In a world where public opinion has become increasingly complex, Russian President Vladimir Putin’s invasion of Ukraine is the latest proving ground for companies walking the PR tightrope and trying to balance business and reputation.
In the early days of the invasion, many Western companies, such as Starbucks Corp., The Coca-Cola Co. and McDonald's Corp., withdrew from Russia in protest. For them, the decision was simple: continuing to offer their consumer goods in Russia amounted to supporting the regime and undermining their humanitarian values. Suspending operations in the country was an easy enough solution to protect a hard-earned reputation that has survived the global COVID-19 pandemic and political unrest – two issues that have defined the decade thus far.
However, for countless other companies of all sizes and across all industries, the decision about whether to withdraw from Russia is not as easy and has hinged on several complex factors.
For companies like software giant SAP and global brewer AB InBev, legal obligations to existing customers and business partners impeded the move toward a clean break. Makers of essential goods, such as Colgate-Palmolive Co., Pfizer Inc., and AstraZeneca plc, have weighed the humanitarian goal of providing necessary products to innocent Russian civilians against the perception that continuing operations supports the Putin regime. Finally, for companies in manufacturing or other areas of critical infrastructure, ceasing operations in Russia could allow Putin to seize factories and equipment and leverage the assets to further invasion efforts and bolster Russia’s coffers.
These factors involve a variety of stakeholders and present unique challenges to both reputation and the bottom line. So, how should companies move forward and navigate this reputational minefield to reach a business decision on Russia?
The answer is to take a holistic approach. CEOs must consider the impact on all stakeholders and ask a range of guiding questions to arrive at a decision:
What will the humanitarian impact be to continuing or ceasing operations, and can you justify your decision to your consumers, employees, and other core stakeholders?
Companies must contemplate the humanitarian implications of leaving Russia and make a calculated decision that aligns with their values and minimises public harm, while examining the various legal and regulatory requirements that apply to their situations.
Does your core consumer base expect you to act based on your previous stances?
Unfortunately, companies that have previously taken stances on social issues have obliged themselves to maintain their postures. If they change course at this moment, they risk losing the hard-earned trust of both their consumer (or customer) base and other relevant stakeholders.
Can you legally cease Russian operations, or are you bound to partner organisations or regulatory authorities?
If you’re legally obligated to maintain operations in some shape or form, how can you distance yourself from the obligations by selling off business units or forgoing profits?
Is your business prepared for and able to withstand the financial consequences if you choose to withdraw?
Companies like French bank Société Générale, which took a 3.1 billion euro loss in selling its Russian business, and British retailer Asos, which saw a 2% reduction in growth by leaving Russia, have felt the financial pain. What would this decision cost you, and how can you prepare for it? The cost may be worthwhile to protect your reputation.
Gone are the days when the bottom line was the sole factor in making business decisions. Today, business is dependent on reputation and balancing the demands of all stakeholders, and Russia’s invasion of Ukraine has presented yet another reputational challenge for brands. To weather this reputational storm, companies must look to their values, consider the impact on all stakeholders they touch, and make a calculated decision that puts humanity first and protects their long-term brand.
If you’d like to learn more about how our global reputation risk and public affairs team can support your organisation in deciding on operations in Russia, get in touch with Barbara Laidlaw at email@example.com.
Barbara Laidlaw brings 25 years of experience developing and running programs that help companies prepare, protect and defend their brand reputations through global and national events, recalls, litigation, data breaches, regulatory issues and labour disputes.