In light of recent events between Russia and the Ukraine, our board members Sangita Shah, Chair, Kinovo PLC and Mark Taylor, Partner, Dorsey & Whitney LLP explore corporate social responsiblity, particularly in times of crisis, and have developed some questions for boards to consider when assessing the need for action.
Assessing Social Impact
The impact and scale of businesses means that they are increasingly seen as a driver of change. Their influence means that they have the ability to make a meaningful social or environmental impact which has been recognised by society. As stakeholders, shareholders or general social consensus becomes increasingly expectant of responsible action by corporations, businesses are faced with the challenge of assessing what action to take to ensure responsibility as well as long term sustainability.
However, corporations must balance the immediate need for action with the long term need for sustainable growth. As our world becomes ever more interconnected, assessing an action needs to also look at the exponential repercussions which will need a systemic assessment, analyzing all related relationships rather than an isolated approach that adheres to a simplified action.
A systemic assessment is important when assessing both social and environmental impact. However, sometimes awareness of such issues is underpinned by emotional drivers rather than a balanced awareness of context and this can therefore skew social expectations of corporations. Whilst it is important for businesses to act responsibly at all times, long term sustainability of a business can only be ensured if action is measured and proactive, rather than reactive to a particular cause at a particular time.
Assessing the impact of Russian – Ukrainian conflict on your business
The past fortnight’s activities have sent most board rooms into a spin – the current cycle of uncertainty, post covid, testing the most agile of companies.
As a consequence of the events with the Ukraine, in tandem with the unprecedented level of sanctions imposed upon Russia and related oligarchs, many high profile companies such as Shell, BP, McDonald’s and Disney have publicly sought to distance themselves from Russia and disentangle their links. Some of these impacts resulting in eye watering write offs (e.g. Shell’s withdrawal of the giant Sakhalin 2 LNG project will result in impairments of $3bn).
Many companies will be assessing their own impact within the region, below are some questions that boards could consider when assessing their own impact:
- Does the company conduct any business activities, including supply chain, in Russia?
- Are key customers or suppliers located in Russia or territories associated with Russia?
- Are the company’s activities and dealings with suppliers and/or customers in Russia consistent with its ESG policies and guidelines?
- Are those activities and dealings appropriate at this time, and is their continuation likely to entail reputational risk and/or jeopardise relationships with key stakeholders?
- Should the company be seeking legal advice on any contractual exposure which might result from disassociation?
- Engage with key shareholders to elicit their views and how they might react to any measures which may be proposed by the company (noting that “doing the right thing” may have consequences for the company’s share price).
- Use market intelligence to establish what other companies in your market segment and with a similar profile are doing.
- Review cyber-security policies and protections and undergo penetration testing including simulating how the business would react to a ransomware or other attack. Is there a designated person/number to inform and has this been widely communicated? Which board member should be contacted in the event of such an occurrence? Have you a media/press statement ready?
- Prepare Crisis Communication Plan
- Agree overall policy at board level and consider whether to make a public statement on where you stand.
- Review your policy regularly
- Where relevant, ensure that your policy, and any updates, are communicated to employees (and other stakeholders as appropriate).