The world is looking on in horror at the events in Ukraine, as a sovereign European country of almost 45 million people is invaded by tens of thousands of Russian troops. The images on our television screens and our phones of ordinary Ukrainians, young and old, cowering in basements or the millions now on the move fleeing their country, has chilling echoes of the past.
The response so far from democratic nations — has surprised many, including it would seem, Putin himself. The unified and united condemnation of this war, and consequentially the economic, political and cultural isolation that has been delivered at speed, has sent a clear and unequivocal message.
The business world has also responded swiftly with over 100 companies having withdrawn from Russia in the past few days. Normally, fashion companies tend to lead the charge on societal issues, but in this instance, it is has been tech, entertainment, finance and heavy industry leading the way. Oil companies such as Shell and BP have severed their ties with Russian partners. Social media companies have demoted posts with links to Russian state media. Three studios (Warner Bros., Sony and Disney) have halted new film releases in Russia. Volvo and Jaguar Land Rover have also halted deliveries to Russia. Apple, whose annual net sales in Russia is more than $7 billion, is pausing the sale of products and has stopped exports into the country. Swiss banks have complied with orders from their government to disable withdrawals by Russian oligarchs. Imposition of U.S. export controls has caused HP to suspend PC shipments to Russia. Canadian miner Kinross Gold has suspended all its operations in Russia and Alcoa, the largest U.S. aluminum producer, announced it has put a halt on selling products to Russian companies and will stop the purchase of raw materials from Russia.
There are three classes of companies to consider. Those that have ties with oligarchs or with the state-owned companies must break those relationships. The second is asset-light companies with few to no employees on the ground, simply importing products, therefore easy to leave the market especially in light of the pressure of sanctions and supply chain challenges. The third, and most complex case, are the companies that have substantial investment in factories, employees and products — from pharmaceuticals to essential nutrition — relied upon by the Russian people. Here are a few observations:
- Business Is Not Waiting for Government — Jeffrey Sonnenfeld, senior associate dean for leadership studies at the Yale School of Management, told me last night that this is the most significant set of actions taken by business in the wake of a geopolitical event since the withdrawal from South Africa in the mid-80s to protest apartheid. “Actions matter more than words. Companies are voting on Russia with their feet. CEOs don’t need to make public declarations; they need to get out of the market for now.”
- National Interests and National Values — U.S. Secretary of State, Antony Blinken, said last year that American companies need to represent American values. The same applies here — Multinational companies based in democratic countries need to represent the values of their country. This is not just about geopolitics, it’s about the future of the democratic system. Deborah Lehr, managing partner of Edelman Global Advisory, predicts that there will be increasing pressure for all major multinationals to take their products out of the Russian market.
- Breaking Into Blocs — Lehr added, “It is deeply important to see who abstained in the UN vote on sanctioning Russia. These changing alliances will make it ever more complicated for business to compete in all global markets.”
- No Business as Usual with This Regime — Ivo Daalder, president of the Chicago Council on Global Affairs and former U.S. Ambassador to NATO, said, “We need to bring the Russian economy to the point of collapse, which could happen in months given the halving of the value of the ruble.”
- Hard to Pull Out Quickly — A senior banker at a Swiss financial institution told me, “You have to take care of your Russian employees; continue to pay them. They are exposed much more than the oligarchs who have money stashed all over the world for just this sort of eventuality.”
- The Knock-On Effect on Mental Health of Employees — Individuals around the world are feeling concerned and stressed. Younger employees are deeply worried about the renewal of the Cold War. Just as many were returning to office after two years of the pandemic, they are now confronted by the specter of a hostile power on their border, interrupting a thirty-year period of integration and peace. We must be sure to communicate with them frequently and provide platforms and outlets where they can talk.
- The Argument for Staying in Russia — I spoke with a senior executive at a large multinational operating in the country. He said, “We provide staple products for over 100 million consumers in Russia. Do we make things better by staying or leaving? We have a responsibility to consumers, to provide essentials for life. We also employ thousands of people who work at our factories or in distribution. We are part of the fabric of Russia.”
How quickly all of this has changed; note that only two weeks ago, a group of Italian industrialists did a Zoom call with Putin to discuss business opportunities in Russia. A German business group was to do the same until its government intervened and demanded cancellation. Instead of being complicit in the continuation of life as usual in Russia, business is leading, taking the risk of action over the more usual path of least resistance, waiting for government mandate.
Geopolitics has become the new test for trust. We saw this with the allegations of human rights abuses in Xinjiang and the war between Ukraine and Russia has only reinforced it. The line between policy and geopolitics continues to become less clear and more difficult for business to navigate. This is a window into the future, with enhanced expectations of employees, consumers and investors motivating companies to act in a broader societal interest. Let’s pray for the people of Ukraine and hope that these actions by business can play a role in causing the madness to end before thousands of more lives are lost.
Richard Edelman is CEO.