Due diligence and transparency obligations in the area of minerals and metals from conflict zones and child labour as well as non-financial reporting obligations came into force in Switzerland on January 1, 2024. In contrast, the European Union has yet to vote his new Corporate Sustainability Due Diligence Directive (CS3D), which would affect both EU and non-EU companies with a significant turnover in the European Union. Having said that, EU member States may enact their own national legislation. In an increasingly complicated legislative framework, businesses must have the necessary tools in place to meet legal requirements and conduct focused due diligence.
Swiss Regulations
Following the rejection in 2020 of the Swiss popular initiative on mandatory environmental and human rights due diligence (commonly referred to as the “Responsible Business Initiative, RBI)”, the counterproposal sponsored by the Swiss Federal Council in the form of an amendment to the Swiss Code of Obligations came into force on January 1, 2024, providing non-financial reporting obligations as well as due diligence and transparency obligations in the area of minerals and metals from conflict zones and child labor.
Non-financial reporting obligations
As per Ordinance on Climate Disclosure (Italian version), starting from the fiscal year 2023, public companies, banks and insurance companies with 500 or more employees and at least CHF 20 million in total assets or more than CHF 40 million in turnover are obliged to report on non-financial matters and disclose publicly environmental, social, labor, human rights and corruption risks, as well as steps taken to address them (see Articles 964a-964c of the Code of Obligations).
Companies fulfilling these requirements but are controlled by a company falling within the abovementioned scope of application or having to prepare an equivalent report under foreign law, are exempt from the non-financial reporting obligations.
Due diligence and transparency in relation to metals and minerals from conflict zones and child labour
Companies exposed to risks in the sensitive areas of child labor and minerals from conflict zones must meet specific due diligence and reporting requirements if the thresholds for the import and processing of minerals and metals from conflict zones, set out in Annex I of the Ordinance on Due Diligence and Transparency Obligations in relation to Minerals and Metals from Conflict-Affected Areas and Child Labor (DDTrO) are exceeded (also see Articles 964k-964l of the Code of Obligations).
The minerals category includes ores, gold and concentrates containing tin, tantalum or tungsten. Metals are those containing or consisting of tin, tantalum, tungsten, or gold – also in form of by-products.
Due diligence obligations include implementing and maintaining a management system as well as establishing a supply chain policy and a supply chain traceability system.
The OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas and the Regulation (EU) 2017/821 serve as reference.
The Swiss Federal Council is now analyzing the implications of the European Union’s Corporate Sustainability Due Diligence Directive (CS3D) for Swiss companies and is expected to decide on the next steps to take once the final version of the CS3D is released and the mechanisms by which the EU Member States will implement this Directive are known.
The European Union and the CS3D saga
The European Union Directive on corporate sustainability due diligence (CS3D), which would require EU and non-EU companies – especially those operating in high-impact industries such as textile manufacturers, food producers, mineral extraction, and construction companies – to carefully manage social and environmental impacts throughout their entire supply chain may come to an end this Friday, March 15, 20024: since its final draft was released in January, the CS3D has faced increasing opposition, the vote has been pushed several times and it’s now the final item on a long agenda for the Coreper (Permanent Representatives Committee to the EU). It is unknown what will happen next: if the CS3D fails to pass, following the existing regulations in Germany (Supply Chain Due Diligence Act or “Lieferkettengesetz”) and France (Duty of Diligence Act or “Loi sur le devoir de vigilance”) or the Netherlands (Child Labor Due Diligence Act, or “Wet Zorgplicht Kinderarbeid”, and the draft supply chain law), more EU member States may for instance enact national legislation, thus introducing corporate due diligence requirement into their own national law to ensure that businesses address the negative consequences of their actions, including those in their value chains.
What is certain is that the legislative landscape regarding this topic is growing more complex and the impact on commodity trading companies (among others) will be significant in the coming years. The LCTA members are offered the opportunity to further discuss this with the Total Quality Assurance Intertek and the human rights consultancy firm focusright next April 17, 2024 and equip themselves with the appropriate tools to meet the legal requirements and conduct focused due diligence.
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Source: SUISSENÉGOCE, revised and completed by LCTA