Construction Industry

Swiss Eternit Group (SEG)"

“At the same time, I made a radical decision: Even though I did not have the faintest idea of how this change was to be implemented, in 1981 I publicly announced that the group would cease to manufacture products containing asbestos (much earlier than the ban eventually imposed by the European Union). I clearly remember the words of one of the plant’s technical managers following my announcement: ‘Young Schmidheiny is mad! He expects to manufacture Eternit products without asbestos. It’s like trying to come up with dry water.’” “Stephan Schmidheiny, My Vision, My Path”, January 2006.


The Beginning of Swiss Eternit

The family’s legacy started in 1867 with the establishment of a brick factory by Stephan’s great-great-grandfather, Jacob Schmidheiny. Later on, his son, Ernst Schmidheiny I, was able to see the opportunity to expand the business during the industrial development at the time, and invested in the production of cement and asbestos through Holderbank and Swiss Eternit. As a result of the high demand, the next generation, Max and Ernst II Schmidheiny, took both companies to the international level by taking on the risks associated with establishing branches in other countries. The fourth generation, Max and Adda Schmidheiny-Scherrer’s children, is headed by Thomas and his younger brother Stephan Schmidheiny, who was born on October 29, 1947.

Max expected his eldest sons to follow his footsteps and take over the companies he had helped build. Therefore, he encouraged them to study engineering. However, Thomas chose Arts and Sciences at the Swiss Federal Institute of Technology (ETH), and Stephan enrolled at Law School at the University of Zurich, where he obtained his Law degree in 1972. With the new visions acquired by their university educations, they both joined the family business. Stephan took on the management of Swiss Eternit in 1976 until his father decided to distribute his assets in 1984, at which time Stephan was given the company he was already managing (later becoming the Swiss Eternit Group, SEG) and his brother Thomas was given the cement company Holderbank (later Holcim).

This is how, at the age of 29, Stephan Schmidheiny received a conglomerate of companies that were managed in a decentralized way, with minority participation—and in some cases majority—with a total of 70 factories in 20 countries. His experience at Eternit began five years earlier; he was still a law student and traveled to Brazil to work in the warehouse at one of the group’s factories, handling bags of asbestos and adding fibers to the mixer. He later took on a temporary position as secretary to one of the company’s top executives, accompanying him around the world to supervise the group’s operations.
Later, Stephan joined the Sales, Planning and Systems Information department at one of the group’s companies in South Africa.

Once he completed his Law degree in 1974, Stephan formally joined Eternit AG in Niederurnen, Switzerland, as Head of Sales, becoming General Manager of the plant a year later. In 1976, his father transferred the general management of Swiss Eternit to him.

The Beginnings of Asbestos

Since it was discovered at the beginning of the 18th century, the use of asbestos in industry was heavily promoted, especially because of its resistance to high temperatures, flexibility, and low cost. It had an important role in real estate development in the 19th century, despite some experts already talking about some of the consequences of inhaling it, but without scientific proof. It was only in the 1980s that the dangers were revealed by the International Labour Organization (ILO), with scientific proof to back it up. At that time, research intensified for possible asbestos substitutes.

Schmidheiny: Pioneer in Safety Measures and Innovation

In 1976, when Schmidheiny took over the leadership of the Swiss Eternit Group, the worldwide research on the dangers of processing asbestos continued to be important but was still in its early stages. But he set in motion an innovative plan called “New Technology.” In his determination to reduce the risks associated with the mineral, at that time he invested the equivalent of what today would be 78 million dollars. This put him at the forefront, even ahead, of what the authorities of the time took years to prevent and regulate.

The program included the installation of new equipment and filters in order to reduce, as much as possible, the concentration of the fibers in the air; the personnel at the plants received new training and retraining. The research led to finding asbestos-free products as reliable substitutes. This is how, in 1984, asbestos fibers were substituted in a significant amount of the production with another raw material that was paper-pulp based.

The research and development of new materials taken on by Schmidheiny in order to find a substitute for asbestos resulted from a meeting with experts of the International Labour Organization (ILO), held in 1973. The experts recommended taking practical preventive measures, carrying out specific actions, and encouraging international cooperation in the biomedical research field related to asbestos, as well as the standardization of quality control in the work environment. Likewise, they suggested adopting one or several international tools on safely using asbestos and continued on to prepare a guide on this subject (1), which was published in 1974, “Asbestos: Health Risks and their Prevention.” This was documented on page 246 of “The ILO’s Protocols on Safety and Security in the Workplace: An Opportunity to Improve Work Conditions and Environment.”

At the time of his innovative plan, Schmidheiny convened a meeting in Neuss, Germany, to explain the initial scientific results of the health risks associated with asbestos to the senior executives where Swiss Eternit had investments. He encouraged them to make every effort to ensure the swift and efficient compliance of the improved industrial hygiene programs. Likewise, he urged them to obey the legal framework in their respective countries regarding the threshold limit value (TLV) of asbestos fibers in the air to which it was believed a worker could be exposed daily without affecting their health, according to the ILO and the World Health Organization (WHO).

Afterwards, the Neuss Institute offered technical assistance in controlling and monitoring the level of asbestos powder in the air. Swiss Eternit was a conglomerate that had different levels of involvement in the companies in various countries and Stephan Schmidheiny never had control over the local management.

In the case of Eternit SpA Italy, the Swiss Eternit Group (SEG) became a majority shareholder in 1973. At that time, the holding had four companies: Eternit Casale Monferrato SpA, with factories in Casale Monferrato, and Cavagnolo; Eternit Naples SpA, with a factory in Bagnoli; Eternit Reggio Emilia SpA , with a factory in Rubiera; and Eternit Sicily SpA, with a factory in Syracuse. That year the Schmidheiny family took over after the Belgian shareholders headed by Baron Louis de Cartier de Marchienne.

1. 1. The ILO’s Protocols on Safety and Security in the Workplace: An Opportunity to Improve Work Conditions and Environment, page 246.
ILO Measures

In 1978, the ILO stressed the need to adopt international tools to prevent and control the risks caused by asbestos exposure, and warned about the urgency to draft a list of practical recommendations on the use of asbestos under safe conditions.

In 1983, the Administrative Council of the ILO approved a document titled “Safety in the Use of Asbestos” and published it in 1984 on page 246 of “The ILO’s Protocols on Safety and Security in the Workplace: An Opportunity to Improve Work Conditions and Environment.” Its purpose was to prevent the risks of exposure and the harmful health effects on the workers being exposed to asbestos, by providing procedures and monitoring practices that were feasible and reasonable in order to reduce the worker’s exposure to asbestos powder as much as possible.

Several countries began adopting the recommendations of the document and began to determine the level of exposure measured in fiber/ml. The numbers vary depending on the country, but they are generally between 0.2 and 5 fiber/ml. Australia, Belgium, Canada, Cyprus, Denmark, Spain, the United States, Finland, France, India, Indonesia, Ireland, Israel, Italy, Japan, Nigeria, Norway, New Zealand, the Netherlands, the United Kingdom, the Federal Republic of Germany, Sweden, Switzerland, Thailand, and Zambia were some of the countries that adopted limits.

The following recommendations for monitoring, which appear on page 248 of the aforementioned document, stand out:

  • The use of waterproof bags;
  • When possible, handle more than one bag at a time so that there is as little loss as possible of the contents of damaged bags;
  • Combine loads (for example, pallets that are tightly wrapped);
  • Transport in closed containers when possible;
  • Load and unload using machines (for example, forklifts), and not hooks or any other kinds of tools that cut or poke;
  • Final storage should be in a warehouse;
  • Immediately repair damaged loads and bags;
  • Clean up spilled asbestos by first wetting it or, better yet, use a vacuum.
1. A collection of practical recommendations titled, “Safety in the Use of Asbestos” from the International Labour Organization (ILO), published in 1984.
2. “The ILO’s Protocols on Safety and Security in the Workplace: An Opportunity to Improve Work Conditions and Environment,” page 246.

3. “The ILO’s Protocols on Safety and Security in the Workplace: An Opportunity to Improve Work Conditions and Environment,” page 248.
Eternit at the Cutting Edge of Safety

Schmidheiny had implemented these types of regulations since 1976 when he assumed leadership of Swiss Eternit, which made him the sole pioneer in putting safety measures into place in industry throughout the world. In addition, in 1981—three years before the publication by the ILO—he publicly announced that Eternit would gradually discontinue making products with asbestos in all its plants. What motivated him was his certainty of the health risks and environmental problems that asbestos could cause, even though he was aware of the competitive risk that would result from the use of more expensive materials and the investment required in adapting the industrial plants. Towards the beginning of the 1980s, Eternit was able to develop a new paper-pulp-based raw material in its laboratories to replace asbestos, and, by 1984, a large amount of its production was asbestos-free.

However, the unfavorable effects also began to emerge at some of the plants, resulting in their loss of competitive edge, and was the reason for their decline. Undoubtedly, their competitiveness was lost due to two closely related factors: 1) the large investment made to implement the “New Technology” program on innovation and safety, and 2) this occurred during a time when the rest of the industry continued operating at low costs because they did not adopt the measures to discontinue the use of the mineral. The closing of plants became more inevitable due to the impossibility of taking on the required manufacturing changes in order achieve asbestos-free production without risking competitiveness.

In 1985, the mayor of Casale Monferrato, where one of Eternit Italy’s factories was located, sent Stephan Schmidheiny a letter expressing his concern about the effects that a possible shutdown would have on the city’s labor market; this letter made no mention of the harmful health risk effects on the community or the environment if they continued producing with asbestos.

Schmidheiny decided not to go back on his decision to replace asbestos in all his products. One of the consequences was the bankruptcy of the Eternit SpA Italy in 1986. Having declared bankruptcy, the liquidator assigned by the court assumed control of the company and Swiss Eternit was completely separated from its management. During the bankruptcy process, it was decided that two of Eternit SpA’s companies (Eternit Reggio Emilia and Eternit Sicily) were to be sold to competitors. The new owners were able to continue production, since the use of asbestos was not yet illegal in Italy.

The liquidator had the Eternit Naples factory in Bagnoli decontaminated and closed down, and sold the factory in Casale Monferrato to the city. Schmidheiny has no knowledge if the municipality put effective security measures in place in the factory it acquired.

At the end of the long bankruptcy proceedings in 2008, the new administrator officially confirmed that two of Eternit SpA Italy’s plants were sold with all rights and responsibilities to the new owners, and the other two facilities were properly decontaminated and closed. This confirmation was part of the terms and conditions that allowed the assets from the bankruptcy to be distributed to the guarantors of Eternit SpA Italy.

The bankruptcy of Eternit SpA Italy had such an effect on Schmidheiny that it led him to make his next momentous decision: in 1989 he decided to completely separate himself from his family’s legacy and began the process of selling Swiss Eternit and all the shares he had in Eternit’s plants around the world. He decided to spend time diversifying his business ideas and invested in other areas that were new to him: finance, energy, technology, watchmaking, mass consumption, among others.

His well-researched endeavors shaped his future and his successful business and philanthropic career, as well as his significant contributions to the development of initiatives that promote economic, social, and environmental sustainability around the world and particularly in Latin America.

Humanitarian Mission for Asbestos Victims

Twenty years after he separated himself from the asbestos industry and with the intention of rectifying the now known health risks of asbestos, Schmidheiny launched a humanitarian mission in 2003 to support asbestos victims and their families in Italy through Becon AG.

In 2007, Becon AG established a program which, by 2013, paid over 50 million Euros in compensation to close to 1,500 victims. It also directly supported mesothelioma research with contributions of over 5 million Euros. As of 2009, he extended the compensation to the affected residents in the areas surrounding the Eternit Italy plants.

1. Mesothelioma is a tumor that affects the tissue that surrounds organs such as lungs, stomach, heart, and others. It usually starts in the lungs, but it can also start in the abdomen or other organs. It can be benign (non-cancerous) or malignant (cancerous). Most people who are affected have worked in areas where they probably inhaled asbestos particles. This type of cancer may take a long time to manifest itself, long after the person has been exposed to asbestos.
Turin Court System Is Suing the Asbestos Industry, but has Only Denounced Schmidheiny in the Case

At the beginning of the 2000s, an Italian doctor presented prosecutor Raffaele Guariniello, with the case of an individual who died from mesothelioma and was a former worker at one of the asbestos plants in Niederurnen, Switzerland, where the Schmidheiny family had holdings. The prosecutor opened a file and began to build a case against the plants that had been the property of the Swiss Eternit Group in Italy. Since one of them was located in the prosecutor’s jurisdiction (the province of Turin), the case was heard before the courts of that jurisdiction.

Prosecutor Guariniello initially brought charges of “manslaughter” and then changed them to “intentional damage,” an accusation that included two people: Belgian Baron, Louis de Cartier de Marchienne (deceased), majority shareholder of Eternit Italy until 1973, and Stephan Schmidheiny, majority shareholder from 1976 to 1986. He held them responsible for the operation of Eternit’s Italian plants from 1952 to 2008.

As shareholder of Eternit Italy, Stephan Schmidheiny never had a direct or formal role in any of the four Italian factories that were part of the Swiss Eternit Group. He never held the position of general manager nor was a member of the board of directors of any of the Eternit Italy companies.

However, the investigation continued its course and the trial started in 2009 until February 13, 2012, when the sentence was handed down. Both men were sentenced to 16 years in prison on charges of “inciting disaster” and “omitting/eliminating safety measures in the workplace;” the sentence also included the payment of 80 million Euros as compensation to the individual victims and their families, as well as collective entities.

An appeal was filed, which was concluded on June 3, 2013, after only 16 weeks. Schmidheiny was found guilty of intentionally causing an environmental disaster and was sentenced to 18 years in prison and to pay 90 million Euros in damages to the plaintiffs.

Ten days before the verdict was announced at the second trial, co-defendant Baron Louis de Cartier passed away. Therefore, the case now continues against Schmidheiny. At the end of 2013, the defense presented an appeal before Rome’s Court of Annulment, where the trial continues to this date.

The Trial in Turin Leads to a New Case

On June 25, 2014, prosecutor Guariniello notified Schmidheiny’s defense of the conclusion of a preliminary investigation, which holds Schmidheiny responsible for the negligent death of 213 people (65 employees and 148 residents of the areas surrounding the plant) between 1976 and 1986. It is stated that Schmidheiny was aware of the dangers posed by processing asbestos, kept the factories open, did not prevent the private use of asbestos residue, and did not implement effective measures to improve the situation. With that, the prosecutor’s office brought the new charge of continued negligent death against Schmidheiny.

At the time of this writing in October 2014, the defense has not gained access to the evidence that supports the prosecutor’s new accusations, in order to analyze the main aspects of the charges; therefore, the defense is completely in the dark about, for example, when and where the 213 people were contaminated by asbestos, since there were other companies that processed asbestos in the same places where Eternit Italy operated.