NEW YORK (Reuters Breakingviews) - Upon moving to Switzerland around the start of the pandemic, the first thing that stuck out in my leafy Zurich neighborhood was the orange flags. They seemed to flutter from every other stately or middle-class home, bearing a large “JA!” and one of those German portmanteau words, “Konzernverantwortungsinitiative,” which translates into English as corporate responsibility initiative. The banners are a visual manifestation of one of the most energetic and populist movements in the West to hold companies accountable on social and environmental matters. The Swiss campaign is attempting to go well beyond sloganeering or the bromidic language of investment according to environmental, social and governance criteria. A referendum on Sunday may have far-reaching consequences for Swiss businesses, hamstringing private enterprise’s ability to operate internationally. That it originates in one of the world’s richest nations bears consideration from global companies, investors and policymakers. Voters will be asked, through Switzerland’s unique direct democratic process, whether the country’s constitution should be modified to ensure that Swiss companies comply with the highest standards for human rights when operating abroad. The ballot, which seems likely to pass, would allow individuals, non-governmental organizations and other aggrieved parties to sue Swiss multinationals for damages in domestic courts. And much to the chagrin of corporations, the burden of proof will be on them to dispel those charges. This may sound consistent with the new model for purpose-driven capitalism taking shape in the developed world, influencing central bankers, shaping politics and striking fear in many a boardroom. But it’s still somewhat surprising to see a small Alpine nation that has spawned an outsized litter of highly admired multinationals, while fostering a tradition for neutrality that borders on a fetish, at the vanguard of this extra-territorial movement. From ABB to Zurich Insurance and Nestlé to Novartis, Swiss corporations have extended their reach in ways that have brought unequalled prosperity to the country’s 8.5 million residents. There are more than 14,000 Swiss-controlled multinational companies, according to Swiss National Bank and Federal Office of Statistics estimates, employing around 900,000 people in the country. Another 11,500 foreign multinationals have Swiss subsidiaries. Together these enterprises account for almost a third of Swiss jobs. This has created extraordinary affluence, with national wealth per adult leading the world at nearly $600,000 in 2019, according to the Credit Suisse Research Institute’s Global Wealth Report. Yet there seems to be little concern among Swiss voters that approving the referendum will amount to biting the hand that feeds. While support for the initiative has fallen as the vote approaches, a poll conducted by the GfS Bern research institute for the Swiss Broadcasting Corporation during the first half of November reported that 57% of respondents said they would vote yes. Only 2% were undecided, suggesting the ballot has a strong chance of passing. It is a demonstration of how swiftly once-fragmented elements of civil society can coalesce around a moral purpose, with business in their crosshairs. The initiative has the backing of a broad coalition of 130 organizations like UNICEF, Greenpeace and Amnesty International, plus churches and members of the country’s Social Democratic, Green and Conservative Democratic parties. The organizers also focused on grassroots campaigns, admittedly made difficult due to the pandemic. Then there were those orange flags: the campaign distributed more than 80,000 of them in German, French and Italian. Yet if the initiative’s organizers deserve kudos for rallying such a diverse spectrum of Swiss society to their cause, big companies were probably too slow to react. They might credibly be accused of having grown too big and too global, while losing sight of important constituencies at home. “The business community completely underestimated the movement,” says Andreas Missbach, joint managing director at research and advocacy group Public Eye, who was involved in bringing the initiative from a petition drive in 2013 to Bern’s green-lighting of the referendum in June. As a belated counterpunch, chief executives including Glencore’s Ivan Glasenberg and the bosses of ABB and Roche have in recent weeks attempted a media charm offensive to try to convince citizens to vote “nein.” While none have gone so far as to say they would pull up and leave Switzerland if the result goes against them, they argue that there are other ways to achieve the same lofty goals, which they profess to share. These include enhanced corporate disclosure, which is the basis of a legislative alternative that will go into effect if the ballot fails. Nestlé Chairman Paul Bulcke says a majority “yes” vote would force companies like the $300 billion consumer goods giant to reconsider their operations in countries such as Venezuela, Syria or Zimbabwe, where they are most needed to combat poverty, hunger and poor health. That’s because the bill makes Swiss companies liable for the conduct of their business partners: “In the event of a lawsuit, a company is even considered guilty until they have proven otherwise,” says Bulcke. But even if big Swiss companies had come up with some sort of middle way before the corporate responsibility movement blossomed, there’s something about today’s Switzerland that might have made the initiative inevitable. The country’s educated populace, high quality of life and deep wealth combine with a tradition of direct democracy to create “the perfect petri dish for these sorts of ideas,” posits Erich Herzog, head of competition and regulatory affairs at Economiesuisse, the federation which represents Swiss industry and finance. The country’s voters usually shy away from radical ideas, as they did with a previous referendum on a universal basic income. “Whether that will be the outcome here I cannot say,” Herzog says. “But you mention the orange flags everywhere. It’s certainly something that will shape the political system for years to come.” If the referendum passes, multinationals the world over can hope that what happens in Switzerland stays there, which is very often the case. The smarter ones should examine whether they too have lost touch with the locals.