Stakeholder Capitalism, Corporate Social Responsibility, and the War in Ukraine

Businesses have responded with words and actions to the Russian invasion of Ukraine. Hundreds of leaders in the life sciences industry signed an open letter condemning the invasion and calling for economic disengagement from Russia. Scores of companies ranging from Apple to IBM have suspended operations in Russia and have devoted resources and money to helping Ukrainians whose lives have been upended by the war. As companies take a stand, they’re demonstrating the importance of stakeholder capitalism and corporate social responsibility. 

What Are Stakeholder Capitalism and Corporate Social Responsibility? 

Stakeholder capitalism as defined by the World Economic Forum means that companies seek long-term value creation by taking into account the needs of all their stakeholders and society at large. As Investis Digital Creative Director Simon Gittings wrote recently, stakeholder capitalism requires a company to undertake an important shift in thinking: from putting investors first to putting all stakeholders first, including people, clients, and the community (or communities) in which a business operates. 

This is an important distinction. In years past, publicly traded businesses especially focused on delivering bottom-line financial returns to investors. They still do. But investors are not the only audience that matters anymore. 

Stakeholder capitalism matters because employees, customers, and job seekers are holding businesses accountable for how well they balance the profit motive (typically seen as shareholder primacy) with the needs of people and the planet – the so-called triple bottom line.  As McKinsey wrote, “Consumers and society at large are expecting more from business. Embracing those responsibilities can help shareholders, too.” This broader remit forces businesses to realize that pleasing shareholders alone is not going to be sufficient. 

Stakeholder capitalism is often associated with corporate social responsibility. With corporate social responsibility, a business aligns its actions with the needs of society at large rather than focusing solely on maximizing profits. For instance, businesses that exercise corporate social responsibility become active participants in the fight against racism. They embrace sustainability. They advocate for the rights of the LGBTQ+ community. Corporate social responsibility is about the actions a business takes. Stakeholder capitalism is about the audiences they answer to.  

How Stakeholder Capitalism Affects Businesses Operating in Russia 

If businesses cared only about their short-term financial returns for shareholders, they would have little incentive to halt their operations in Russia. The country is a large economic market. Halting the sale of products and services in Russia means lost sales as well as increased costs associated with closing an office. And this is happening at a time when the stock market is already being rocked by the war and inflation. 

But businesses need to answer to more stakeholders now.  According to a Morning Consult survey, Americans overwhelmingly approve of businesses halting operations in Russia. Moreover, taking no action is unacceptable: only 4 percent of Americans said brands should keep doing business with Russia and do nothing in response to the invasion of Ukraine. In addition, according to a YouGov survey, nearly one-third of U.S. consumers say that not issuing a statement concerning Russia’s invasion of Ukraine lowers their opinion of a brand. More than a quarter of respondents in YouGov’s survey said they have considered boycotting companies that have not made a public statement about the crisis. 

Businesses are accepting a tradeoff: shareholders may take a hit, but businesses also create goodwill with consumers. And there is an overlap between these audiences. Consumers are also investors. They’re employees. Businesses need to cater to their values. 

Building loyalty will, in the long run, drive shareholder value. For instance, according to Harvard Business Review, aligning the actions of a business with a higher purpose beyond profit leads to more profit than a profit-first mindset does. Harvard Business Review found that “companies with high levels of purpose outperform the market by 5%–7% per year.” 

At Investis Digital, we recommend that businesses: 

• Read the room. Use feedback tools such as surveys and social listening to understand what your employees, investors, and customers want. What kind of stand do they want you to take? 
• Consider your role. Businesses can do more than halt operations in Russia. They can also act as trusted sources of information about the war. This matters especially now. We live in uncertain times. Your employees are likely experiencing stress and anxiety. Consider how you might play a role by offering information about global events and opportunities for your people to make a difference. After all, according to Edelman, people trust businesses more than they do the government and news media. 
• Discuss what you are doing. Share updates about your actions and statements on your website, socials, and everywhere else you communicate with your audiences. 

Stakeholder capitalism and corporate social responsibility are going to become even more important as businesses accept their role responding to the needs of society. How is your business responding? 

Our recently published report Building Trust through the 4Rs: Responsibility, Reputation, Recruitment, and Reach will help you get started. The report discusses ways businesses are building trust with their audiences through corporate social responsibility.  

Contact Investis Digital to tell your story through a credible narrative or learn more about our Brand & Corporate solutions here.