More businesses are showing their support for Ukraine by cutting ties with Russia, but it’ll often come at a cost.
Russia’s invasion of Ukraine is prompting businesses to pull Russian products from their shelves or conduct business elsewhere. Meta will no longer allow Russian-state media to run ads on its platforms. Certain U.S. governors are banning liquor stores owned by the state from selling Russian vodka. Daimler Truck, one of the world’s largest commercial vehicle manufacturers, said that it immediately halted its business affairs in Russia, which include its partnership with Kamaz, a Russian truck maker.
Smaller businesses are similarly ditching their business interests and associations with Russia. The Chicago-based Ann’s Deli & Bakery, which is known for selling Russian goods, displayed a sign at the store saying the business would no longer supply Russian-made products, per a report from the DailyMail. Jacob Liquor Exchange in Wichita, Kansas, decided to pull more than 100 bottles of Russian vodka from the liquor store and intends to feature Ukrainian vodka more widely.
There’s also DroneDek Corporation, a Lawrence, Indiana-based startup looking to disrupt the mailbox space. CEO Dan O’Toole says the three-year-old company, which has 12 employees, will no longer attempt to establish its drone-delivery patents in Russia as a result of the invasion. The company is also removing Russia from its global roll-out for its smart mailboxes and will not conduct business in the country for the foreseeable future. The company’s smart mailboxes are designed to accommodate both standard mail delivery and drone parcel delivery.
O’Toole acknowledges that though he helms a smaller company, the startup’s intent to cease ties with Russia is symbolic, and he hopes that other businesses will follow suit. “To say nothing is to say a lot,” he says.
To be sure, companies big or small should think long and hard about the ramifications of such a response. Withdrawing entirely may not be wise for every business. A communications company operating in the region that’s offering to help keep regular citizens informed of what’s happening on the ground, for instance, wouldn’t necessarily want to pull out. And businesses should double-check the origins of the products they’re dropping: While some bartenders are protesting the invasion of Ukraine by dumping out Stoli Vodka, the only thing Russian about that vodka brand is the name itself. (Stoli Vodka is bottled in Latvia.)
There may also be long-term consequences for companies curbing growth opportunities. One is certainly the revenue hit that follows when withdrawing business, so it would be wise to start looking elsewhere for other opportunities. Companies need to ask themselves if continuing business in Russia is a growth opportunity that they really want to have, says Jeff Carr, a clinical professor of marketing and entrepreneurship at New York University’s Leonard N. Stern School of Business.
“Companies need to keep in mind that they should be choosing their customers and clients as carefully as they believe that their clients and customers choose them,” he says.
Nicole Sayegh Succar, a lawyer at the Washington, D.C.-based Crowell & Moring, which focuses on matters related to U.S. sanctions against Russia and other countries, adds that if companies want to stay in Russia, they need to invest in compliance to ensure that continued business activity remains above the line.
“If they don’t have the means to do that, then, unfortunately, the perceived financial upside may not be as great,” Succar adds.
For O’Toole, he says his actions are merited and just, but they’re also going to sting. DroneDek worked for about two years to conduct its due diligence and establish its intellectual property in Russia, a process that’s both timely and costly. The company worked for months to extend the reach of its U.S. patents to other regions of the world, including the likes of Australia, Brazil, the European Union, Israel, Japan, and the United Kingdom. Russia used to be on that list, until O’Toole and his team made their decision this past weekend.
“Russia is a huge country and obviously there’s a lot of opportunity there, but it’s not the opportunity for DroneDek,” he says.
Though O’Toole says that the decision to cut ties with Russia was pretty unanimous among staff, he recognizes that not every investor may be on board. He even says that he would go as far to purchase back shares from investors who don’t approve of the company’s decision, but adds that investors have yet to take him up on his offer.
“We don’t want to get into this political realm, but this transcends all politics,” he says. “This gets into the inalienable rights of just being a human being.”