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The war in Ukraine has resulted in many of the world’s biggest companies deciding to stop doing business with Russia. McDonald’s, IKEA, Apple are Some examplesThese are some of the well-known corporations that took a stand.
But why? This is a well-known rule of economics. States that the social responsibility of business is to “increase its profits”. These companies will surely take a financial hit by being isolated from such a large nation.
Perhaps then, the social role of business has changed, and the professional duty to maximise shareholders’ interests and keep businesses growing is no longer all encompassing. These leaders are moral beings who want the best for the world and citizens. Employees who are upset by the images from Ukraine will expect their bosses and managers to respond accordingly.
Of course, we could also interpret such a “moral stance” as having no altruistic motivation whatsoever. Withdrawing from the Russian market may be nothing more than an attempt to minimise potential damage to a company’s global reputation and brand – particularly if they are seen as being out of step with a competitor.
For, as the Scottish economist Adam Smith said and as the philosopher Adam Smith Proclamed back in 1776: “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own self-interest.” According to this view, the purpose of supplying what a customer needs is no more (or less) than an exchange process designed to generate profit.
But there is an alternative explanation for McDonald’s, Starbucks and the rest closing their outlets in Russia – something called “enlightened self-interest”. This is where you can act to benefit your own interest by advancing the interests of others. It simply means that a business can do well by doing good.
I am a member of a research group examining this approach, with the aim of showing how a sense of responsibility and purpose can be both financially profitable and also generate what we refer to as “good dividends” – developing a new theory of business which integrates profit, people and the planet.
This does not mean that the idea of acting solely for the benefit of shareholders is dead. However, we are now in a very different situation. Participation of corporations in climate change conferences such as COP26 is a key element. They respond to sustainable development goals set out by the UN and invest in and report on their social and environmental responsibilities.
We have found that a developing moral awareness from corporate decision makers is helping to undo a traditional “us and them” Form of leadership which is being replaced with a sense of “us with them”. Businesses of all sizes and in all sectors – coffee sales, metal manufacture, house building, public relations – are raising the value of their business while making a positive social impact at the same time.
Profit and power
The global nature of Russian business shows how decisions about doing business in Russia are made. There are many corporations that are as large as countries. In fact, 150 of the 200 largest companies (revenues) are worth more than the countries (GDP). richest global entitiesAre businesses.
Walmart, the US retail giant, is more wealthy than Australia. The “economies” of Shell and Toyota are each larger than those of Mexico or Sweden or Russia. So alongside a country’s political sanctions, many large companies have the financial muscle with which to make an impact; when they walk away from doing business with a country, the citizens (and politicians) of that country cannot fail to notice.
This is why I’m inclined to see corporate actions against Russia as more than just good PR. Business leaders are not immune from society’s concerns, and nor do many of them want to be. The business world may have turned a page and is now able to see its role in society from a new perspective.
For away from the horrors of Ukraine, there are many issues – climate change, poverty, oppression – which demand the business world’s urgent attention. Future generations might point to the 2020s as a time when business and society have fundamentally changed. For humanity’s sake, let’s hope so.
