André Pratte is chair of the Canadian Centre for the Purpose of the Corporation and a principal at Navigator.
On March 4, 10 days after Russia had launched its invasion of Ukraine, Shell bought a tanker-full of Russian oil. When the news broke, the reaction on social media was immediate. On Twitter, Ukrainian Foreign Minister Dmytro Kuleba asked: “Doesn’t Russian oil smell [of] Ukrainian blood for you?”
The huge international wave of support for Ukraine is unprecedented. In liberal democracies, governments are under pressure to do more to help Ukrainians defend their country, provide generous humanitarian assistance and welcome as many refugees as possible.
The response from the international business community is also unparalleled: According to a list compiled by the Yale Chief Executive Leadership Institute, at least 300 companies have withdrawn from Russia in protest. On March 8, Mr. Kuleba wrote an open letter to the world’s corporate leaders, demanding that they “join the ethically and socially responsible global businesses, which have already stopped or suspended operations with or in the Russian Federation, refusing to finance Russian violence, murders and crimes against humanity with their taxes.”
The pressure on companies to adopt a social purpose and take a stand on the sociopolitical problems of the day is already more intense than ever. A survey conducted last May for the Canadian Centre for the Purpose of the Corporation revealed that between 63 per cent and 75 per cent of Canadians support corporations taking a stand on such issues.
In many instances where public opinion is aroused, silence – the default position preferred by many CEOs – is not an option anymore. Customers, investors and employees will find that silence signals acquiescence, and punish the brand accordingly. Certainly, in the case of Ukraine, international public opinion has quickly and convincingly sided with the courageous Ukrainians, and businesses operating in Russia have had little alternative but to distance themselves from the invader.
This was the case for Shell, which, after initially defending its purchase of Russian oil, backtracked and admitted that the decision “was not the right one and we are sorry.” At the same time, the oil and gas giant announced a series of measures to disentangle itself from Russia.
“These societal challenges highlight the dilemma between putting pressure on the Russian government over its atrocities in Ukraine and ensuring stable, secure energy supplies across Europe,” Shell chief executive officer Ben van Beurden said.
Other corporations have been more proactive about the invasion of Ukraine: For example, on Tuesday, McDonald’s CEO Chris Kempczinski announced the temporary closure of the brand’s 850 restaurants in Russia.
“In Russia, we employ 62,000 people who have poured their heart and soul into our McDonald’s brand to serve their communities. We work with hundreds of local, Russian suppliers and partners who produce the food for our menu and support our brand,” Mr. Kempczinski said. “At the same time, our values mean we cannot ignore the needless human suffering unfolding in Ukraine.”
Although the economic and financial costs of such decisions are significant, Ukraine is a relatively easy case, as Western public opinion is one-sided in their support. By contrast, CEOs and boards struggle with social and political issues that are more polarizing. Should CEOs act, in each instance, on the basis of their personal convictions and values alone?
At the Canadian Centre for the Purpose of the Corporation, we believe it is wiser that each company be guided by its reason for existence, its mission, its North Star – in other words, its purpose. As Jonathan Knowles, B. Tom Hunsaker, Hannah Grove and Alison James remark in the current issue of the Harvard Business Review, “Purpose has become something of a fad and victim of its own success … Despite its sudden elevation in corporate life, purpose remains a confusing subject of sharply polarized debate.”
Companies that have invested considerable amounts of time, energy and money in corporate social responsibility (CSR) and environmental, social and corporate governance (ESG) initiatives wonder how becoming “purposeful” is different. It is very different. Companies often do CSR and ESG on the side, as an afterthought to their operations. “Purpose” is embedded in operations. It implies tough decisions, balancing the interests of the business’s stakeholders.
Defining, developing and implementing purpose is difficult. But once the hard work is done, purpose simplifies difficult decisions. It provides guiding principles to ensure strategy and public positioning are meaningful and, most importantly, authentic.
The decisions announced by the world’s large corporations in support of Ukraine are heartening. What’s more, they may exemplify the end of an era when, as long as profits were generated, too many businesses were indifferent toward the moral side of the issues confronting the world. Their stakeholders now demand more. Their long-term viability requires more.
Some worry that CEOs will become social activists, imposing their own values upon society and ignoring the legitimate interests of their company’s shareholders. But that is not what becoming purposeful is about. Indeed, taking stands on issues should and will remain a very small part of what company executives do. First and foremost, purpose is about the strategic decisions and the operations of the firm.
However, when the moment comes for essential choices that could impact the firm’s brand and its relationships with shareholders and other stakeholders, C-suites need to be ready. Those choices should be guided not by the personal values of the CEO or that of the members of the board, but by a corporation’s well-thought-out purpose.
The Ukraine crisis is a cruel reminder that there are times when, for corporations as for individuals, indifference is impossible, and silence is not an option.
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