Over the past two years, business leaders have encountered an endless succession of disruptive events — from growing social unrest to a lingering global pandemic to Russia’s horrific assault on Ukraine. Each of these events has jolted business leaders into a new realty — a reality requiring action of growing complexity and consequence.
In recent days, McDonald’s said it would leave Russia after more than 30 years of operating in the country, jettisoning ten percent of its global business, and making it the latest company to announce its exit. McDonald’s joined more than 1,000 businesses — including the likes of Disney, Citigroup, BP, Starbucks, and Boeing — that have suspended operations or cut ties altogether in the aftermath of the Russian invasion.
But therein lies a challenge. What has become increasingly clear to business leaders since the February invasion is that navigating your way out of Russia is no simple task. The private sector has had to wade into a geopolitical quagmire where there is significant cost associated with acting, but an even higher cost for choosing not to act. This new reality is underscored in the most recent findings of the 2022 Ƶ Trust Barometer Special Report: The Geopolitical Business.
The Ukraine Effect
Our study revealed trust gains, especially in the West. People also appeared to reward those societal leaders and governments who took decisive action in responding to the Ukraine crisis. This Ukraine Effect is the strongest evidence yet that action drives trust and trust drives action.
Since the outbreak of war in Ukraine, Business has held steady as the most trusted institution (62 percent of respondents saying they now trust Business). During this same period, government saw its biggest increase in trust in three years, up three from our 2022 Ƶ Trust Barometer published in January. For those countries who acted decisively against Russian aggression, several recorded notable trust gains, such as the U.S. and U.K. (both up six points) and Germany (up four points). Conversely, those countries who offered a muted response saw an erosion of trust: China (down three points and the UAE and Saudi Arabia (both down one point).
Our study also revealed that when it comes to condemning or punishing a country’s bad behavior, inaction by business is not an option. This is certainly true when it comes to Russia. Nearly half of those surveyed (47 percent) said they have bought or boycotted a brand or company based on their response to Russia’s invasion of Ukraine. At the same time, our study showed a precipitous drop in employee advocacy and loyalty when a company’s response to the Ukraine crisis failed to meet expectations. And employees made those expectations clear — they are less likely to be loyal (by 24 points) and less likely to be an employer advocate (by 26 points) — if their employer’s response doesn’t meet their standard.
Furthermore, a resounding 95 percent of respondents said they expect companies to react to an unprovoked invasion of another country where they have business interests. Their sentiment was equally strong in their expectations of business on other geopolitical issues. Ninety-five percent or more expect a strong business response to repressive governments and abusive work practices in countries where they do business.
Implications for CEOs
When it comes to confronting issues like the Ukraine crisis or human rights violations, most people expect CEOs to inform, speak out and “be the face” of their actions on social and geopolitical issues. When business leaders choose to stay silent on these issues, they are now viewed as being guilty of complicity.
So, what does all this mean to business and the CEOs who lead companies in these turbulent times?
Business must lead from the front — with action: When the stakes are highest, business leaders have shown they have the capacity to act — and to act swiftly to affect demonstrative change. In the last 24 months, business leaders put aside self-interest to speed delivery of a Covid-19 vaccine; and they have done so, again, in decisively condemning the wrongful aggression of Russia.
The bar for business continues to rise: As its role in society continuously evolves, the expectation of business as an agent of change and a stabilizing force continues to grow. Our survey respondents overwhelmingly believe that a company’s obligation to society is now on par with its core remit as a purveyor of products and services and generator of jobs and wealth. While most people (79 percent) want business to focus on wealth creation, a clear majority (76 percent) also want business to tackle persistent societal issues within their home countries, as well as pressing global challenges, such as climate change.
Business must adapt to a shifting geopolitical landscape: CEOs have been thrust head on into geopolitics, and there is no retreat. Just as business leaders have learned to navigate a global pandemic, growing social unrest, and devastating climate events, they must now learn to navigate geopolitical affairs — which are proving ever more complex. Business leaders stepped up in their strong response to Russia’s invasion of Ukraine, but that’s just their first real test. Other thorny issues will follow, leading many to ask: What lessons will business apply when it comes to those situations where the stakes are even higher?
All this points to one clear conclusion: The business of business is no longer just business.
Dave Samson is Global Vice Chairman, Corporate Affairs