Final CSR ordinance for Switzerland published

Beginning of December, the Federal Council confirmed the final draft of the Ordinance on Due Diligence and Transparency in the Sectors of Minerals and Metals from Conflict Areas and Child Labour (“ODDT”) based on the results of the consultation procedure previously held this spring and summer. The Federal Council further sticks to its original timetable, whereupon the amendments to the Code of Obligations in relation to the indirect counter-proposal of the Corporate Responsibility Initiative and the ODDT shall enter into force on January 1, 2022. The new reporting, due diligence and transparency requirements will therefore first apply for the financial year 2023. The first reporting must then be done within six months from the end of the fiscal year in 2024 for the fiscal year 2023.

Child Labour

Small and medium-sized enterprises that fall below two of the following thresholds within two consecutive years are exempt from the due diligence and transparency obligations regarding child labour: (a) balance sheet total less than CHF 20 million, (b) sales revenue less than CHF 40 million or (c) less than 250 full-time positions on an annual average.

Companies that exceed the above thresholds, but do not operate in areas where child labour is likely to occur, should regularly check for their own compliance whether they fall under the “low risk” exemption under Art. 7 ODDT. The Children’s Right in the Workplace Index can be used for this purpose.

Companies that exceed the above-mentioned thresholds and do not fall under the low-risk exemption must review suspected cases of child labour. Additionally, they are obliged to organize their supply chain in such a way that child labour can be prevented. For this purpose, it must also be ensured that a company enables traceability of products or services within its supply chain and allows reporting of suspected cases.

Compared to the initial draft of the ordinance, there has been an aggravation in the area of child labour through the introduction of a catch-all provision for “obvious” cases, whereby Switzerland will go further than the current EU legislation. The above-mentioned exception for SMEs and companies with low risk for child labour do not apply, if products or services are obviously produced by the use of child labour. In such cases, the due diligence and reporting obligation will nevertheless apply. Unfortunately, it is unclear from the Federal Council’s report to date as of which threshold a product or service was “obviously” produced or provided using child labour. The explanatory report lists “blatant cases that catch the eye”, however no explicit example is given. In such obvious cases, a company also no longer has to investigate, because the violation is already obvious. In addition, it is unclear how a violation due to overlooking an obvious case will be controlled. 

Conflict Minerals

The suggested exceptions for SMEs and use of recycled metals and minerals did not make it into the final version of the ODDT.

Therefore, only the defined thresholds in Appendix 1 as well as the origin of metals and minerals are relevant for the due diligence and transparency obligations. The Federal Council used the currently applicable thresholds for metals and minerals in the EU as a guidance for the thresholds applicable for Switzerland. Appendix 1 of the ODDT lists the threshold values applicable as of January 1, 2022 (same threshold as on EU level). Appendix 1 can be updated anytime by the Federal Council if needed. Below these thresholds, the due diligence and transparency obligations are not applicable for a Swiss company. The indicative list shows the countries that are considered conflict-affected or high risk areas.

• Attention: Thresholds apply on a consolidated basis and not just for individual companies in a group.
• Attention: Conflict mineral reports must also be audited by a licensed auditing firm.

Further, Appendix 2 lists the recognized equivalent regulations which – if complied with – lead to an exemption from the due diligence and transparency obligations. In addition, companies that offer products from other companies that are already under a comparable reporting obligation in Switzerland or elsewhere, are exempt from reporting themselves. However, foreign reports based on regulatory frameworks other than those listed in Appendix 2 should be treated with caution, as equivalence might not be accepted in these cases.

By Pauline Pfirter & Lia Börlin, Vischer, Switzerland, a Transatlantic Law International Affiliated Firm.

For further information or for any assistance please contact switzerland@transatlanticlaw.com

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