Three ways to watch corporate responses to the Ukraine conflict

Just over three decades ago, Chrystia Freeland and I started our careers as cub reporters for the Financial Times in the former Soviet Union. Freeland, who is of Ukrainian-Canadian descent, was initially based in Kyiv; I was in the Baltic republics and central Asia. However, we often hung out together in scruffy Moscow bars in those tumultuous days, filing dispatches on the collapse of the Soviet system.

How times change. Or maybe not. Today Freeland is deputy prime minister and finance minister of Canada. But last week, she reignited her writing skills with an FT column that argued that since “brave Ukraine is the moral leader of the free world . . . Russia cannot simultaneously open fire on our system, while also enjoying its fruits.”

But are western companies willing to hurt themselves by denying Russia these business “fruits”? Four new platforms have already sprung up to let investors and consumers track the response more consistently: we have rounded up the main tools below. This is digital transparency and crowdsourced oversight at work in a way that was utterly unimaginable three decades ago — and probably contributed to the startling response from companies such as Mastercard and Visa.

So will this oversight make a difference? Is it a good idea? We would love to hear your views.

Today’s newsletter looks at how companies are responding to the Ukraine crisis, as well as another consequence of the invasion: food price rises will make it harder for global charities to tackle famine elsewhere. We also explore the boom in private investment into American renewables and a report from Mellody Hobson of Ariel Capital about what companies are getting wrong about diversity. Read on. — Gillian Tett

The ‘three buckets’ of corporate responsibility in Russia

What’s the socially responsible thing to do for a multinational operating in Russia right now? For many westerners, the answer is clear: get out, because playing any part in Russia’s economy only helps Vladimir Putin. Even ardent critics of Big Oil and Big Tech have applauded BP’s decision to end its Russian joint venture or Apple’s moves to stop iPhone sales in a country suddenly cast as a pariah state. You can find tallies of who has done what at The Good Lobby, Just Capital, the US Chamber of Commerce and Yale’s School of Management.

We expect consumer goods groups to lead the corporate response to most crises. At the time of writing, though, some of the biggest brands, Coca-Cola, McDonald’s and Pepsi, for example, have been quiet on their Russia plans. Finding out why has been difficult — a lot of reporters’ calls have gone unreturned — but one close observer argued that we should think of companies’ responses in three buckets.

There are those like BP whose Russian investments were so intertwined with the government that they were inescapably toxic; others like Apple with fairly small operations could leave relatively easily; but a third group have thousands of Russian employees and hundreds of thousands of Russian consumers. They’re stakeholders too (see Danone’s explanation of why it plans to keep selling baby food).

The three-bucket theory doesn’t explain, for example, why luxury goods groups were so slow to close in Russia. But it hints at the alarm executives express in private about the risks facing their people in the country.

Either way, pressure is building on consumer brands to join the corporate stampede from Russia. Boycott campaigns are bubbling on social media and the $280bn New York State Common Retirement Fund on Friday urged McDonald’s, PepsiCo and others to consider pulling out.

Business must rise to the moment as Ukraine’s people have, former Unilever chief Paul Polman wrote this weekend. His successor has condemned Russia’s invasion as “a brutal act of war”, but for now The Good Lobby’s traffic light-style verdict on Unilever’s response is red, for “whitewashing” or “complicity”.

Russia’s assault on Ukraine has unleashed countless complexities for multinationals and there is a risk of judging them too simplistically. Companies’ responses must be guided by clear principles. Some, though, are clearly finding it harder than others to say publicly what those principles are. (Andrew Edgecliffe-Johnson)

Sowing the seeds of a food crisis

The invasion of Ukraine has sparked frenzied debate in the past week about the outlook for energy prices. Now the world is waking up to another big issue: Ukraine is such a crucial source of commodities such as grain and corn that the conflict will also increase global food prices.

This has a nasty knock-on implications for multilateral institutions and corporate philanthropy programmes, since it will create (even) more stress for the world’s poor, and undermine efforts to fight famine.

Aid organisations, which have been battling the food crisis in Afghanistan, Yemen and Ethiopia over the past six months, have already started to sound the alarm bells. On Friday, the World Food Programme warned that the world’s hungry “cannot afford” another crisis. The organisation is already struggling to cover vulnerable populations with the current levels of funding. If funding is not increased, there could be a new global humanitarian disaster.

“It’s dire. We’re [already] looking at a price hike of approximately anywhere from $60mn-$75mn more per month [in our existing aid programmes],” Shaza Moghraby, a press and advocacy officer for the WFP told Moral Money.

On Friday, the UN reported that its food index had hit a record high, up nearly 4 per cent from January. However, this is likely to rise further. Currently, Russia and Ukraine are responsible for 29 per cent of the global wheat trade, 19 per cent of global corn, and 80 per cent of global sunflower oil exports. Continued disruption to production is likely push food prices to heights not seen in the past decade, as our colleague Emiko Terazono wrote.

What makes the challenge even worse is that the Ukraine crisis could divert the attention of donors away from existing hotspots, particularly in the arena of corporate philanthropy. And this comes at a time when the Covid-19 crisis has already undermined the economies of many poor regions, wiping out previous progress in healthcare and development, the World Bank has repeatedly warned.

“Over the past seven years, we’ve seen there’s been a stark rise in the people in deep food insecure positions,” said Rob Vos, a director at the International Food Policy Research Institute. “Aid organisations like the WFP are in trouble. The ability for them to purchase food will be limited by the rising food price . . . [and] when energy prices rise it also pushes commodities prices as well, so it’s a perfect storm. The added tack-on is that fertiliser prices are going up as well, which raises issues for farmers.” 

The bottom line: even as the world reels from the horrors in Ukraine — and rushes to offer food, medicine and other aid — donors cannot afford to ignore other places around the world that are in need. Many of these nations are no longer in the headlines — and they need continued attention precisely because they are less visible. (Kristen Talman and Gillian Tett)

US tech giants power demand for renewable energy

US companies, including Microsoft, Amazon, Alphabet and Meta, bought a record amount of renewable energy in 2021, fuelling growth in renewable energy investment and consumption, according to an annual report published on Friday by BloombergNEF and the Business Council for Sustainable Energy.

Big companies are increasingly buying long-term contracts for renewable electricity. Corporate power purchase agreements for clean energy totalled a record 17GW in 2021, up from the previous record of 14GW in 2019. The four technology companies mentioned in the report accounted for 9.8GW of renewable energy purchases (for comparison, New York City uses up to 11.5GW of electricity a day).

“Big tech completely dominated clean energy buying in the US,” the report said.

Overall, renewable energy comprised 21 per cent of US energy consumption in 2021. But coal power inched up to 22 per cent of the total, the first annual increase in coal generation since 2014, the report said. However, “this uptick in coal generation is likely to be shortlived” because no new coal plants have gone online in almost a decade.

US carbon dioxide emissions also bounced back after a sharp drop during the 2020 pandemic — though they remained 4.4 per cent below 2019 levels.

Corporate renewable energy purchases are set to surge in the years ahead as companies chase targets of 100 per cent clean power, the report said. Nine more big companies joined the pledge to meet that goal last year, including Home Depot, Under Armour and DuPont.

With conventional fuel costs spiking, combined with the huge sums invested into renewable energy projects, hope remains that the energy transition momentum can weather the disruption from Russia’s invasion of Ukraine. (Patrick Temple-West)

Chart of the Day

Black Fortune 500 directors said that despite the focus on diversity, equity and inclusion in the workplace over the past 18 months, they are still under-represented on corporate boards, according to research released by Ariel Investments. Yet their white counterparts feel the opposite.

The survey, which polled 151 black, Latinx Fortune 500 corporate directors, expressed sentiments that Mellody Hobson, a black woman, has felt herself as the chair of Starbucks and a director of JPMorgan Chase.

“Companies are grappling with DEI and that’s a good sign,” Hobson, president and co-chief of Ariel Investments, told Moral Money. “It’s a sign that progress is to come.”

Over half of the white male workers reported that race received “too much attention” — a view shared by only 3 per cent of non-white directors.

Hobson found it surprising that even a small minority of non-white directors had that view, but added that mere conversations about board diversity “aren’t enough”.

“In the past 18 months the conversation has grown but measuring success needs to improve,” Hobson said. (Kristen Talman)

Smart read

• If you have watched the events in Ukraine in horror, and want to help, it is worth reading this smart piece in The Conversation by Beth Gazley of Indiana University. She outlines five points that any company, foundation or individual should think about before sending their money. (Top tip: don’t try to send clothes or other physical items while the supply chains are so clogged; it might make you feel good, but will probably create more headaches than real help.)