The case for more companies to keep pulling out of Russia
After Russia attacked Ukraine, companies started to respond to the aggression within days. BP and Shell said that they would pull out of oil and gas investments in Russia worth billions. General Motors, Volvo, and Volkswagen stopped selling cars in Russia. Apple stopped selling iPhones and other products, limited access to Apple Pay, and banned Russian propaganda apps. Nike and Ikea closed stores. Disney and WarnerMedia paused the release of new movies. Norway’s $1.3 trillion sovereign wealth fund said it would divest shares of 47 Russian companies and Russian government bonds. And the list goes on.
Some of the decisions could have a clear impact on the war. The Russian economy relies on fossil fuels, and as Western oil companies end partnerships, some funding for the war will begin to dry up. Oil companies pulling out, “combined with other financial measures, will make it much more difficult for the Russian petroleum industry to raise funding,” says Philip Nichols, a professor of social responsibility and ethics in business at the Wharton School of the University of Pennsylvania who has worked in both Russia and Ukraine. “And oil and natural gas exploration are very capital intensive industries. We’re going to start feeling the effects of that relatively soon.” Other decisions may not have significant impacts on either the companies or Russian policy; GM, for example, sells only 3,000 cars annually in Russia out of the 6 million it sells worldwide.
What does it mean if Russians can’t buy iPhones now? It’s clear that some Russian citizens were already resisting the invasion even without any additional incentive—thousands have been protesting in streets. The war is especially unpopular with young people in Russia. It’s less clear that Putin cares. So far, more than 7,000 people in Russia have been arrested for protesting the war. Putin is reportedly considering a new law that would punish anyone who publishes “fake” news about the Ukraine invasion—e.g., anything that criticizes it—with 15 years in prison. As companies make life harder for Russian citizens, adding to the pressure from sanctions, the hope is that it could erode support for Putin further, but it’s not obvious how much it might take to make Putin change course.
“In the past decade, Putin’s administration has undertaken a lot of things that either insulate the administration from public opinion or manipulate public opinion,” Nichols says. “So when the Russian people are hurt by all of these things, it kind of dulls the effect that that will have inside of the Kremlin. On the other hand, just because it dulls it doesn’t mean it is not felt.”
Many experts argue that every company has an ethical responsibility to cut ties with Russia now. “Ordinary companies should make a decision,” Fiona Hill, the Russian policy expert who gained a global profile during the first Trump impeachment, told Politico. “This is the epitome of ‘ESG’ that companies are saying is their priority right now — upholding standards of good environmental, social and corporate governance. Just like people didn’t want their money invested in South Africa during apartheid, do you really want to have your money invested in Russia during Russia’s brutal invasion and subjugation and carving up of Ukraine?” Pension funds should also pull out of Russian investments, she says, since many major Russian companies are tied to the Kremlin.
“In a time of war, decisions have to be made quickly and not all considerations can be taken into account,” says Marjella Lecourt-Alma, the CEO and co-founder of Datamaran, an ESG risk management platform. “At present, it is about prioritizing the most important question: which side are you going to be on, and do you want to be seen as contributing to Russia’s war chest?”
Consumers expect companies to act. “We’ve seen an uptick in expectations of companies from consumers, and in particular of CEOs, to step up on all manner of social issues,” says Martin Whittaker, CEO of Just Capital, a nonprofit that studies corporate social responsibility and is tracking how companies are responding to the Russian invasion. In the past, Just Capital has polled consumers on other issues, including how companies should respond to challenges like climate change and racial inequality. “We haven’t been thinking about war,” he says. “It just adds a whole new context to this and it really quite begins to question, what is the role of business in supporting healthy democracies? That’s the deeper question here.”
Nichols says that each company will need to consider its own response in Russia. “Someone who provides critical medicines or basic foodstuffs is in a different position than a firm that provides high-end handbags,” he says. As every company decides what to do, “they need to take into account the extent to which they are abetting or propping up a regime that’s doing bad things,” he says. “A business cannot excuse itself simply by saying we’re a business firm. Business is not distinct from the rest of society.”
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