The Russia Sanctions Are Working — Now U.S. Companies Have Work to Do at Home

Russian media has painted a picture of a strong wartime economy, enabling the country to continue its war against Ukraine and ultimately prevail. The evidence, though, clearly indicates that the Russian economy is in free fall. The economic sanctions are working, and a new study based on exclusive research by the Yale School of Management describes how business leaders have played a key role in making them work. Even so, the same fascistic tendencies at work in Russia are present here at home, with no similarly coordinated response from U.S. businesses.

When boycotts work: brand reputation on the line

Consumer boycotts are notoriously fickle and difficult to sustain. Business-to-business boycotts, though, have become powerful tools for progressive activists fighting against hate speech, misogyny and extremism from the radical right.

The grassroots campaign #GrabYourWallet is one leading example. Launched during former President Trump’s 2016 campaign, #GrabYourWallet organized members of the public to contact and shame retailers that were selling goods under the Trump and Ivanka brands. The effort was aimed at drawing attention to the candidate’s racist, xenophobic remarks in the runup to Election Day, and his to policies as U.S. president afterwards.

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Another boycott campaign that launched around the same time, Sleeping Giants, organized members of the public to shame advertisers on media that enable or disseminate hate speech and right-wing extremism.

The boycott movement has also expanded to include withdrawing platform support. For example, some tech companies halted business with the extremist social media site Gab in 2018, after it was linked to a hate-fueled massacre at a synagogue in Pittsburgh.

Another example is OAN, a far-right media organization reportedly favored by Trump. OAN has been dropped by both of its major television carriers, DirectTV and Verizon. It is also facing a lawsuit by the company Dominion Voting Systems over unfounded claims of voter fraud during the 2020 election.

Brand reputation and the business case against Russia

The experience of progressive business-to-business boycotts in the U.S. helped prime the pump for the corporate response after Russia launched its unprovoked attack on Ukraine in February.

In fact, the organizing forces behind the Russia boycott are similar to the models used by #GrabYourWallet and Sleeping Giants. They coordinate and amplify the voice of progressive sentiment in order to encourage corporate activism.

Shortly after Russia’s attack on Ukraine, for example, the organizations Good Lobby and Progressive Shopper created an online index for consumers to track the corporate response to the invasion.

Here in the U.S, the Yale School of Management set up a similar system. Within six weeks of the invasion, their online list included hundreds of U.S. companies that had voluntarily withdrawn or curtailed operations in Russia, as well as those failing to take action.

As with the other online boycotts organizers, Yale set up its index with a very specific goal.

“We realize that some companies already do business with many other repressive and murderous regimes around the world. But now there’s a chance to draw a line with one country, over one unprovoked war of aggression, and make a difference,” they explain.

When boycotts work: the Yale difference

In contrast to other Russia boycott indexes, the Yale project leverages a considerable range of unique resources. A team of 24 researchers combs through “private Russian language and unconventional data sources including high frequency consumer data, cross-channel checks, releases from Russia’s international trade partners, and data mining of complex shipping data.”

Another point of contrast is name recognition. The Yale School of Management came into the corporate tracking field with a widely recognized legacy brand name of its own, and a worldwide reputation for academic excellence and policy influence.

The Yale project is led by Jeffrey Sonnenfeld, the Lester Crown professor in management practice and a senior associate dean at the Yale School of Management, and Steven Tian, the director of research at the Yale Chief Executive Leadership Institute. They credit the school’s reputation with raising the profile of their index from the beginning.

“When the list was first published the week of February 28, only several dozen companies had announced their departure from Russia,” they point out. “In the two months since, this list of companies staying/leaving Russia has already garnered significant attention for its role in helping catalyze the mass corporate exodus from Russia, with widespread media coverage and circulation across company boardrooms, policymaker circles, and other communities of concerned citizens across the world.” 

This boycott really is working

Sonnenfeld and Tian recapped the Yale boycott tracking project in an article published in Foreign Policy magazine last week. 

“Far from being ineffective or disappointing, as many have argued, international sanctions and voluntary business retreats have exerted a devastating effect over Russia’s economy,” they wrote.

They also published an analysis of their findings in the online library SSRN, titled “Business Retreats and Sanctions Are Crippling the Russian Economy.”

According to their analysis, the 1,000-plus companies exiting Russia represent a combined investment of more than $600 billion, or approximately 40 percent of Russian GDP.

This astonishing feat of solidarity “almost single-handedly” reversed 30 years of progress on attracting foreign investment and integrating the Russian economy with the rest of the rest of the world, they write.

As a consequence, the authors assert, domestic production has virtually halted, and the nation is incapable of replacing the loss of business, or the loss of employee and executive talent. That includes foreign employees in Russia who were expelled along with an estimated 500,000 Russian citizens who fled their own country after the invasion, taking their skills, experience and assets along with them.

“Looking ahead, there is no path out of economic oblivion for Russia as long as the allied countries remain unified in maintaining and increasing sanctions pressure against Russia,” the Yale team asserts. “Defeatist headlines arguing that Russia’s economy has bounced back are simply not factual — the facts are that, by any metric and on any level, the Russian economy is reeling, and now is not the time to step on the brakes.”

ESG lessons for the U.S. as fascism spreads

The success of the Russia boycott is a clear demonstration of the power of U.S. and global businesses to push back against fascism. It also demonstrates that fighting fascism can have bottom-line benefits.

“We found that foreign investors by far and large rewarded companies for removing the risk overhang associated with exposure to Russia,” the Yale team explains.

In that regard, the Russia boycott reflects the strength of the ESG (environment, social and governance) sustainable investing movement.

ESG reporting is still in the early stages of standardization, which leave some room for uncertainty. However, the field is also maturing and expanding to encompass corporate behavior on a holistic level.

In one especially interesting example, S&P booted Tesla from its S&P 500 ESG Index last May. 

“While Tesla may be playing its part in taking fuel-powered cars off the road, it has fallen behind its peers when examined through a wider ESG lens,” explains Margaret Dorn, S&P’s Head of ESG Indices North America.

Businesses that take brand reputation and ESG reporting to heart were highly motivated to withdraw from Russia, and they made the right decision. Now they need to reassess their role in supporting the fascist movement in America.

It's no accident that the pattern of policy making on the Republican side of the aisle, including the 6-3 Republican majority in the Supreme Court, echoes the regime of Russian President Putin. Homophobia, transphobia, misogyny, censorship, banning books, rewriting history, disrupting the electoral system and fostering violence to achieve permanent power are all part of the plan, here in the U.S. as in Russia.

If any more line-drawing from the business community is forthcoming, right here at home is a good place to start. 

Image credit: Ehimetalor Akhere Unuabona via Unsplash