Navigating DEI-related regulations: how Swiss companies can turn DEI compliance into a competitive advantage?
Introduction
In today's rapidly changing world, organizations are recognizing the importance of diversity, equity, and inclusion (DEI) more than ever before. DEI can enhance problem-solving abilities, innovation, decision-making, and market reach.
For Swiss companies operating globally, understanding and complying with DEI-related regulations is essential. Embracing DEI is also crucial for building a stronger brand image.
Navigating the complex landscape of DEI-related regulations can be challenging for Swiss companies, as different countries have different requirements and reporting obligations. For example, the U.S. Securities and Exchange Commission (SEC) is considering implementing diversity and inclusion disclosure requirements for companies listed on U.S. stock exchanges, and the European Union has already issued directives on gender-balanced boards to promote workplace equality.
In this article, we will explore the global and local perspectives on the DEI-related regulation landscape and its implications for Swiss companies.
Impact of DEI-related regulations
To fully understand the importance of these regulations, Swiss companies should take a global perspective and review DEI regulations in other countries. This will give them a better understanding of the different compliance requirements, financial implications, and reputational risks associated with DEI maturity.
One notable example of DEI-related regulation is the proposal about Diversity and Inclusion Disclosure Requirements issued in 2020 which is in discussion at the U.S. Securities and Exchange Commission (SEC). These requirements aim to promote transparency and accountability in corporate diversity practices. If implemented, this would require companies to disclose information about their board diversity, diversity policies, practices, and statistics which has the potential to affect Swiss companies listed on the U.S stock exchanges. Non-compliance could result in legal consequences, damage to reputation, and financial penalties.
Moving beyond the United States, the European Union (EU) has also taken steps towards promoting workplace equality through its Directive on Gender-Balanced Boards. The directive requires that listed companies have 40 percent of nonexecutive directors, or 33 percent of all directors, be members of the underrepresented sex by the middle of 2026. While this regulation may not directly apply to Swiss companies, it is essential for them to be aware of these compliance requirements if they operate within EU member states or have subsidiaries in those countries. Non-compliance with gender-balanced board obligations can lead to fines, public scrutiny, and negative perceptions from stakeholders.
Switzerland does not have a comprehensive federal law specifically focused on Diversity, Equity, and Inclusion (DEI) in the workplace, unlike some other countries that have enacted specific legislation like the Employment Equity Act in Canada or various EU directives. However, the Swiss Federal Constitution: Article 8, prohibits discrimination based on origin, race, gender, age, language, social status, way of life, religious, ideological, or political convictions, or because of a physical, mental, or psychological disability.
In addition, Switzerland has adopted the revised Gender Equality Act (GEA) in Switzerland since the 1st of July 2020. The revised GEA requires all companies covered by the new provisions to perform an initial equal pay analysis by June 30, 2021. This is a step Swiss regulations have taken above international standards of DEI regulations to ensure pay equity in all sectors.
Similarly, various countries have implemented regulations that echo the goals of enhancing diversity, equity, and inclusion (DEI) within workplaces. In Canada, the Employment Equity Act mandates affirmative action for designated groups such as women, Indigenous peoples, persons with disabilities, and visible minorities. Whereas the United Kingdom's Financial Conduct Authority (FCA) actively promotes DEI within the financial sector, expecting firms to adhere to policies, targets, and reporting requirements.
Perspectives
Beyond Regulation
Navigating the complexities of DEI regulations is crucial, but the broader implications for brands go well beyond legal requirements. Several global companies have experienced damage to their brand image due to DEI-related controversies.
Abercrombie & Fitch faced significant challenges around DEI, including a 2015 U.S. Supreme Court ruling for discriminating against a Muslim woman over her hijab. These issues were widely publicized, even making it to a Netflix documentary that dived into discriminatory corporate cultures. While the company has taken steps to improve its DEI policies, the lasting impact of these controversies continues to shape its public image.
H&M: Faced immense public backlash for an advertising campaign that featured a young Black boy wearing a hoodie with the text "Coolest Monkey in the Jungle." The controversy led to calls for boycotts and had a lasting negative impact on the company's reputation.
Aviva: The insurance firm saw its CEO step down amid allegations of bullying and inappropriate behavior, highlighting the importance of maintaining a culture of equity and inclusion at all levels of an organization.
The real cost of Harassment
The real cost of harassment in the workplace extends far beyond immediate legal repercussions; it strikes at the core of a company's culture, performance, and reputation. Harassment impacts employee morale, hampers productivity, and undermines trust—factors that collectively affect an organization's long-term success. Moreover, news of a toxic work environment can quickly become public, leading to difficulties in attracting and retaining talents as well as the potential loss of clients or investors.
Navigating DEI-related regulations effectively
Swiss companies have close business relations with the US and EU, so they must adopt DEI standards from those regions, even if there is no federal law in Switzerland specifically targeting DEI. To do this effectively, Swiss companies should proactively adopt best practices that ensure compliance and promote diversity, equity, and inclusion (DEI) within their organizations.
These practices include developing evidence-based DEI strategies, equipping leaders with DEI expertise, and monitoring their success against DEI metrics.
Swiss companies should also stay informed about changes to DEI regulations at both national and international levels, and ensure they are meeting their legal obligations while also demonstrating transparency in their efforts towards diversity and inclusion.
As we look to the future, we can expect even more robust regulatory frameworks aimed at fostering inclusive workplaces. Whether it's new rules on the horizon in the US, existing laws in the EU, or employees' expectations, the global trend is clear: DEI matters and it's here to stay.
While Switzerland may not yet have a federal law specifically targeting DEI, initiatives like the Gender Equality Act also represent the country's effort to foster inclusive workplaces.
But embracing DEI isn't just about avoiding pitfalls. It's also good for business. Companies that actively seek to fulfill or even exceed DEI requirements are set to thrive, enhance their brand image, and gain a competitive advantage in an ever-changing diverse global market.
Author: Aida Berkla
Sources:
https://www.admin.ch/gov/fr/accueil/documentation/communiques.msg-id-90134.html
https://www.admin.ch/gov/fr/accueil/documentation/communiques.msg-id-90134.html
https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv:OJ.L_.2022.315.01.0044.01.ENG
https://businesslawtoday.org/2021/05/11941/
https://www.dechert.com/knowledge/onpoint/2021/8/sec-approves-nasdaq-board-diversity-rules.html
