Ukraine war: pressure to justify: why companies stay in Russia

Companies pulling out of Russia can now expect applause. Companies that stay in the country have a much harder time. What motivates Henkel, Bayer and Co. to take this step?

Many German corporations from Adidas to VW have stopped their business in Russia for the time being because of the Ukraine war. Others like Bayer, Henkel or Metro are sticking to it.

Given the general outrage at the Russian aggression, it’s not easy for the companies. Why are they doing it anyway? Is it about the responsibility for employees and customers or just about the money?

“Companies that Russia remain under enormous pressure to justify themselves,” observes marketing expert Karsten Kilian from the University of Applied Sciences in Würzburg. “They often argue that the Russian population also needs to be taken care of, but given the need in the Ukraine it’s not an easy position.”

Bayer gives reasons to stay

Trade expert Martin Fassnacht from the WHU business school in Düsseldorf emphasizes: “It’s not easy to justify why you continue to do business in a country that has started a war.” A company must have very good arguments if it wants to continue supplying the Russian market, otherwise there is a risk of lasting damage to its image. “It is very important how the profits made there are dealt with.”

In any case, the pharmaceutical and crop protection group Bayer sees good reasons for remaining active in Russia. “Depriving civilians of essential health and agricultural products — such as those used to treat cancer or cardiovascular disease, health products for pregnant women and children, and seeds for growing food — would only multiply the death toll this war is taking.” , he defended his decision. However, the concern stopped all advertising in Russia and Belarus and halted all investment projects indefinitely.

The Bad Homburg Dax company Fresenius argues similarly. “Our responsibility as a healthcare company also includes not leaving our patients in Russia alone, but continuing to provide them with medical care.” The patients there are also dependent on vital products and services. According to the information, Fresenius has around 100 dialysis centers for kidney patients in Russia, and a good 3,000 people work for the group in the country. The share of business in Russia in Fresenius sales of 37.5 billion euros is “well below 1 percent.” But that’s still a lot of money: One percent would correspond to 375 million euros in sales.

Merck refers to patients

The Darmstadt-based pharmaceutical and technology group Merck also refers to its obligations to patients. “Our top priority is of course to ensure the safety of our employees and the supply of patients with our medicines,” says the Dax company, which does not have a large business in Russia. Local stocks have been increased and will be expanded in the coming weeks.

“The issue of withdrawing from Russia is a double-edged sword for companies. Because there are good reasons for both decisions – to go or to stay,” says marketing expert Kilian. Of course, the important question is how important the Russian market is for the company, whether only goods are delivered or whether one has its own production facilities in Russia and what becomes of the employees. But planning for day X after the end of the war is also of great importance.

Retailers who are still active in Russia are under pressure to explain, perhaps even more than pharmaceutical manufacturers. The wholesale chain Metro, for example, which keeps its 93 wholesale markets open in Russia. In a letter to employees, the Management Board emphasized: “We are aware that the situation of our 10,000 employees in Russia is in no way comparable to the acute suffering of the Ukrainian employees, whose lives are threatened. Nevertheless, we also bear a responsibility for our Russian colleagues. None one of them is personally responsible for the war in Ukraine.”

Russian employees an issue

According to the company, the cessation of business operations by Metro Russia would have a significant impact on the jobs of 10,000 people and the business of 2.5 million small and medium-sized entrepreneurs. “That’s why we decided to maintain our business in Russia,” said the board.

The retail chain Globus also has its 19 hypermarkets open in Russia and refers to the almost 10,000 Russian employees. The company does not want to hold them responsible for political decisions, “because we also perceive a strong desire for peace in them,” said Globus boss Matthias Bruch. “As a food retailer, we also see ourselves as having a special responsibility towards our Russian customers. We are jointly responsible for the basic needs of the people”.

The argument that you don’t want to meet normal Russian citizens who can’t help the war has a catch, says marketing expert Fassnacht. “Because ultimately the sanctions are supposed to affect the whole country and thus increase the pressure on Putin.”

It should also not be forgotten that a lot of money is at stake for the companies. The Russian government has recently threatened to expropriate international companies that suspend their business in the country. That drives the German economy around. According to the Association of German Chambers of Industry and Commerce (DIHK), around 3,650 German companies were active in Russia before the outbreak of the Ukraine war. Many companies have been active in Russia for decades and are responsible for around 280,000 employees, said Michael Harms, Managing Director of the German Economic Committee on Eastern European Economic Relations.

“Ultimately, every company has to decide for itself whether to withdraw and, if in doubt, endure the criticism,” says marketing expert Kilian. “Anyone who can do that might have a head start on the Russian market if the situation eventually returns to normal.”

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