The war in Ukraine has brought some difficult challenges for western businesses. For instance, Nils Pratley in the Guardian discussed the changes facing Unilever’s relatively new CEO. The headline summed up the article – “Unilever’s new boss should seize last chance to exit Russia”. ”.
“Hein Schumacher has been the chief executive of Unilever for two months now, which ought to be enough time to form an opinion on the issue that continues to generate more headlines about the consumer goods titan company than any other: its continued operating presence in Russia and its willingness to keep paying taxes to the Russian state.
Schumacher arrived promising to look with “fresh eyes”…. It’s time to say something. If the current dance lasts much longer, Schumacher will look like he’s playing for time and hoping, against all evidence, that the noise will go away”.
Unilever is one of the large western consumer goods firms that has continued to operate in Russia throughout the war with Ukraine. Many have pulled out such as Ford, Renault, McDonald's, Ikea and Shell, according to a list compiled by Yale University. But thousands of other firms, mainly German, are still operating in the country.
But now Unilever is accused of supporting Putin’s invasion, as the tax on its profits – as well as presumably income tax from its employees, or any local property taxes – are supporting the Russian war machine. Its presence is also good from a motivational point of view for Putin and Russian citizens. Dominic Lawson in the Sunday Times also commented.
“Hein Schumacher said the matter was “not straightforward” and Unilever had been unable to arrange an exit that met the company’s “objectives”. In other words, to avoid a fire sale that would lead to a big asset write-down — which is what BP faced when it said it would pull out of its Russian business”.
This is in truth a difficult issue. Unilever says that it also has a duty of care towards its 3000 staff in the country, although it has also admitted it won’t stop them being conscripted into the Russian army. But clearly the shareholder value issue around losing both the income stream and the risk of property being appropriated by Russia is significant. The firm also claimed the Russians would just run the plant and make the money – but that’s a poor argument. If you really wanted to, you could quite easily even sabotage the equipment before you left.
The issue is perhaps more difficult for Unilever because of the way the firm has positioned itself as a leader in sustainable and ethical behaviour. We’ve written about Unilever here and featured the firm in the Procurement with Purpose book a number of times as an exemplar of good practice. So their talk of “purpose” does not sit well with providing succour to a homicidal war criminal and his aggression.
Interestingly, Proctor and Gamble has also stayed in Russia, although it has scaled back its operations (Unilever has too). P&G and Unilever have been big rivals for decades, so maybe this is a bit of a game of “chicken” – neither wants to concede profit and market share in Russia to the other. Perhaps a quiet phone call between the CEOs could broker an agreement that both should pull out. I wonder whether more consumer pressure would help – there hasn’t been any serious push for a customer boycott, but that might well help to change attitudes.
But if Unilever stays, this will colour the consumer and media reaction whenever the firm talks about their (often excellent) work in various areas of sustainability, from packaging innovation to supporting poorly paid workers through their global supply chain. They will be seen as hypocrites, I’m afraid, for as long as they stay in Russia.