The so-called Responsible Business Initiative is the result of five years of campaigning, and the Swiss Coalition for Corporate Justice collected 120,000 signatures in less than a year before submitting to parliament. In June, a counter-proposal brought to parliament was narrowly defeated. Now, in a popular referendum, citizens will decide on this amendment to the country's constitution.

Other governments have considered adopting similar legislation. The European Union published a draft directive last month mandating supply chain due diligence. As of yet, no nation has progressed as far as Switzerland is poised to go.

Unprecedented alignment with the UNGPs

Back in 2011, the United Nations developed the Guiding Principles on Business and Human Rights (UNGPs) to clarify the role businesses and governments play in creating ethical supply chains. These take the form of three pillars: governments passing and implementing laws to ensure businesses don’t violate human rights, corporations continuously taking concrete steps to respect human rights, and governments providing a remedy when companies do abuse human rights.

With respect to the first and third pillars: Thus far, even a decade after the U.N.’s principles were published, governments have yet to hold companies legally accountable for the actions taking place in their supply chains — and many multinational corporations have shown they don’t even know what’s happening upstream.

Part of the reason this Swiss proposal is unprecedented is because of a fear that businesses, even nations, may become uncompetitive in a regulated global marketplace. This is part of the concern IndustriALL says the Swiss corporate lobby has voiced in its resistance to the initiative.

Without top-down governance, many of the recent improvements to the global supply chain have come in a grassroots way: corporations responding to growing global crises and the greening preferences and demands of their customers. A study from earlier in 2020 found that a third of consumers will stop purchasing a preferred product if they lose trust in the brand. And these customers are voting with their money for sustainable, transparent and value-driven brands, even if it costs more, findings showed. Companies like L’Oreal are taking their own initiative to clean up the supply chain and align with customer values. For example, earlier this year, L’Oreal announced its efforts to support a more renewable plastic recycling process.

Data transparency is a key to improving the supply chain

While it’s yet to be seen how legal enforcement will take shape, it is clear that creating an ethical and sustainable supply chain benefits businesses, if only by avoiding public shaming and lawsuits — such as the suit filed in January against Silicon Valley tech giants on behalf of child cobalt miners and their families.

For any company that even wants to avoid a public relations disaster, data is a good place to start in improving supply chain sustainability. A 2019 report from CDP about its Supply Chain Program, which facilitates carbon emission transparency, states that “as suppliers become more mature in their understanding of sustainability issues and advance their approaches for taking action, there is evidence that they too are improving their efforts to cascade positive change downwards through their own supply chains.” This improvement, the Harvard Business Review notes, is because company disclosures influence how these multinational corporations contract with suppliers.

Whether or not the Swiss decide they want to hold corporations legally accountable for supply chain injustices, the vote itself shows the UNGPs’ first and third pillars are finding ground at the upper levels of governments. Fulfilling the responsible business ecosystem outlined in the UNGPs can only further support the environments and people sustaining complex supply chains, as well as the businesses profiting at the top.

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