MIT SMR Strategy Forum
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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.).”
“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?”
University of California, Berkeley
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.”
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.”
“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.”
“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.”
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.”