Swiss companies are not considered to be sustainable business groundbreakers, but they respond to criticism and strive to meet the demands of Swiss consumers for high standards
Switzerland is notable for its long-lived companies. The Swiss seem to have gone through a particularly energetic spell of start-ups in the mid-19th century. Nestlé’s roots go back to 1867, while banking giants UBS and Credit Suisse were founded in 1854 and 1856 respectively.
While the rest of Europe was mired in political upheaval and even revolution, the Swiss were establishing Omega watches (1848), Bally shoes (1851) and lifts group Schindler (1874). Many Swiss companies go back even further, to 1755 in the case of luxury watch maker Vacheron Constantin, for example.
The longevity of Swiss corporations is a testament to the stability of their homeland. Swiss companies also enjoy a favourable tax regime with an effective corporate tax rate of 13-22%, depending on their home canton. Switzerland charges a federal corporate tax rate of 8.5%, with the 26 cantons free to charge their own top-up levy.
But Switzerland’s low-tax reputation can overshadow other favourable aspects of its business environment. These include a central location within Europe, excellent communications and other infrastructure, a flexible legal framework, and the presence of an “efficient, powerful finance centre, which can ensure your global financing”, says Thomas Pletscher, head of regulatory policy at the country’s main business federation, Economiesuisse.
Should they want to, firms can also take advantage of Swiss discretion and limited transparency requirements.
It all adds up to an almost ideal situation from a corporate point of view. Swiss companies can grow steadily and reap healthy financial rewards without having to hand too much of it over to the state, and without too much government interference. Reporting requirements are lenient.
This tends to mean that Swiss companies are not pushed too hard on corporate responsibility, unless they happen to find themselves in the firing line over a particular issue, as Nestlé did during the baby milk scandal. “Corporate responsibility initiatives are often not spontaneous,” says Antoine Mach, of Swiss corporate responsibility researchers Covalence. “Negative news acts as a stimulus. Less exposed companies tend to do a bit less.”
Pletscher says Switzerland’s corporate responsibility leaders, such as Nestlé and Novartis, tend to be the companies most exposed to NGO pressure. Novartis, for example, works on development issues through the Novartis Foundation for Sustainable Development. These companies “have for a long time had defined policies, standards and mechanisms,” Pletscher says.
Switzerland also has a number of industrial companies considered to be effective corporate responsibility performers. Engineering group ABB, for example, is “very active and engaged,” according to Pletscher. ABB’s priorities include the reduction of energy and raw material consumption, and the company has a corporate citizenship programme aimed at bringing electricity to remote communities in India and Tanzania.
The traditional watch-making industry, meanwhile is “less exposed” to accusations of poor ethical behaviour, says Pletscher. It is a sector with a relatively small environmental footprint, and it is in the interests of the companies involved that they have good working conditions and employee relations, because they need to retain their highly skilled staff.
Not the best, not the worst
Covalence publishes the EthicalQuote rating of multinationals. This ranks the most ethically minded Swiss companies as Nestlé and cement maker Holcim, which are among the top 20% of most responsible corporations globally.
ABB comes lower down in the rankings, along with Novartis and fellow pharmaceutical firm Roche, insurers Swiss Re and Zurich Financial, and Richemont, the holding company for luxury brands such as Cartier, Dunhill, Montblanc and Piaget. Lower still, in the bottom 20%, are bankers Credit Suisse, Julius Baer and UBS, and crop scientists Syngenta. EthicalQuote scores companies according to their working conditions, the impacts of their production processes, their products, their operations, and their reputation as reflected by media coverage.
A similar roll-call of companies features in the Dow Jones Sustainability Index, where Switzerland is well represented compared with similarly sized countries. Julius Baer and Richemont do not feature, but machinery manufacturer Sulzer does.
“There is no great movement in Switzerland to lead the pack,” says Jean-Pierre Méan, president of the Swiss chapter of international campaign group Transparency International. They are “not among the best, but not among the worst”. However, Swiss corporations are expected to meet high environmental and workplace standards, compared with many other countries, and are in general sticklers for keeping to the rules. They are, for example, among the least likely companies to pay bribes abroad, according to Transparency International rankings.
Swiss firms must also be responsive to demanding Swiss consumers, who are proud of their Alpine environment and expect high ethical standards. Sales figures for brands with ethical labels are high relative to other markets. The Swiss spend more per person on fair trade products than any other nation, for example.
Carine Boetsch, who oversees ethically labelled product ranges for Swiss supermarket group Coop, says the Swiss are well educated about environmental and social issues. Coop began selling eco-products in 1989, organic food in 1993 and organic textiles in 1995. “Our consumers are aware about quality and added value, so they are not that focused on lowest prices,” she says. “If you offer them a wide range of products with quality and respect for nature and humans at an acceptable price, they take it.”
Swiss consumers are also wealthy, interested in health and well being, and educated about human rights and other ethical issues, in part influenced by the role played by organisations such as the Red Cross in the national psyche. This, says Covalence’s Antoine Mach, means there is “space for non-material needs to be met, and maybe corporate responsibility goes in this direction”.
Case study: Switcher
Clothing brand Switcher is often cited as one of Switzerland’s most progressive and responsible companies. Covalence’s Antoine Mach says it is a “pioneer in monitoring working conditions along the supply chain”.
Robin Cornelius started the company in 1981 when he was still a student at the University of Lausanne. Danièle Buonocore, a Switcher corporate responsibility manager, says Cornelius “spoke about sustainability almost since the creation of the company. For instance, in 1997, he appointed a CSR director and created a whole department dedicated to sustainability.” In 1987 he set up an alliance with Indian garment maker Prem Group. In a reversal of the usual way of doing things, Prem Group bought into Switcher in 2010, and now co-owns it with Cornelius.
Buonocore says the company’s aim is to “maintain a good level of working conditions in our supply chain and also to ensure full traceability of our products”. This is done through extensive auditing of suppliers and the awarding of ratings on a “whale scale” (Switcher’s logo is a whale). The benchmark for audits is the Switcher code of conduct, which is based on International Labour Organisation standards, but also emphasises fair wages, fair working hours and “decency” of working conditions, for example in terms of the cleanliness of the workplace.
If a supplier is found to be substandard, it will be given either a red or orange whale. Red-whale suppliers are those that refuse to enter into discussions about making improvements, in which case Switcher declares itself unable to work with them. Orange-whale suppliers, however, are not beyond redemption, and rather than abandoning them, Switcher works with them to improve conditions and practices. If this succeeds, the supplier can be rewarded with a green (good) or yellow (excellent) whale.
Ultimately, Switcher says, the company “seeks to create a ‘smiling chain’ where all the company’s partners and collaborators are happy in their work and no one feels exploited”.
Case study: Intersport
In many ways, Intersport is a typically Swiss organisation. In common with institutions such as the Red Cross, it is based on pooled effort and shared benefits, having been established in the 1960s by buying organisations from Austria, Belgium, Denmark, France, Germany, Italy, Netherlands, Norway, Sweden and Switzerland. Naturally it chose central and stable Switzerland as its home. It is now the world’s largest retailer of sports brands, including its own, which are manufactured by third parties.
According to the company, its partnership-based approach provided its first corporate responsibility headache. “The main challenge for the Intersport group is the fact that it is a cooperative organisation,” says Reidar Magnus, the firm’s senior corporate responsibility and supply chain manager. Each of the company’s units, from head office to national organisations and retailers, is run independently.
Thus “the first hurdle we met when implementing our new CR strategy in 2005 was to get a clear overview of our entire supply chain with all its trading partners and intermediaries, and to pinpoint the final producing destination – the factory,” Magnus says. The situation is further complicated by the dynamic nature of the fashion sector, with a rapid turnover of producers, suppliers, and even producing countries. “Keeping our vendor-management system updated with the relevant CR information can be a major challenge,” Magnus adds.
In building up a comprehensive picture of its supply chain, Intersport made some observations that are relevant to many companies. It found that factories sometimes have to cope with multiple codes of conduct from western retailers, though often these reflect similar requirements. It also takes time to convince suppliers of the benefits of a more responsible approach to business operations.
The firm uses as its benchmark the code of conduct developed by the Business Social Compliance Initiative (BSCI), the Brussels-based corporate responsibility platform for companies manufacturing outside their own countries, which tends to attract continental European, rather than British or North American, members.
“Our current CSR priorities are quite clearly focused on our commitment to the BSCI to ensure that social standards within our supply chain are improved,” Magnus says. The company’s audits are backed up by information-exchange meetings with suppliers and factory managers with a view to capacity building.
Intersport admits to a certain naivety when starting to implement its supplier programme. “In the beginning a lot of tasks were done independently from our buyers and the product and purchasing department,” Magnus says. “But we have learned that for implementing a successful CR strategy, staff on all levels need to be made aware of what the company’s goals are. Buyers and merchandisers must be given a key role.”