Swiss need to catch up in corporate accountability

Tin ingots being marked at the Vinto plant near Oruro in Bolivia, which used to belong to Swiss-based commodities giant Glencore before being nationalised by the Bolivian government in 2007 Reuters

Switzerland needs to fall in line with internationally agreed standards and make firms report on their ethical as well as financial track records, according to a former United Nations special representative who introduced rules on business and human rights.

The European Union and the United States are already much further advanced in this area and Switzerland will be obliged to follow, notes John Ruggie, the driving force behind the UN Guiding Principles on Human Rights and BusinessExternal link adopted in June 2011 (see infobox below).

Ruggie, now a professor in human rights and international affairs at Harvard’s Kennedy School of Government, was in Geneva this week for a conference on “Human rights without borders: risks and challenges for Swiss companies” at the Geneva Graduate Institute, organised by the Fondation Guilé.  

swissinfo.ch: It’s almost four years since the publication of the UN Guiding Principles. Britain was the first state to launch a national action plan in September 2013 to implement the principles but only a dozen others have followed suit. Are you disappointed with this limited impact?

John Ruggie: I think some governments got off to a slow start but they’re beginning to catch on. Even the United States – a horrendously complex system of government – has announced that they are going to try to put together a national action plan. There is also Colombia and Mozambique is at work on one. Ghana has reached out for help. So it’s beginning to spread.  

The national action plans are just one component of a much, much larger picture. Individual elements of the guiding principles have already been incorporated into national policy and in some cases national law. 

John Ruggie Keystone

swissinfo.ch: This month a new surveyExternal link revealed just under half of large businesses are engaged in sustainability partnerships and only one-fifth of the 4,000 executives surveyed believe their boards provide substantial oversight on sustainability. Despite nearly unanimous consensus on the importance of sustainability, this suggests that practice appears to lag well behind belief.

J.R.: It’s certainly a work in progress but a work in progress that in four years has achieved at least as much if not more than any treaty I’m familiar with of equal complexity or contestation. 

A global company like Coca Cola, for example, operates in 200 countries and territories. To translate a policy commitment into action on the ground, particularly if you don’t own the franchises, bottling plants or sugar mills takes a long time. People have to be trained, monitored, assessed and it has to become part of your annual bonus calculations. These issues take time. You don’t turn a big ship around very quickly.  

swissinfo.ch: In a swissinfo.ch interview in 2006 you praised Switzerland for leading the field in ensuring firms respect human rights when they conduct business across the world. Would you say the same today?

J.R.: I think Switzerland was extremely supportive of the UN Global CompactExternal link External linkwhen it started. Switzerland was supportive of my mandate throughout and played a significant role in a number of areas. I think as a government it is currently not in a leadership position. It’s close but not quite there. Others have moved faster and further. 

swissinfo.ch: Critics say all the solutions proposed so far in Switzerland have focused on voluntary measures and that neither the government nor parliament has so far been prepared to take the necessary next step and to formulate legally binding requirements on companies based in Switzerland. They say it’s now time to “force businesses to do the right thing – not rely on their goodwill”. What is your feeling?

J.R.: I think the Swiss government will find that there are certain mandatory policies that they will have to adopt. If the US has a mandatory non-financial reporting requirement and the EU does too, it’s hard to see how Switzerland is not going to have one. 

I suspect Switzerland will be obliged to introduce some mandatory measures. This doesn’t mean that the entire guiding principles should be translated into a treaty instrument or single piece of legislation. That would be humanly impossible. A smart mix of policies is what I’ve said all along. 

swissinfo.ch: Frustrated with the speed of change, the Swiss Coalition of Corporate Justice plans to launch a people’s initiativeExternal link in the second half of April 2015 to require Swiss companies to respect human rights and environmental standards abroad as well as at home. Could Swiss citizens end up becoming a model for other countries by forcing stricter rules on Swiss-based firms?

J.R.: I think the essence of establishing corporate accountability is to have an adequate due diligence process. The guiding principles say that if a government is involved in a business enterprise, whether it’s through export credit or export insurance it ought to require that adequate due diligence takes place. I think this initiative as I understand it would take this a step further and universally require it.

If you are going to have a non-financial reporting requirement, which I believe Switzerland will have to follow, it’s hard to imagine how to do that without going through a due diligence process so I think these two are very closely related.  

swissinfo.ch: In recent years Switzerland has become a global hub for commodities tradingExternal link. Critics warn that the related risks, in particular reputational, are a time-bomb for Switzerland. Do you agree?

J.R.: I think the issue is about transparency. At the moment we know so little. Everything may be fine but we simply don’t know, as there is such lack of transparency in commodities trading. 

I think Switzerland, like the EU countries, will have to make progress on a national action plan. I hope it comes sooner rather than later, as these are important issues not only for the reputation of business but also of countries. It needs to restore people’s faith and trust in business itself and in the capacity and willingness of government to do what governments are supposed to do, which is to govern in the public interest. 

The Guiding Principles

In 2005 John Ruggie was appointed the UN Secretary-General’s Special Representative for Business and Human Rights, and given the task of coming up with a set of principles. The United Nations Guiding Principles on Business and Human RightsExternal link were adopted unanimously by the UN Human Rights Council and published in 2011. They are based on the idea of three pillars – “Protect, respect and remedy”. The first pillar represents the duty of the state to protect its own citizens; the second, the duty of corporations to respect the rights of those citizens, and the third, “the need for greater access by victims to effective remedy, both judicial and non-judicial”.

This has prompted states to start developing country-specific national action plans to put the Guiding Principles into practice. A dozen countries have adopted or are working on action plans. Numerous voluntary corporate sustainability initiatives exist, like the UN Global Compact, but these are criticised by NGOs because of the lack of effective monitoring and enforcement provisions.

Swiss approach

Since 2011, following a petition and ongoing debate in Switzerland on business and human rights, parliament has asked the government to put together a national action plan, as well as a comparative law report on due diligence with respect to human rights and the environment and a report on access to justice for the victims of human rights violations caused by companies. The Swiss authorities say their national action plan is due in summer 2015.

In 2013 the government released a report calling for voluntary measures, but stopping short of proposing tighter rules on trading companies. Switzerland is home to an estimated 500 companies in the sector, including commodities giants Glencore, Cargill, Vitol and Trafigura, which represent 3.5% of the country’s Gross Domestic Product.  

The Swiss Coalition of Corporate Justice plans to launch a people’s initiative in the second half of April 2015 to require Swiss companies to respect human rights and environmental standards abroad as well as at home.