The Reputational Risks Of Doing Business In Russia

By Maja Pawinska Sims, writing for PRokeMedia…

Over the past two weeks, we have seen an unprecedented brand exodus from Russia. International brands that have been present in the country for many years have made the decision to pull out of their operations, as a direct consequence of president Putin’s own decision to invade Ukraine.

Big consumer brands including Disney, Spotify, Levi’s, Warner Bros, Adidas, Apple and Netflix pulled out days into the war. Luxury brands such as Chanel, Prada, LVMH and Burberry followed suit. Energy firms Exxon, BP, Shell and Equinor announced they were divesting Russian investments and partnerships, and financial institutions Visa, Mastercard, Paypal and American Express, as well as PwC and KPMG, also ceased operations, at least for the time being.

Airbnb not only suspended bookings of its 90,000 rental properties in Russia and Belarus and stopped residents of those countries from making bookings, but also waived fees for hosts and those booking rentals in Ukraine after people from around the world spontaneously began making bookings there with no intention of travelling, as a way of supporting Ukrainian residents. The company’s non-profit arm also pledged to offer free housing to 100,000 Ukrainian refugees.

Given the swift corporate response to the invasion – often ahead of and more tangible than sanctions and statements by international governments – there has been growing pressure on brands that did not take decisive, and early, action. This week, after a building movement to boycott their brands, McDonald’s, Coca-Cola, Starbucks and PepsiCo finally suspended their Russia operations.

Should brands stay or should they go?

The reasons given by brands for ceasing operations in Russia, at least temporarily, are many and varied. There is a complex, overlapping set of factors at play, from taking a moral, political and human stance to show support for Ukraine and its people, to more practical, business-driven considerations, such as logistical, supply chain and manufacturing difficulties, rising costs and trading conditions. In its statement on pausing operations in Russia, for instance, IKEA cited both human impact and supply chain disruption as reasons for its decision.

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