As various changes in the law have shown in the past, it is important for companies to deal with the possible consequences of planned legislation at an early stage. The General Data Protection Regulation (GDPR) was one of many examples of the fact that the adaptation of internal company processes can take a lot of time and effort to meet new legal requirements. Is this also the case with the corporate responsibility initiative?
The popular initiative "For responsible companies - to protect people and the environment" (in short "Corporate Responsibility Initiative", in German "Konzernverantwortungsinitiative") provides for a relatively strong expansion of corporate liability in the area of human rights and environmental protection. In particular, companies are to be held accountable for the conduct of subsidiaries abroad and, as part of the duty of care, even with regard to "all business relationships" of the company. The initiative is available in the form of an amendment to the Federal Constitution and, once adopted, would still have to be converted into a law. The companies targeted by the initiative are large international corporations. Depending on the wording of the law, however, the due diligence obligations in particular could also affect small and medium-sized companies. In the absence of a legal text, however, the exact material implications cannot yet be assessed.
The indirect counter-proposal ("indirekter Gegenvorschlag") that has now been presented after long parliamentary debates (the final vote in parliament is still pending) dispenses with new legally binding liability rules and instead, in line with the EU, mainly imposes reporting obligations. The intention is that primarily reputational risks should control the behaviour of companies. Due diligence checks are to be carried out for conflict minerals and child labour. The material scope of application is already clearly defined here.
The initiative submitted in autumn 2016 was the subject of debate in the Federal Council and parliament for over three years. It is now expected to be put to the vote next November. If the initiative is approved, a law will have to be drafted and enacted on the basis of the initiative text, which will take time. If the initiative is rejected, there will be an indirect counter-proposal from parliament, which - if no referendum is held - would come into force. Because of the referendum deadline, even in the case of the indirect counter-proposal, entry into force cannot be expected very soon.
Law and reputation
As it is not yet clear at this stage which legal provisions will come into force and as it will take some time until then, there is no great urgency to take precautions from a purely legal point of view. However, the Corporate Citizenship Initiative calls for a conscientious approach to human rights and environmental issues, not so much because of the potential legal adjustments, but rather because of the increased public attention. Although "human rights and environmental protection" is a very broad field, the relevant areas are probably already addressed by most companies for reputational reasons anyway. If this is not the case, companies should examine whether and in which areas of corporate activity there could be a critical link to human rights and environmental protection. A business practice that is in line with international standards on human rights and environmental protection is only worthwhile for reputational reasons anyway, regardless of the result of the vote on the Corporate Responsibility Initiative.
Keeping a constant eye on legislative changes
The Corporate Responsibility Initiative is a further example of how compliance affects a wide range of areas of business life and companies should always keep their perspective wide open to keep an eye on all applicable legal regulations.