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War in Europe and corporate responsibility

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By Georg Kell

· 8 min read

Born in 1954 in Germany, I always wished to live at least until the year 2045, so I could say, “100 years of peace in Europe – lucky me, it has been accomplished!” This dream was shattered on Feb. 24, 2022. The oldest story in the world, the narcissistic will to power, which runs most rampant in those who are the most powerful, is still alive and kicking. Alas, homo sapiens has yet to arrive in the halls of state power.

The arrogance of state power and the horrors of war are at full display once again - this time in Europe. Vladimir Putin’s brutal war against the people of Ukraine has ushered in a new era on the continent. Its outcome is unpredictable, but even if the war can be contained and its worst outcomes avoided, it is already clear that it will have a lasting and deep impact around the world. Intensified regime rivalry, economic stagflation, humanitarian crises situations and further environmental degradation are all in the cards.

For businesses, the war in Ukraine adds a colossal additional layer of uncertainty to an already uncertain outlook due to accelerating technological disruptions, environmental degradation, the Covid pandemic and shifting macroeconomic conditions. For the corporate sustainability agenda, the following points are illustrative:

First, the war is driving home the point that state power trumps markets, especially in times of turbulence. The comprehensive sanctions against Putin’s Russia have already induced massive divestments or suspensions of business activities by foreign companies operating in Russia. Compliance with sanctions raises legal, social and human rights issues. While sanctions, including so-called “smart sanctions,” are intended to harm the political elite, they mostly fall on the shoulders of innocent citizens and local employees. Those issuing sanctions mostly ignore this collateral damage, but for businesses, retreating or suspending their activities is a serious moral issue. Sadly, many companies seem to just rush to the exit, cutting their losses. But a few, such as the Volkswagen Group, have put in place explicit activities to care for their employees. This is not only morally the right thing to do but also an investment in peace.

Second, humanitarian assistance and support for civilians who are suffering from war must be a priority. The business community can now play its role as good corporate citizen by providing financial, logistical, volunteering and other support. Established international organizations, such as the UN Global Compact, have issued concrete guidance that helps to ensure that such support is effective and reaches the people in need. Many corporations have already stepped forward, and as the crisis deepens, such contributions will be urgently needed.

Third, the war accelerates the rise of the bossy state in many economies. Already prior to the war, we saw a steady rise of economic nationalism and industrial policy making. The balance between the private and the public spheres will shift further in favor of state power. Navigating sanctions, coping with diverging national and regional regulations and being seen as a national rather than an international player will put an extra premium on legal and compliance functions and will challenge the agility of corporate cultures, even if such activities do not support productivity and innovation. Businesses have no choice but to go local and to play along.

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About the author

Georg Kell is a prominent figure in the field of sustainable business and corporate social responsibility. He is the founding Director of the UN Global Compact, the world's largest corporate sustainability initiative. He currently serves as the Chairman of Arabesque, a technology company that uses AI and big data to assess sustainability performance. Georg is also the spokesperson for the Volkswagen Sustainability Council where he plays an instrumental role in promoting the company's sustainability initiatives.

Georg is a confirmed keynote speaker at Terra Tuscany, the sustainability leaders offsite powered by illuminem.

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