“Companies must have a foreign policy”

Will the rapid departure of companies from Russia after the war in Ukraine mark a turning point for international companies?

Yes and no. Like the Covid, this war will accelerate a fundamental trend. The rivalry between the China and the United States has already led companies to reflect on their strategy. Climate change is also contributing to this in some way. They will have to ask themselves the question of their role.

Blackrock boss Larry Fink talks about deglobalization. Does this seem justified to you?

We are entering a new phase of globalization. We are at the end of an era when we believed that the economy was the solution to everything. Basically, since the beginning of the 1990s, the dominant idea was that trade and the internationalization of companies were going to solve all the difficulties. To the concept of the “end of history” [développé par Francis Fukuyama] in international relations was answered in economics that of a “flat world”. We realized that it was more complicated. Contrary to popular belief, China did not converge with the Western world after its accession to the WTO. The 2008 crisis has already marked a first break: the response to the crisis has been more public debt. Then the Covid, and now the war.

Should companies prepare for a multiplication of conflicts, which involve quickly leaving an area, as is the case in Russia?

Economic stability has brought peace to international relations. The current war in Ukraine marks us because it had disappeared from our Western countries. If there were no trade relations between the United States and China, there would have been military clashes long ago. Believing that turning in on oneself will pacify the world is a mistake. This will further harden international relations. It is not a coincidence if Russia has chosen the military option and taken the risk of economic sanctions: the country is not an economic power. It represents the GDP of Spain for seven times more inhabitants. She didn’t have much to lose.

How to review its supply chains and its international positioning?

Companies were the first to rush into this breach of the “flat” world: those who went to Russia found new raw materials there, which enabled them to develop new products. They were also able to benefit from cheap labor to open up to new consumers. This led them to turn a blind eye to geopolitical aspects. They told themselves that as long as there was business to be done, they would find a solution. If we go in a logic of confrontation between large blocks, at some point, we will push our companies to choose their side. The risks become so enormous that they can put them in jeopardy. Companies need to question themselves upstream and see themselves as real political actors. Alongside their international strategy, companies will have to adopt a foreign policy.

What does this imply ?

If they think of themselves as political actors, defending human rights, taking their climate footprint into account, etc. They must adapt their strategy accordingly. That doesn’t mean they shouldn’t go to China. But they must ask themselves why they go there, under what social and environmental conditions…. Today, they are reacting: civil society is panicking because Zara has factories in Xinjiang and Zara is reviewing its supplies. Companies decide on a case-by-case basis between the financial costs and the risks to their image. They will have to become proactive. Waking up when a crisis emerges will cost too much.

Are companies already getting into geopolitics?

Oil groups have always done it. This is becoming a new concern for the food industry and distribution. Of course, leaving a country after having invested billions in it is complicated, but they can argue their choices, perhaps invest a little less in certain areas. Having a strategy also allows them to enter into negotiations with the public authorities: I am settling here, but I demand certain conditions. There is a common interest of States to have companies on their territories. And in this world where relations are hardening, they have a role to play in making it possible to find compromises between divergent interests.

Some companies have already had to leave a market, for example Iran in 2018. How is the current crisis different? Does it ask new questions?

Companies have already chosen to withdraw and give up certain areas when the risk of compliance [conformité] was too important. But the problem was quite easy to solve: you had laws to respect, you complied with them. Sometimes it was US rules, because of the extraterritoriality indeed. Companies are in a much more complicated situation now. The challenge concerns their responsibility in relation to social, environmental and human rights criteria.

It is no longer lawyers and the law, but civil society and NGOs that set the course. The rise in power of these actors has accelerated since 2018 and joins a gap in the representativeness of our democracies, which oblige populations to bring their claims forward through activism. This presents companies with something new. We enter the more vague domain of ethics and moral values. Companies begin to go into this field when they define a raison d’être. Interestingly, some companies have put forward their values ​​to explain their choice to stay in Russia, such as Auchan. It is more audible than the financial losses.

Can this accelerate the relocation of activities to France?

Reflection on sovereignty goes in this direction. We are going to reinvest in certain types of activity. In France, there is a consensus to say that the choice to move entire sections of the value chain was not the right one. But even if we relocate, we will still have to get some raw materials elsewhere. There will always be a foreign dependency.

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“Companies must have a foreign policy”

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