Western companies have faced intense pressure to take a stand since Russia’s invasion of Ukraine began in February. An evaluation list is intended to make it clear which companies have taken which measures so far, thereby increasing the pressure. Compiled by researchers at the Yale School of Management in Connecticut, the list assesses the status of companies’ operations in Russia based on public sources such as government filings, company statements, financial analyst reports, and non-public sources such as the network of company insiders, whistleblowers, and Contacts of executives on a scale from A to F.
The list, also dubbed the “Hall of Shame,” is believed to have been the catalyst behind last month’s exodus of companies from Russia. On a landing page for the list, located on the business school’s website, the research team notes that when the list was first released on February 28, only a few dozen companies had announced their withdrawals. Now almost five hundred companies have withdrawn from Russia, almost forty of them from the clothing and jewelry industry.
Clothing companies “missed” the right timing in relation to Ukraine
Speaking on the Sway podcast, hosted by acclaimed New York Times tech reporter Kara Swisher, the project’s lead researcher and senior associate dean for leadership programs, Jeffrey Sonnenfeld, explained that the intent of the list is to: to certify to the companies that they actually took the steps they claim. He explained that the list gives hesitant companies the confidence to act. “These CEOs can use it to go to their boards and say, ‘Hey, we’re not leaning out the window – the poppy syndrome, as Australians call it – we’re not being snubbed because we were the first to make a step forward. We can run as part of the herd,” he said.
Sonnenfeld expressed his astonishment at the industries that jumped on the bandwagon early and those that didn’t. “The choreography was surprising. It’s not the usual pattern for big oil and energy companies to be at the forefront of societal change,” he told DW when Shell, BP and ExxonMobil announced their early withdrawals. “The companies that weren’t there were the consumer goods companies — non-food, groceries, apparel, perfume companies — companies that are typically at the forefront of social change missed the moment.”
How the rating works
The research team created the following rating scale reflecting the actions taken by the companies:
Grade A: The company has shut down operations entirely or pulled out of Russia with a clean cut.
Grade B: The company has temporarily restricted most or almost all activities but is keeping options open for a return.
Note C: The company has scaled back some key business activities while continuing others.
Grade D: The company has deferred new investment, development and marketing initiatives while continuing to conduct significant business in Russia.
Note F: The company is resisting calls for an exit and is continuing with business as usual.
Most fashion giants, from luxury goods conglomerate LVMH to sportswear leaders Adidas and Nike to fast fashion giant H&M, received B grades. Companies in this category have closed their stores and halted all shipments and operations, but hope to return soon . E-commerce companies like Yoox, Farfetch, Ebay, Etsy and Asos fared better because the nature of their businesses allowed for a clean cut by ceasing shipments to customers in Russia and disabling commerce in Russia. Salvatore Ferragamo also received top marks as the company has no stores in Russia and has halted all shipments, causing the business to disappear entirely from the country.
Off-price store TJ Maxx also received an A for divesting its minority stake in Familia, a $186 million Russian off-price retailer, at a loss ($39 million less than it Paid for it in 2019, as Reuters reports). The company has also pledged to stop purchasing from Russia and Belarus.
Sportswear company Decathlon has earned an F for refusing to take any action regarding its sixty stores and e-commerce website in Russia until this week. Since the announcement this week, Decathlon has disappeared from the list, perhaps because researchers are reevaluating the company. The only clothing retailer still on the list is multinational Alibaba Group, which is based in China and owns e-commerce company AliExpress. AliExpress has a joint venture and equity stake in VK, the Russian social networking service.
Companies continue to pay employees in Russia
Companies like LVMH and Nike, as well as companies from other industries, have announced that they will continue to pay their employees in Russia even if their stores and operations in the country are closed. However, Sonnenfeld believes this defeats part of the purpose of the closure. “They’re still pumping money into the economy,” he told Swisher. “The well-intentioned explanation for this is: We don’t want to fire loyal, long-time employees who are innocent and have nothing to do with the whole thing. I don’t buy that. We want civil society to come to a standstill,” he explained. “Putin is not in power because he is loved. He’s not there as a legitimate Democratic leader. He is in power with brute force. You can take on a totalitarian and show that he’s not in the control he thinks he is. Then he loses support. It’s a way to weaken him.”
“Desmond Tutu told me personally in the early 1990s,” he said, referring to the South African leader known for his anti-apartheid efforts, “that the symbolic side of the companies withdrawing from South Africa was as important as it was the significant damage to the South African economy.”
Ukrainian President Zelenskyy could agree. He gave a speech to the French Parliament in March, but at the same time he addressed the entire western world, because everything he says is picked up by almost all media. “We fought heroically against the superior forces of Russia, but we need more help,” he said through a translator. “We need more support so that we don’t lose our freedom.” The president called for French companies to pull out of the Russian market, called for tougher sanctions, and simply conceded to those who were watching: “Most of the answers lie in their hands.”
This article was previously published on FashionUnited.uk. Translation and editing: Barbara Russ