Will Russian Sanctions Have Long-Term Effects on Human Rights Protections?

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MIT SMR Strategy Forum

The MIT SMR Strategy Forum offers monthly insights from academic experts on pressing strategy issues related to business, management, technology, and public policy.
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Since Russia invaded Ukraine in February, governments worldwide have responded by imposing severe economic sanctions on Russia. The global uproar over Russia’s grievous violence against Ukrainians has highlighted human rights abuses, and many multinational companies have suspended operations in Russia in response.

It’s clear that unprovoked warfare and atrocities against civilians have been a strong motivating factor for multinational companies to make swift decisions in Russia. But will this be an example that companies learn from and apply to other geographies and parts of their supply chains where human rights violations are taking place?

In this month’s MIT Sloan Management Review Strategy Forum, we asked our panel of strategy experts to respond to the following statement: Sanctions against Russia will cause multinational companies to consider human rights protections in supply chains more broadly.

Disagree and Strongly Disagree

Nearly half (44%) of respondents disagree that Russian sanctions will drive multinational concerns on this front. “The concerns of the multinational companies are probably more geopolitics-related rather than about human rights directly,” comments Jin Li of Hong Kong University. Some panelists see the two issues as distinct (“I see no connection,” says Stanford’s John Roberts) and predict that companies will share this outlook. Alfonso Gambardella of Bocconi University notes, “I think that in the eyes of these companies, the two issues are likely to appear as independent.”

Other panelists suggest that companies won’t feel pressure to change if the public response is tepid. “Outside of extraordinary events, not that many stakeholders pay attention to what happens in companies’ supply chains,” notes Olav Sorenson of UCLA. “Most companies do not face much pressure to consider human rights in their operations.”

Caroline Flammer of Columbia University questions whether the scope of corporate concerns will extend beyond active conflict zones: “I don’t think it is the sanctions per se but rather the war itself that will make companies revisit their supply chains. … I doubt that this will extend to other human rights issues in supply chains (such as child labor, sweatshops, etc.).”

Disagree


“Multinationals are driven to grow and maximize profits. Governments are tasked with protecting the well-being of their people. … If governments have a hard time doing what’s ‘right,’ why expect multinationals to do that?”
Timothy Simcoe
Steve Tadelis
University of California, Berkeley

Neutral

Twenty percent of our panelists fall somewhere in the middle, expecting minimal effects for a variety of reasons. The University of Toronto’s Joshua Gans suggests an important distinction: “Human rights abuses didn’t lead to this degree of sanctions. Russia’s military aggression did. … I think this might make some more mindful, but the real effects are hard to parse.” Duke University’s Ashish Arora adds, “I am less sure how companies would respond if the conflict was taking place in Asia or Africa.”

“How much this will impact actual operations, strategy, and investment remains to be seen,” notes MIT’s Scott Stern. But Monika Schnitzer of Ludwig Maximilian University of Munich doesn’t expect lasting change: “While the current sanctions against Russia may momentarily have raised awareness of human rights issues in supply chains, based on past experience, I do not expect this effect to be long-lasting for supply chains in general.”

Neither Agree nor Disagree


“Human rights abuses didn’t lead to this degree of sanctions. Russia’s military aggression did.”
Timothy Simcoe
Joshua Gans
University of Toronto

Strongly Agree and Agree

A third (36%) of respondents agree that, yes, multinational companies will now expand their human rights considerations in supply chains — if they haven’t responded already. Indeed, many suggest that Russia’s blatant war crimes have driven corporations to consider broader human rights concerns amid public responses by consumers and activists alike. “Not only the sanctions but the atrocities in Ukraine and elsewhere are making human rights a bigger concern for people, governments, and companies around the world,” says Richard Florida of the University of Toronto.

“The recent public outcry to disengage from Russia is unprecedented in scale, but in fact, the call for organizations to consider human rights in supply chains has been growing over many years,” London Business School’s Olenka Kacperczyk writes. “But certainly the pace will now be accelerated, as the widespread shunning of Russia has demonstrated to activists and watchdogs the scale of what is possible.”

Strongly Agree


“Many companies (and nations) were playing a dangerous game by doing extensive business with regimes like Putin’s. With the invasion of Ukraine and the atrocities there, that has become untenable.”
Timothy Simcoe
Erik Brynjolfsson
Stanford University

Agree


“Human rights issues in supply chains have long been seen as a key CSR challenge, and normally, multinational companies can spend considerable time performing such due diligence. However, the recent pandemic and the current war in Ukraine has underscored the need for often very swift due diligence.”
Timothy Simcoe
Nicolai Foss
Copenhagen Business School

“Customers are now able to coordinate very quickly on an equilibrium where basically all companies have to respond to serious human rights concerns,” notes Richard Holden of the University of New South Wales. Many panelists across the spectrum, regardless of their agreement with our statement, concur that public pressure, even more so than official sanctions, is the likeliest factor to drive real change. “The causal link between sanctions and human rights considerations may not be as strong as we want,” says University of Toronto’s Anita McGahan, who nevertheless holds out hope: “I think that the most powerful source of change will be public pressure on companies rather than the sanctions per se.”

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MIT SMR Strategy Forum

The MIT SMR Strategy Forum offers monthly insights from academic experts on pressing strategy issues related to business, management, technology, and public policy.
More in this series

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Comment (1)
Boris Slavin
The crisis provoked by the conflict between Russia and Ukraine showed that the modern world was absolutely not ready to solve problems in the conditions of large-scale globalization of the economy and communications. Connecting businesses to solving political problems by breaking supply chains is tantamount to opening a Pandora's box. 
Won't other problems be solved in the same way in the future? Who can formulate the criteria of what is possible and right to do and what is not. In a light form, we saw a similar situation during the conflict with Trump's social networks, when the accounts of political opponents were blocked. And even then it was clear that conflicts should not be regulated in this way.
The first thing to think about today is how not to bring conflicts to military clashes. What is happening in Ukraine today is terrible. But weren't the wars in Afghanistan, Iraq, Syria, Libya, and the Balkans terrible? There can be no justification for military actions. Wars are not right and wrong. We urgently need to look for mechanisms that will stop wars in the world in general.
The second. Business is international in its essence. It should be used to unite people, not to separate them. Examples can be given of companies that were established in Western Europe and had business in Russia and Ukraine. They considered and consider themselves a single family. But contrary to their wishes, under the pressure of the so-called public, they are forced to close their business, destroying families.
The third. The emotions that cover all people when viewing the terrible pictures of blown-up houses, dead people, the suffering of refugees are understandable. But emotions are a bad friend. The military and politicians use emotions to solve their interests: strengthen your power or get additional funding for defense. All that emotions generate today is the intensification of military confrontation, the destruction of communications between people. It is necerrary to stop emotion.
And finally the fourth. It is necessary to oppose emotions with a collective mind, whose task should not be to identify the perpetrators (this is the task of the world court), not punishment or revenge, but the search for peaceful solutions to conflicts. Neither the military nor the politicians will find this way out. A collective mind should unite people from all countries (including from Russia and Ukraine) who agree that there is no justification for military actions.