Money or Ethics: The Russian Aggression Towards Ukraine and Corporate Social Responsibility
Updated: Mar 26, 2022
Since the start of the Russian aggression against Ukraine many companies have banned trade with, or in Russia. Sanctions were imposed by European and NATO countries that limit the possibilities of trade. Shell, Nike, Nanushka, EA, IKEA, Inditex, Heineken, Samsung and Apple all gave statements on their reasoning to stop trade within Russia. Within this article, I'd like to dig deeper into corporate social responsibility and how corporations choose to react to global events, and even war.
Capital, law or ethics?
Firstly, I would like to set out what is meant by corporate social responsibility – or CSR. According to Carroll (2016) and Bones (1953) businesses and corporations are vital centres of power, they affect citizens in numerous ways, CSR centres around the question: which responsibilities do corporations hold in the face of society? Carroll's pyramid of CSR shows a four-part definitional framework: "Corporate social responsibility encompasses the economic, legal, ethical, and philanthropic expectations that society has of organisations at a given point in time" (Carroll 1979, 1991).
Let's take a brief look at the economic, legal and ethical components of Carroll's framework. The economic component of Carroll's pyramid is based on how our society currently expects businesses to sustain themselves, while the legal and ethical components play into beliefs, mores, and ideals. Legally, laws are implied on local, national, and international level, these are our 'codified ethics'. The ethical component, however, demands more, society expects businesses to embrace societal norms that are not codified. Legislation is mandated or can be seen as a 'rulebook' for corporations, while ethics are up for interpretation. Businesses are expected to have a set of principles and beliefs, these however, are varied, which makes the question of CSR so incredibly interesting.
The main driver of businesses within a capitalist society is to make profit, we can see that values play a significantly larger role in recent years regarding the choices consumers make, and where they spend their hard-earned money. Ethics, values and beliefs are becoming vital when operating a business. The difficulties that big companies experience while navigating the fine line between economics, laws and ethics are made abundantly clear, when looking at the Russian aggression against Ukraine.
A fine line between motivations
'Nike makes online sales unavailable in Russia', 'Apple halts all product sales in Russia', 'Zara owner Inditex ceases trading in Russia 'temporarily'', and 'IKEA suspends activities in Russia and Belarus due to war'. These were just a few headlines we saw the past two weeks.
It might be compelling to categorise these statements and the possible motivations of companies to stop sales within Russia. For now, there seem to be ones that have a legal, ethical and economical motivation. Inditex for example do not mention the Russian aggression: “In the current circumstances Inditex cannot guarantee the continuity of the operations and commercial conditions in the Russian Federation and temporarily suspends its activity.” (source: the Guardian) This statement seems to indicate a legal reasoning behind the Russian ban, the war is not criticised, economic sanctions aren’t condemned either. Adam Cochrane, an analyst at Deutche Bank points out the importance of the Russian market for Inditex. “The combination of the weakness in the rouble resulting in large price increases for the Russian consumer and increased logistical difficulties will make operations difficult for all retailers importing into Russia, even if there are no direct sanctions on their product categories."
Disney, Warner Bros. and Sony paused their services in Russia as well. 'We will make future business decisions based on the evolving situation,' Disney stated. 'In the meantime, given the scale of the emerging refugee crisis, we are working with our NGO partners to provide urgent aid and other humanitarian assistance.' (source: Reuters). This reasoning seems to be based on ethics, mainly due to the mentioning of work with NGO partners and humanitarian assistance.
One company stood out since the war in Ukraine started, as one of the first – and most influential, Shell released a statement on the 28th of February, and announced that it will stop its ventures with Russian energy company Gazprom. Chief Executive Ben van Beurden declared the company was 'shocked by the loss of life in Ukraine'. Just a few days later, however, it become clear that Shell decided to discretely purchase Russian crude oil at a vast discount. 'The firm said it remains "appalled by the war in Ukraine" and has stopped most activities involving Russian oil, but it added the situation with supplies is highly complex' (BBC News).
Shell's case shows the pressure of society to abide by ethical, uncodified values, with many condemning Shells actions. The energy firm has now apologised publicly for its 'mishap' and said to close all its service stations and stop all activity within Russia.
Changing values and togetherness
So, why am I writing about warfare, economic sanctions, and the increase in 'conscious consumerism' in relation to corporate social responsibility? The past three years we have witnessed an increase in 'wokeness' and 'awareness' especially in relation to business. Consumers are calling for corporations to produce sustainably and ethically, to diversify and to be transparent in their practice. Companies cannot continue trade if they don't set out their values clearly in the near future. A large group of consumers will not buy from a corporation that does not represent similar values to theirs.
With NATO and the European Union being more united than ever regarding sanctions on Russia, it seems to be logical for corporations to follow suit. However, their intentions are distinguishable. Inditex only stopping sales for legal reasons isn't surprising, Shells 'mishaps' did not come out of left field either. We live in a time where we can observe changes in the public opinion every day. Our expectations of the responsibilities of business are rapidly changing. Some businesses are adapting to consumers' expectations, while others try, and miss the mark completely. An economic driver hidden as ethical values has a negative effect. Consumers want to know that a company is genuine in their value system and that they will not be partially responsible for harm to people and the planet.
References and further reading:
BBC News (2022) 'Shell defends 'difficult' decision to buy Russian crude oil', published on: 07/03/2022, accessed at: https://www.bbc.co.uk/news/business-60638255
BBC News (2022) 'Shell sorry and pledges to stop buying Russian oil', published on: 09/02/2022, accessed at: https://www.bbc.co.uk/news/business-60661611
Carroll, A.B. (2016) 'Carroll’s pyramid of CSR: taking another look', accessed through: https://jcsr.springeropen.com/articles/10.1186/s40991-016-0004-6/
IKEA (2022) 'IKEA pauses operations in Russia and Belarus', published on: 03/03/2022, accessed at: https://about.ikea.com/en/newsroom/2022/03/03/ikea-pauses-operations-in-russia-and-belarus
Independent (2022) 'IKEA suspends activities in Russia and Belarus due to war with 15,000 employees put on leave', published on: 07/03/2022, accessed at: https://www.independent.co.uk/life-style/ikea-suspends-activities-russia-belarus-ukraine-b2027770.html
L. Moir (2001) 'What do we mean by corporate social responsibility?', accessed at: https://www.emerald.com/insight/content/doi/10.1108/EUM0000000005486/full/html
NOS (2022) 'Het ene na het andere bedrijf keert Rusland de rug toe, maar voor hoelang?' Published on: 05/03/2022, accessed at: https://nos.nl/index.php/collectie/13888/artikel/2419956-het-ene-na-het-andere-bedrijf-keert-rusland-de-rug-toe-maar-voor-hoelang
Reuters (2022) 'Disney, Warner Bros., Sony pausing film releases in Russia over Ukraine invasion', published on: 01/03/2022, accessed at: https://www.reuters.com/lifestyle/disney-pausing-film-releases-russia-over-ukraine-invasion-2022-03-01/
Reuters (2022) 'Apple says it halts all product sales in Russia', published on: 01/03/2022, accessed at: https://www.reuters.com/technology/apple-says-it-halted-all-product-sales-russia-2022-03-01/
RFE/RL (2022) 'Energy Giant Shell Withdrawing From Russia, Will Stop Buying Moscow's Oil And Gas', published on 08/03/2022, accessed at: https://www.rferl.org/a/russia-shell-ukraine-severing-ties-exxon/31742764.html
Shell (2022) 'Shell announces intent to withdraw from Russian oil and gas', published on: 08/03/2022, accessed at: https://www.shell.com/media/news-and-media-releases/2022/shell-announces-intent-to-withdraw-from-russian-oil-and-gas.html
The Guardian (2022) Zara owner Inditex ceases trading in Russia ‘temporarily’, published on 05/03/2022, accessed at: https://www.theguardian.com/world/2022/mar/05/zara-owner-inditex-ceases-trading-in-russia-temporarily-ukraine-sanctions