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“For the people in power in Russia, it does not really matter whether or not Coca-Cola or McDonald’s operate in Moscow”

Date:19 May 2022
Boudewijn de Bruin
Boudewijn de Bruin

As professor in Financial Ethics, Boudewijn de Bruin focuses on a myriad of topics, such as ethics and behavior in financial institutions, codes of conduct, remuneration policies in the financial sector and in other large firms and more recently sustainable finance and the role of financing in climate change. As the war in Ukraine drags on, how does he view the ethical challenges and ethical risks that businesses operating in Russia face? FEB asked the ethics expert some questions on the issue.

Since the invasion at the end of February, many Western companies have pulled or suspended their operations in Russia. With this, these companies imply that they can play a role in ending the war. Following this logic, these companies might have been able to prevent this new invasion altogether if they had left earlier. Why do you think they didn’t?
“The idea and feeling that it is all coming closer now, physically and mentally, is very prevalent. As long as effects are far away in time and space, are less mediagenic or play a smaller role in the media, these effects are less influential. The 2014 invasion in the east of Ukraine and the Crimea was never really framed as a war by the media. Also, the shooting down of the MH17 was not strongly brought into connection with a rhetoric of war, even though it was an airplane with mostly Dutch passengers. So, in 2014, companies didn’t decide to leave Russia. If a couple of companies had then already decided to leave, then more of them probably would have followed as a natural reaction. Another aspect that might play a role is that, over the years, companies have started to attach more value to corporate social responsibility (CSR), as they are dealt with more firmly in society. The case against Shell that was filed by Friends of the Earth Netherlands (Milieudefensie) is a good example of that. It could be that the sentiment has changed, not only with regards to Ukraine and businesses in Russia, but also when it comes to other forms of social responsibility of corporations.”

Do you think it would have helped if companies had left Russia earlier?
“No, looking at the current situation, I don’t believe that would have made a difference. As you can now conclude that the actions businesses have taken so far have not helped to stop this war. For the people in power in Russia, it does not really matter whether or not Coca-Cola or McDonald’s operate in Moscow. The companies that could have made a difference are still in operation and so crucial financial flows continue to exist. Many firms have left Russia, but these are not the firms that are capable of really making a difference. If from day 1 we had said: we will no longer use Russian gas, that would have made a bigger impact. I can imagine it is quite frustrating for companies that are trying to make a difference by suspending their Russian activities, as many governments, and especially the Dutch government, are really not doing much themselves. It is of course much easier for Coca-Cola to suspend their activities in Russia - as most Europeans can still continue drinking Coca-Cola - than for us to collectively decide to ban Russian gas, because that would lead to greater changes in our everyday lives.”

How come so many firms, including some of the world’s biggest multinationals, have all ended their operations in Russia but still seem to have no problem with doing business in other countries and regions where human rights abuses also take place regularly, like Qatar and China (Xinjiang)?
“It is a hard question, because we don’t know enough about it yet, but it could be an interesting research topic. When it comes to the visibility of moral and ethical issues in the corporate world, it often comes down to proximity. This is well-known from business ethics research on moral intensity. Ukraine is much closer to us than China. We see Ukrainian cars on our roads here, but few of us have ever met people from the Uighur region in China. Ukraine is not only closer in spatial terms; the country’s culture is also closer to our own. Also, the Russian domination in Eastern Europe after the second World War is still ingrained in our collective memories. There are many factors that cause the situation in Ukraine to hit closer to home than human rights abuses in China or Qatar. Yet, it remains important to hold a mirror up to companies and point them towards their social responsibilities in other parts of the world.”

How do you view the weighing up of the pros and cons for companies staying in Putin’s Russia? What risks and considerations do these companies face?
“It is very hard to quantify the reputational damage companies would suffer if they had decided to stay in Russia. I think it all really depends on the decisions of other prominent companies in a peer group. If most of the other prominent companies in one sector leave, the remaining companies are likely to follow. But if most companies had decided to stay, this probably would not have led to huge boycott against any of these individual companies. The majority of companies that have left Russia are Business to Consumer (B2C), as Business to Business (B2B) companies are less visible to the general public, many of these firms may still continue their operations in Russia.”

How do international firms that have pulled or suspended their operations in Russia ensure they minimize the collateral damage to Russian employees that have never supported this war?
“Many companies that have left Russia will continue to pay their Russian workers’ wages till the end of this calendar year, but of course they can’t keep doing that forever. I don’t expect the war to be over soon, and even if the Russians retreat, it will take quite a while to restore the (diplomatic) relations with Russia. Thus, to prevent Russian workers from losing their jobs and incomes, some of the multinationals that have suspended their Russian activities have made sure these activities were taken over by Russian companies. All in all, it remains important for firms to carefully consider the consequences and impact of their actions, especially since it is now clear that for many companies entirely suspending operations in Russia does not make a difference in stopping this war. How does this then weigh up to the potential damage to civilian workers in Russia?”

As the suspension and pulling of businesses’ operations in Russia has not yet made much of a difference, do you expect companies might start returning to Russia in the foreseeable future?
“That is a possibility, especially if sweeping international sanctions continue to lack, Yet, again it all depends on the actions of multiple companies in a peer group. Prominent companies in a sector are unlikely to return individually, but if a couple of them do, then more might follow. But it is doubtful whether international firms are even able to operate within Russia’s current social and financial infrastructure, which of course has been damaged by the international sanctions. So, you can conclude that even if these companies had not left Russia on their own, they might have been forced to do so in the long term anyways due to the circumstances.”