Companies leaving Russia are caving to public pressure, not actually making a difference

Toronto: This week, McDonald’s announced its final exit from Russia, making it one of almost 1,000 western companies that have partly, or entirely, ceased operations in Russia. They did so, not just to comply with sanctions, but as a voluntary reaction to the war.

In some ways, it is textbook corporate social responsibility — a form of self-regulation in which companies make commitments to the broader social good.

In this case, many companies cut ties with Russia in response to the pressure to support Ukraine from governments, investors, consumers, competitors and the general public. Some even made hefty financial sacrifices. McDonald’s, for example, expects a hit of up to USD 1.4 billion.

I challenge this move by western corporations because it follows dubious ethical judgments. The apparent “social good” created by businesses exiting Russia is anything but clear and should be examined with a critical eye.

The immoral moral argument Companies that provide goods and services used directly in the war, including the financial services that fund it, do have an immediate responsibility. It makes sense for certain companies to cease operations in Russia if they directly enable the invasion of Ukraine — financially, technologically or otherwise.

However, producing or consuming a Uniqlo sweater, a Happy Meal or a Renault Clio, has no effect on the war itself. The only impact corporate exits might have are on Russian suppliers, employees and communities. The rights and interests of the Russian stakeholders of western-owned companies do not seem to matter.

Some proponents have compared today’s situation to the boycott of South Africa during apartheid when American and European companies had to implement anti-apartheid laws in their South African manufacturing plants and sales operations.

The corporate exit and boycott in South Africa during that time period was designed to stop companies from being directly complicit in apartheid. It is much harder to establish a similarly direct connection between selling McDonald’s burgers or Lego toys and the Russian invasion of Ukraine.

Company responsibility

How much, then, are companies responsible for the actions of their governments? To answer this, we can look to the genocide of the Uyghur minority in China. Many displaced Uyghurs are currently working as forced labour for western companies. No such call for corporate boycotting have been made there.

There is a clear double standard about which wars and atrocities are widely condemned and which are not. There are 20 ongoing wars happening around the world as we speak. Which of them qualify for a corporate boycott? Saudi Arabia’s role in the war in Yemen, which has resulted in at least 230,000 fatalities since 2015, has never been scrutinised. Such ethical assignments of corporate responsibility are arbitrary and questionable.

But Ukraine is more relevant to the West, as mainstream news media has illustrated, because Ukrainians “look like us,” with their “blond hair and blue eyes” who “pray like us” and “drive cars like we do.” Boycotting Russia based on this type of external pressure is just pandering to racism.

Which side is the ‘good guy’ in this war?

War is reprehensible in all its forms. The ultimate question for corporate engagement, however, is the moral status of the reasons for war. Who are the bad guys? Who deserves the punishment of sanctions? On the one hand the mainstream consensus seems to be that Russia is aggressively attempting to rebuild the Soviet empire, ignoring the territorial integrity of Ukraine.

On the other hand, there are a number of arguments that challenge this. Russia started the invasion to prevent Ukraine from joining NATO. Last week, the U.S. and Australia threatened military action in the tiny Solomon Islands if that government allows China to have military presence there. If the U.S. considers what goes on 12,000 kilometres away from its borders a threat, how can we expect Russia to agree to NATO presence right on its doorstep? Political scientist John Mearsheimer has written about the historical reasons to empathize with Russian anxieties — including tracing the roots of the NATO conflict back to 2008 when George W. Bush’s administration began pushing for Ukraine to become a member — while still placing the initial responsibility for the war on President Vladimir Putin’s shoulders.

By sanctioning Russia, companies take a moral position in this war: Russia is the bad guy and deserves punishment. I argue that this situation is much more ambiguous and that the ethics of such a position is dubious at the very least — as is the social good coming out of this form of corporate social responsibility.

Being ‘woke’ is profitable

The commitments to social responsibility and ethical values of a Russian exit are little more than hypocrisy. Ultimately, corporations do these things to remain profitable, in our case, by giving in to pressure from their investors, employees and consumers. “Woke” corporations, as Vivek Ramasamy or Carl Rhodes would suggest, do this because they know that maintaining an ethical veneer is good for the bottom line. Whether exiting Russia will actually achieve any social good, such as ending the war, is largely sidelined.

It is perfectly legitimate to demand greater social responsibility and ethical conduct from business. We need more of it. But publicly pressuring businesses to undertake responsibilities that can only be addressed by governments and the democratic process is the wrong way to get there.

(By Dirk Matten: Associate Dean Research, Professor of Sustainability, Hewlett-Packard Chair in Corporate Social Responsibility, Schulich School of Business, York University, Canada. The Conversation)