Corporations Can’t Afford To Stay Out Of Russia’s War In Ukraine

Corporate leaders have entered the war against Russia. Since Russia invaded Ukraine on February 24, a cascade of global corporations have suspended operations in Russia or exited entirely. ExxonMobil, BP, and Shell are rapidly exiting investments. Apple, Google, and Meta have restricted their services in Russia. Automakers like Toyota, Volkswagen, and Mercedes-Benz have suspended deliveries and operations in Russia. A domino effect among B2B corporations has occurred, as some will be unable to business profitably without shipping giants like Maersk, UPS, and FedEx. Three major factors have played into the desire of corporations to exit Russia: the desire to keep their hands clean of war crimes, the broad reach of Western sanctions, and the demand for global corporate citizenship from consumers worldwide. Today’s corporations do not want the moral stain of the World War II-era German companies who tacitly supported the Nazis. Instead, they are stepping into the role of socially responsible corporate leaders that the modern era demands.

Corporate leaders want to avoid supporting the war effort. The culpability of German corporations for supporting the Nazis led corporate leaders to be indicted for war crimes after World War II. German industrialists I.G. Farben, Krupp, and others bailed out a broke Nazi party and enabled it to ascend to its reign of terror. Others inside and outside of Germany, including Bosch, Bertelsmann, BMW, and L’Oreal, continue to have their legacies haunted by their ties to the Nazi party. For many Americans, these corporate stories are unknown, but Europeans, Israels, and Jews worldwide have not forgotten. Most taxis and many trucks in Israel are German, part of a large reparations package paid by Germany to Israel. Hugo Boss, Daimler-Benz, Siemens, Bosch, Volkswagen, Krupp, and IG Farben are among 6,500 corporations who have paid reparations to Holocaust victims, in cooperation with the German government. After World War II, the Nuremburg Tribunals convicted senior corporate leaders of IG Farben, Krupp, and Flick of war crimes. The court found that these officials provided weapons or financial assistance for the Germans’ war of aggression. When the war in Ukraine ends, corporations and their leaders will not be immune from criminal prosecution. Ukraine has already been employing an aggressive lawfare strategy against Russia since the 2014 invasion of Crimea. It will undoubtedly continue to pursue legal claims against Russian businesses and individuals involved in perpetuating the war. Given Russian state ownership over many of its financial and energy companies, and the close ties of their leaders to Putin, those officers of those companies could easily have been aware of, or been involved in, Russian combat activities. Foreign corporations would be wise to wash their hands of their ties to these companies before they find blood on them.

Severe sanctions launched in tandem by the U.S., U.K., and E.U. make it challenging for many corporations to do business within Russia. Sanctions launched since February 21 include blocking sanctions against Russian financial institutions and their associated entities, along with high-profile individuals in Putin’s inner circle; and additional sanctions involving financial institutions, sovereign debt, debt and equity prohibitions, and export controls. They also prohibit most business transactions within the so-called Dontesk and Lunahsk People’s Republics. With each newly announced sanction, corporations must identify and screen business, imports, exports, and corporate structures involving appropriate regions and individuals. Companies must also analyze touch points with Russian financial institutions, financial service providers, and any companies with ties to sanctioned individuals. Performing risk assessments alone can involve millions of dollars in legal fees. These evaluations may result in a decision to wind down business or modify contracts, at great expense. For many companies, exiting may be a more viable financial option than engaging in the laborious compliance with sanctions.

Corporations are also exiting Russia because their customers demand it. Customers are increasingly looking to business leaders to be world leaders, and are rewarding global corporate citizenship with brand loyalty. A recent poll by Morning Consult found that 75% of U.S. adults support corporations stopping business dealings in Russia, temporarily or permanently. More than 76% also want companies to donate to the Ukrainian people. 73% support companies speaking out in support of Ukraine in addition to their actions. These U.S. numbers echo a broader desire for more corporate social responsibility by consumers worldwide. The 2022 Edelman Trust Barometer, a well-regarded survey of more than 36,000 people in 28 countries found that 58% of respondents buy or advocate for brands based on their beliefs and values. 60% choose a place to work based on their beliefs and values, and 64% choose where to invest based on their beliefs and values. 60% say that, when considering a job, they expect the CEO to speak publicly about controversial social and political issues that they care about. Russia’s war in Ukraine has sparked global outcry, and consumers are clearly looking for business leaders to respond.

Corporations simply cannot afford to stay out of Russia’s war in Ukraine. Neutrality is not an option. The long reach of Western sanctions will force many corporations to take a side. For those companies that remain untouched, or who can afford to navigate the legal minefield they create, their corporate leadership will have difficult decisions to make as the war continues. Some, like Meta, may have reason to stay in Russia to allow its citizens to organize, while adopting other restrictions to prevent Russia from exploiting its platform. Others will have a stark choice of which side of history they want to be on—and what consequences they are willing to accept to do so.