FRANCK PAUCOD 

PARTNER, HEAD OF AUDIT, MAZARS IN SWITZERLAND 

"More and more, companies are acting to protect their reputation."

"...the concern regarding ethics varies widely from country to country."

Do you think there are economical benefits from online retailers becoming and/or remaining ethical?

The first objective of a business is to survive and make a profit. This means that one of the concerns is to manage a reputation to make sure they will survive and continue to sell and make profit. Things they don’t like in their reputation: to be in the media for a big scandal in connection with blood diamonds, etc. More and more, companies are acting to protect their reputation.

How do companies/organizations manage ethical issues to protect their e-commerce privacy, security, trust and intellectual property?

To manage the ethical issue and reputation raised, they first need to have a strong framework of procedures and internal controls. It begins with codes of conduct and strong rules/ regulations, developed for each area. Management comes from having the right process in place, the right communication, and the right training for your employees, particularly for people in e-commerce.

How is Switzerland different regarding ethics/compliance when compared to other EU countries?

Ethically, it’s difficult to answer on a country level. It’s more an industry-level answer, and some industries are more linked to one country or another. For a country which is highly linked to the food industry, as in Switzerland we have Nestle, they are a key player and need to have the right rules and regulations in place to ensure the quality of the food is proper. The global education of the country is also important; it’s true that for Scandinavian countries, they are generally advanced in social matters, including equality, gender equality and non-discrimination, so there are a combination of factors, including the maturity of the society. Additionally, even if you can convince someone in a very mature society, if they just do not have the means, the economical forward, then that’s also a criteria.

What regulatory/legislative measures in Switzerland are currently have a positive and/or negative impact on SMEs attempting to become more ethical?

The Swiss Confederation has, in the past, issued new laws in connection with ethics and anti-money laundering, because we were under pressure by the rest of the world. It has been a positive momentum, with only good consequences for the companies and country. In parallel, some associations/NGOs have launched initiatives and certifications, which has also had a positive impact on the economy. However, when it comes to small-sized companies, they have to face various initiatives, certifications and legal obligations, and it becomes difficult. They move from having one person in a legal compliance department to 3 or 4 now, and it is a cost. Additionally, they have spent a lot of time to prepare, to be in compliance with these rules and regulations, and to satisfy audits, so this is quite heavy for small companies, and it is a complaint the authorities face regularly.

May 25, 2018 is a date put into almost every online company agenda. GDPR marks a paradigm shift in data protection and privacy (closely related to ethics). What are your thoughts on the regulation and its impact in the coming year, particularly for SMEs in Switzerland?

This is extremely important, and GDPR for e-commerce and everything else online is more and more important. Switzerland is not under the pressure for the deadline in May, but what we understood is that companies are late.They are late in the EU, and they are obviously late in Switzerland. So, in Switzerland, by the end of May, the companies having personal data from Euro- pean citizens need to be in compliance with the legislation, but they won’t be. Particularly, SMEs won’t be. We anticipate that 60-80% of companies won’t be ready by the deadline. However, everybody is currently talking about this, which means that when Swiss law will come, which will be May 2020/2021, we can expect companies will be ready by that date. The good news is that Switzerland is not a part of the EU and therefore has a bit more freedom, but this is a real challenge today, especially for companies without the proper organization and IT systems to ensure legal compliance by the deadline.

Do you feel Swiss consumer trust in online retailers is declining?

It’s more the trust in the brand, in the products which are sold by the retailer, as the link between the retailer and the clients may be sensitive for data privacy. Overall, focusing on e-commerce, particularly for luxury products the key issue in terms of trust are: are the products real, or counterfeit? On the other hand, for brands, one of the issues with e-commerce, particularly for luxury brands, is the ‘grey market’. I mean that they sell products to one specific country at a specific price, and finally these products are sold through a ‘grey market’, a parallel distribution channel, to other regions of the world. This is something that luxury brands do not like, but we see it more and more with e-commerce.

It seems from both perspectives, both consumer and retailer, there is a usage of and reliance on cross-border trade?

It’s true that in international trade, particularly in Switzerland, for both consumers and retailers, the sourcing and country of origin is more and more important. It started with food, and then for medical products, and now it’s more and more for all other materials. Companies now need to show that they are responsible, and ensure that they have the right sourcing of their product(s), which counts for more and more materials. Whether it’s international trade or local trade, it’s all global anyway. When it comes
to ethics, the question that a lot of people are asking (consumers, retailers, everyone), surrounds where a product has come from, whether it has been sourced ethically/sustainably and whether it can be verified – the conversation is really about supply chain ethics.

What are some of the main ethical issues businesses have to deal with in e-commerce?

E-commerce in Switzerland may, for example, relate to the watch industry, because this is mainly a Swiss product. In the industry, Swiss watches are mechanical, meaning they are the most expensive watches compared to the quartz watches produced in Asia. This means they are not often involved in e-commerce because of competing products that are already sold in excess via inter- net platforms. Ethical issues are basically the same in e-commerce, to the best of my knowledge. We are talking about social issues, environmental issues, sourcing of products, and general matters likely bribery and anti-money laundering. If we look specifically to e-commerce, the biggest challenge is the sourcing of product(s).

What are the opportunities and challenges for businesses to apply business ethics in their online trading?

One opportunity is clearly Blockchain, because the challenge is to ensure consumers of the origin of their product(s), or the origins of the materials included in the product. This is obviously true for any food or health product, as it is a global concern for the entire society, however coming to the Swiss watch industry, this is very important for precious metals and stones. It is a critical challenge to make sure that the gold or diamonds do not come from artisanal mining, not protecting the environment, using mercury, and working with under-aged employees and/or employees working too many hours/days at a time. This is a key challenge that Blockchain technology may be able to help with, creating the link between artisanal mining and the gold refinery, and the producer of watches/jewelry.

How are consumer preferences and/or behaviors shaping the conversation around business ethics and online trading?

The behavior of the people from one country to another is very different. After traveling extensively around the world, I can say the concern regarding ethics varies widely from country to country. The question consumers may ask surrounds: is it important for me to buy a product from a responsible company, meaning they respect human rights, anti-bribery laws and environmental issues? In mainland China, for example, it is rare for a boutique to pay close attention to these questions. However, if I’m in Switzerland, these concerns are highly important. In the U.S., the answer may be very different if we are in New York or South Dakota. So, it is a global trend of the world to be more and more sensitive to the origins of product(s). I strongly believe that in the future, in the next 20 years, successful companies will be those that are sustainable.

"Companies now need to show they are responsible, and ensure they have the right sourcing of their product(s)."