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Swiss corporate due diligence vote fails, despite winning popular vote

Setback comes as EU prepares for legislative proposals with emerging business opposition

The Swiss Popular Initiative on Responsible Business, which sought to introduce social and environmental due diligence rules for companies into the Helvetic constitution, has failed to meet the necessary qualified majority.

Although the promoters of the referendum, the Swiss Coalition for Corporate Justice, persuaded 51% of voters to back it, the reforms also required a majority of Switzerland’s 26 cantons to vote in favour. See results here.

The initiative wanted to introduce a legally binding article into the constitution for multinationals to take responsibility for their supply chains, particularly their subsidiaries abroad. See RI coverage here.

The proposal was based in part on the UN Guiding Principles on Business and Human Rights, also known as Ruggie Principles after Professor John Ruggie – an early supporter of the referendum.

The Swiss Coalition for Corporate Justice said the referendum showed the majority of Swiss people believe that “profit cannot be made at the expense of people or the environment” and that the result of the popular vote was indicative of an international trend which will see countries “more and more enacting laws on corporate responsibility”.

A slimmed-down counter proposal will now be enacted, which requires due diligence for conflict minerals and child labour, and the publication of sustainability report in line with the EU’s Non Financial Reporting Directive from large companies. 

The Swiss referendum offers insights into the potential opposition that current EU legislative initiatives can face on similar subjects. 

The European Commission Commission and the European Parliament have ongoing proposals aimed at introducing mandatory due diligence on ESG issues at board level.

EuropeanIssuers, the business trade body, has already pushed back against the project led by Commissioner for Justice Didier Reynders, arguing that analysis supporting the proposals “suffers from severe shortcomings from a methodological point of view by using deeply flawed assumptions without presenting strong evidence and ignoring relevant academic research”. See letter to Commissioner Reynders here.