Sunday, December 4, 2022

Report: Companies get credit for leaving Russia while failing to do so

by Thaisa SemenovaJune 28, 2022 11:24 pm

Report: Companies get credit for leaving Russia while failing to do soSkyscraper office buildings of the Moscow International Business Center, also known as Moscow City, in Moscow, Russia, on Wednesday, Dec. 8, 2021. Photo: via Getty Images

After Russia began its brutal full-scale invasion of Ukraine on Feb. 24, many multinational companies have announced that they are voluntarily curtailing or halting their business there. Some, like Nestle or PepsiCo, were pressured into making the decision after facing pushback from their employees in Ukraine, customers around the globe, and investors.

On June 23, the U.S. clothing and footwear manufacturer Nike became the latest brand to say it’s going for good, after at first taking temporary measures.

Foreign businesses receive reputational gains for exiting Russia and thus stopping funding its war by paying taxes in the country. 

However, not every company that claimed to pull out of Russia entirely did so, according to a June 28 report by the Moral Rating agency, an organization focused on tracking companies’ response to Russia’s invasion of Ukraine. The agency was founded shortly after Feb. 24 by Mark Dixon, who runs the mergers and acquisitions consultancy Thinking Linking in London and New York. 

The agency rated the level of exit of the 114 largest corporations in the world that had ties with Russia as of Feb. 24. They received the rates from one to 10, with 10 meaning a complete exit. Measured activities include exports, imports, and partially or wholly-owned assets.

According to the report, only 6%, or seven of the 114 companies have entirely exited Russia. They include e-commerce giant Amazon and conglomerate Alphabet (parent company of Google and others). 

The majority, 55% of the corporations, made a withdrawal that either covered only part of the corporation’s Russian activities, or was not completely realized, or both. The rest, 39%, made no exit announcement at all. 

Most are in ‘gray zone’

The agency says that 63 of the 114 analyzed companies are often viewed as being fully out of Russia while they have only achieved “some degree of withdrawal.”

Among others, the report mentions Siemens continuing to serve existing clients, Meta (previously Facebook) still selling ads locally, General Motors retaining employees in Russia, and Microsoft “supporting schools and hospitals.”

“The companies don’t just fail to exit properly. They often also exaggerate or spin up their paltry efforts,” said Mark Dixon, the founder of the Moral Rating agency, as quoted in the report.

The organization said there were some loopholes that corporations could use to avoid fully leaving the Russian market. For example, a company could commit to a sale of a Russian company or asset without mentioning any timeframe for it, meaning it may not materialize. 

Also, an activity in Russia may not be mentioned in the companies’ statements, allowing them to keep operating “something that is often economically more significant than the announced closure.”

“By avoiding the spotlight, they can keep their customers and shareholders in the dark, while they keep earning from Russia and while Putin’s regime benefits from the other side of the transaction,” said Dixon.

Thaisa Semenova
Thaisa Semenova
National reporter

Thaisa Semenova is a national reporter at the Kyiv Independent. She worked as a staff writer for the Kyiv Post until November 2021.

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