• October 7, 2022

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On February 28, 2022, BP withdrew from a $25 billion investment in the Russian oil company Rosneft. This decision was an abrupt U-turn from a mere two weeks earlier, when the CEO of BP, Bernard Looney, confidently stated that the company would “continue the business of business” in the country, even as Russian troops massed on the Ukrainian border.

While the complexities are undeniable, the business response to the war in Ukraine has been unprecedented with over a thousand companies curtailing operations in Russia, according to the tracker from the Yale School of Management. As BP discovered, in the age of purpose-driven brands and intense public scrutiny, the idea of hiding behind Friedman’s “business-of-business” free-market argument can seem entirely insufficient.

Forrester has already provided guidance for how CEOs and others should react to the conflict. I wanted to understand how broad the impact of the war was on B2B companies, what was motivating reactions, and specifically how B2B businesses have responded to the conflict. To answer these questions, in mid-April, I conducted a survey of B2B companies, and over 280 responded, mostly from the US. The results are telling: 38% of survey respondents said the war was already having a direct impact on their business. We also found that:

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  • Most large B2B companies have already made a public response to the Ukraine war. Overall, 44% of respondents to our survey said their company had taken a public stance on the war in Ukraine. This rose significantly to 75% for larger businesses with revenues over $750 million.
  • B2B responses to the war go beyond voicing support for Ukraine. Of the companies that have made a public response to the war, 85% say they have made a public statement voicing support for Ukraine. But actions go beyond just words: 80% also report they have made corporate donations of time, services, or financial support to aid organizations or NGOs, and 79% have changed business practices. As with BP’s withdrawal, many B2B companies have taken actions that cause pain to shareholders and to the bottom line: Companies as diverse as AVID, Interpublic, JLL, Kofax, and McKinsey have all completely withdrawn operations from Russia
  • Organizational responses to the conflict have limits. The extent to which B2B businesses are acting clearly has boundaries. For example, of the companies that said they have taken action, only 32% said they will refuse to do business with another company that operates in Russia.
  • The motivations for action are many and complex. Of the companies that have made a public response, 32% said this was motivated by employee pressure to act, but only 16% said the same of investors and 6% of the public (these numbers all rose for larger companies).

To be clear, most companies are doing only what economic sanctions require. Public pressure doesn’t seem to be a dominant influence, although employees do have a voice and are propelling action.

Whatever the motivations, it’s clear that B2B businesses are being held to higher account. Business leaders should expect to be interrogated on their stance on the conflict and will be asked to explain how this aligns with the brand’s purpose and values. Platitudes of support are insufficient, especially if the business has material interests in Russia or Ukraine.

Begin by engaging with employees and others and by understanding how to activate the brand purpose. Hold the business accountable for its actions. Brand purpose is an authentic expression of how the organization will contribute to society and help build and sustain a better future. This may sound lofty and self-important, or even somewhat incompatible with the commercial realities of the business. This is erroneous thinking. Companies tend to be very good at calculating the economic impact of an action on their P&L, but less able to account for the considerable impact inaction has on their goodwill and brand value. The motivation for developing a meaningful brand purpose comes from a conviction based on deeply held brand values and the recognition that acting in the interests of society at large is consistent with the long-term commercial interests of the business.

Those that fail to act will face consequences.

This post was written by VP, Principal Analyst Ian Bruce and it originally appeared here.

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