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What the Invasion of Ukraine Really Means for Business What role should business play during a global crisis?

By Cyrus Patten

entrepreneur daily

Opinions expressed by Entrepreneur contributors are their own.

On February 21, Russia sent troops into the two self-proclaimed independent republics on the eastern border of Ukraine. Three days later, it launched a full-scale invasion of Ukraine.

The news is full of reports on the fighting while business news reveals another concern of many: How will the conflict in Eastern Europe affect my bottom line? There's good reason to ask this question. Shipping companies across the world are halting cargo deliveries to Russia, hurting both imports and exports substantially. The Ruble has fallen nearly 70% in the last five days. Seven Russian banks were cut from SWIFT — a severe move that will undercut faith in Russian financial markets.

Browse the business news related to the Russian invasion, and you'll see concerns about the price of grain, volatility in oil prices and other economic symptoms of global unrest. Yet, we're missing an opportunity to have an important discussion: What is the role of business in times such as these?

Businesses and their representatives stand with Ukraine

Look closely, and you'll see the two main camps emerge. Some businesses remain quiet — passively hoping the conflict is resolved before supply-chain issues reach them. Others are unable to sit on the sidelines and watch. Starlink has sent terminals to Ukraine to help prop up communications that have been disrupted by Russian attacks. Airbnb is offering free short term housing to Ukrainian refugees fleeing the Russian occupation. Even FIFA has banned Russian teams from competing while Adidas dropped their agreements with the teams as well.

Businesses are taking proactive steps to not only signal their general support, but also show it with concrete actions. And it's not just businesses that are stepping in; it's their representatives as well. The Business Roundtable issued a statement, saying "... our members join the Ukrainian people, the U.S. government and global community in condemning Russia's attack on Ukraine and its citizens." B Lab, the parent organization that represents and certifies a global network of over 4,000 Benefit Corporations, recently updated its website to include a condemnation of Russia's aggression and resources for supporting those affected by conflict.

For some businesses, this will prove to be a savvy marketing move. But for others, they stand to lose substantial value for shareholders. This underscores the fundamental question we still need to answer. Since the beginning of time, business has had a responsibility to prioritize the needs of shareholders. But that maxim is changing, and shareholder primacy is coming to an end.

Related: These Franchises Have Stopped Doing Business in Russia

What gets priority during a global crisis?

Given this, we now have a more nuanced understanding of business's role in society. As a result, we face a not-so-simple question: If the financial motives of shareholders are in conflict with basic human rights, whose needs should be the priority?

My lifelong argument has been that the long-term needs of shareholders are never in misalignment with our societal needs. Henry Ford famously argued that excess profits should subsidize the price of his cars so that his employees could afford to buy them. He knew that making cars more affordable would create a much bigger market for them in the long term. His investors took him to court because he was trading the short-term profit for shareholders for the long-term financial viability of the company as well as the benefit to society.

With regards to the conflict in Ukraine, many businesses have arrived at a fork in the road. The path they choose may provide immediate relief for shareholders but not accurately reflect their values as an organization. But the notion that one's personal ethics can be separate from those of one's business is a fallacy.

Related: How to Be an Ethical Leader

A good business move and a moral imperative

The need for businesses to pull out of Russia is both a good business move and a moral imperative. Positive public perception, a reliable supply chain and strong diplomatic values are all in the long-term interest of shareholders. Doing business with and in a country with erratic and aggressive foreign policy will most likely erode shareholder value over time. Society and investors are more adept at seeing the long-term benefits of being a "good" business. This case is no exception.

As for the moral imperative, I'm certain that many businesses will opt out of taking a stand against Russia's invasion of Ukraine. They'll likely do just fine on behalf of their shareholders in the coming years. But as the paradigm of shareholder primacy erodes, the businesses that thrive will be those that reflect the values of their founders and our society.

Our ability to separate our personal ethics from those of our business has been at the heart of the debate around corporate social responsibility for decades. It's up to us to break down the firewall between individual and corporate ethics and shepherd in a future in which business does good and does well at the same time.

Related: Why Should Your Business Care About Social Responsibility?

Cyrus Patten

Social Entrepreneur, speaker, change agent

Dr. Cyrus Patten is a social entrepreneur, speaker, consultant and educator. He works with businesses, organizations, and governments to make the world a better place with an entrepreneurial mindset.

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