Russia’s war pushes corporate outcome, exposes risks to business Lifestyle

Russia’s invasion of Ukraine has messed up business plans and forced a growing number of the world’s most famous brands – from Apple to Mercedes-Benz and BP – to leave the country as a global outcast as companies strive to maintain their reputations and meet corporate responsibility standards.

Investors were attracted to Russia in search of lucrative profits they believed it worth the geopolitical risks. This calculation changed after the war in Russia began a wave of global sanctions and export restrictions that have threw its economy into confusion and disrupted the work of multinational corporations there.

“In essence, Russia is becoming a commercial paradise,” said economist Mary Lowley, a senior fellow at the Peterson Institute for International Economics in Washington. “Virtually no company, no multinational company, wants to be caught on the wrong side of US and Western sanctions.”

They also express concern about the plight of Ukrainiansshowing how they want to be seen on the right side of history.

Complicating companies’ desire to flee is Moscow’s order to temporarily restrict foreign investors from selling Russian assets. Prime Minister Mikhail Mishustin said on Tuesday that it would help investors make a “thoughtful decision” rather than succumb to political pressure from sanctions. It is unclear how this could affect corporate efforts to exit Russia.

Oil and gas companies are already feeling the heat from climate activists invest in renewable energywere among the companies that announced the fastest and most dramatic exits.

Energy company BP said on Sunday it would give up its share of $ 14 billion in the Russian state oil and gas company Rosneft. The next day Shell said yes leaving the joint venture with the state-owned Gazprom and its participation in the Nord Stream 2 gas pipeline is now suspended built to transport natural gas to Western Europe.

ExxonMobil has said it will exit a key oil and gas project and halt any new investment in Russia. All of their leaders said they were shocked and upset by the increasingly bloody conflict. This example was followed by smaller energy companies.

Companies in other areasincluding automakers, have signaled that they remain outside the Russian market either because of concerns about Ukraine or because of Western sanctions.

Toyota is shutting down production at its St. Petersburg plant, which produces the RAV4 and Camry, starting Friday due to supply chain disruptions, saying it is watching the events “with great concern for the safety of Ukrainians.”

Mercedes-Benz has suspended car exports to Russia and production there. The Volkswagen Group, which also owns Porsche and Audi, has done the same, saying it believes that “a lasting solution to the conflict can only be found on the basis of international law.”

Volvo Cars said it had cut off supplies because of “potential risks associated with trade in materials with Russia”, citing Western sanctions. Ford has suspended operations.

Harley-Davidson has stopped supplies of motorcycles to Russia, saying its views “continue for the safety of the people of Ukraine.” Putin famously rode a three-wheeled Harley during a visit to Ukraine in 2010.

Others, who are more at stake in Russia, may find it harder to survive the crisis.

French carmaker Renault, Russia’s second-largest market, said only that it was temporarily suspending production at its Moscow plant until Saturday “due to some logistics problems”, not to mention more specifically.

The Danish brewery Carlsberg has suspended production at three of its breweries in Ukraine, but noted that operations in Russia, where it owns the Baltika brewery in St. Petersburg and employs 8,400 people, will continue.

“Millions of lives have been affected, and we strongly condemn the acts of violence and aggression we are witnessing,” Christian Wolff Sondergaard, vice president of corporate affairs, said in an e-mail. Carlsberg is obliged to “protect the livelihoods of all our employees” in Russia, as the economy is increasingly pressured by sanctions, he said.

Czech brewer Budvar, who sees Russia as one of the five main markets, has cut off beer supplies to the country, saying business is not a top priority and he is looking for ways to help, including finding housing for Ukrainian refugees.

“It is really difficult to do business in Russia in the best conditions. Now it’s just going crazy. So leaving is a smart business proposition, ”said James O’Rourke, a professor at Mendoza College of Business at Notre Dame University who specializes in reputation management.

Companies will have to consider any losses the cost of doing business.

“It’s like going into business with the Manson family,” O’Rourke said, referring to followers of cult leader Charles Manson. “Honestly, you don’t want your name associated with these people, and it probably won’t cost you that much money to disinvest.”

Ikea has suspended Russian operations and suspended Russian exports and imports along with its neighboring ally Belarus. The Swedish furniture giant said: “The war has had a huge human impact” and has led to “serious disruptions in supply chains and trade conditions.”

The fast fashion brand H&M has suspended sales in Russian stores, expressing concern over the “tragic developments.” Nike has stated on its Russian website that it cannot guarantee deliveries.

The plane manufacturers Boeing and Airbus have stopped supplies of spare parts and service support for Russian carriers. Boeing has suspended major operations in Moscow and temporarily closed its Kiev office.

Even Hollywood studios are delaying the release of new films in Russia, which is not a leading film market, but is usually in the top ten countries in terms of box office. Warner Bros., Walt Disney Co. and Sony Pictures referred to the “humanitarian crisis”.

Technical companies also headed to the door.

Apple has said it will stop selling its iPhone and other popular devices in Russia, while computer maker Dell Technologies has “suspended” sales in both Ukraine and Russia.

Google and TikTok have blocked Russian state media channels on their platforms at the request of the European Union. Apple has blocked the download of RT News and Sputnik News from its App Store outside of Russia.

Companies need to respond not only to sanctions, but also to public sentiment as the human cost of war grows.

The company’s commitment to environmental, social and corporate governance, known as ESG, is being tested. ESG has become a popular acronym that is increasingly seen as an important way for corporations to advertise responsible business data.

“But there can also be an element of green cleaning,” when companies say things that make them feel they hold certain values ​​or are on the right side of ESG issues, while their practices and behaviors suggest otherwise, said an associate professor at Columbia School. Vanessa Bourbon’s business. .

“Stakeholders, such as employees and consumers, will want to see if the actions and behavior of companies are commensurate with the support that companies provide to Ukrainians,” she said.

Some companies have gone beyond stopping deliveries or operations.

Lego, Ford and the Volkswagen Group have said they will make millions of dollars in charitable donations in support of Ukrainian refugees.

Associated Press Writers Matt O’Brien in Providence, Rhode Island; Danica Kirk in London; Tali Arbel and Ken World in New York; Michael Lidtke in San Ramon, California; and Jan M. Olsen in Copenhagen, Denmark, contributed.

Follow the AP’s coverage of tensions between Russia and Ukraine on https://apnews.com/hub/russia-ukraine. Follow Kelvin Chan on Twitter at https://www.twitter.com/chanman.