After the start of Russia’s full-blown war against Ukraine, parliaments worldwide designated Russia as a state sponsor of terrorism and multinational companies started leaving the aggressor country in droves. But not Procter & Gamble.
P&G’s policies for business conduct state, “The Company is concerned not only with results but with how those results are achieved. We will never condone nor tolerate efforts or activities to achieve results through illegal or unethical dealings anywhere in the world.”
In reality, despite claiming to prioritize ethics in its charter, Procter & Gamble not only continues operating in Russia but has not scaled down production at its two large factories, which continue paying taxes to the Russian budget, the Ukraine-based Council for Economic Security reports.
From taxes to mobilization
After 24 February 2022, Procter & Gamble, along with hundreds of other international companies, released a series of high-profile statements condemning Moscow’s actions, announcing that they would be “significantly reducing” sales, and even warning of a complete exit from the Russian market.
However, not only has P&G stayed in Russia, it continues the full-fledged operation of its two giant factories in the country. This supports Russia’s economy and, consequently helps fund the invasion of Ukraine.
There are two Procter & Gamble manufacturing giants operating in Russia:
- the Gillette razor manufacturing plant in St. Petersburg
- a toiletries manufacturing plant in Tula Oblast, which is the world’s largest producer of detergents for P&G.
The Tula plant produces brands such as:
- Mr. Proper (Mr. Clean)
On a visit to this plant in 2020, Tula Oblast Governor Aleksey Dyumin called Procter & Gamble “a strategic partner of Tula Oblast.” And rightly so: the plant provides jobs for 2,500 Russians and in 2021 made a net profit of RUB 1.4 bn ($20.5 mn), after paying around $5.2 mn taxes to the Russian budget in taxes.
With the start of Russia’s invasion in February, Procter & Gamble announced that it would suspend capital investments in Russia and reduce its product portfolio “to focus on basic health, hygiene, and personal care items needed by the many Russian families who depend on them in their daily lives,” yet stated it would keep supporting its Russia workers.
However, P&G later raised the prices of such products, which almost offset the loss of income from reducing the brand portfolio. It looks as if the stated concern for “many Russian families” was actually an attempt to stay in the Russian market by any means possible and take advantage of an empty market that was abandoned by more responsible competitors.
Moreover, under new Russian legislation, corporations operating in the Russian Federation are required to participate in the mobilization process, promote the conscription of their employees into the army, and even finance their military equipment.
Therefore, Procter & Gamble supports Russia’s war not only by paying taxes to the Russian budget but also by facilitating the conscription of its employees into the Russian army.
Companies leaving Russia will have more profits in the long run
For most multinationals, completely exiting the Russian market has led to huge financial losses. These losses were not only associated with sales. Some holding companies had invested billions in vast manufacturing facilities in Russia, and at the moment, it is impossible to withdraw investments from a country that holds international law in contempt.
Nevertheless, experts from Yale say leaving the totalitarian state will give companies more profits than losses in the long run.
Despite suspending operations in Russia and losing assets there, the share price of companies that left Russia has risen significantly. Moreover, the faster the companies withdrew their business from the aggressor state, the more positive the market reaction.
Markets are more favorable to companies that voluntarily left Russia, as this improved their corporate reputation, leading to better treatment when it comes to financing.
Other well-known brands still operational in Russia
Other well-known brands which have remained in the Russian Federation besides P&G include:
- Johnson & Johnson
- Kraft Heinz
- Ritter Sport
- Leroy Merlin
- and Yves Rocher.
The list goes on – hundreds of companies still remain.
The second largest player in the razor market, the French company BIC, is one of them. The company has removed its official sponsorship logo from the website of the St Petersburg football club Zenit, but it continues to sell products in Russia, paying taxes to the state budget.
In contrast, other companies left Russia, despite financial losses. McDonald’s, Netflix, Apple, Coca-Cola, eBay, Mercedes-Benz, BMW, Volkswagen, Henkel, Dr. Oetker and L’Occitane are some of them. Renault stopped running its plant in Moscow only after widespread criticism.
Public condemnation, pressure from partner companies, and the risk of sanctions all affect the decisions that the holding companies’ management makes. Corporations understand that most consumers do care who produces or sells their goods and services.
More and more people in Ukraine are boycotting Gillette, Fairy, and Lenore, insisting that even the quality of these products, tested over the years, does not justify the manufacturer’s support of the Russian economy. There is even a Telegram bot, @BoycottRussiaBot, that was created to display the list of companies that have stayed in the Russian Federation.
Sponsoring Russia’s war with one hand and donating to help Ukrainian victims with the other
Major companies such as Procter & Gamble or Auchan do a lot of humanitarian work in Ukraine, supplying hygiene kits to frontline regions and assistance centers for refugees and internally displaced persons.
P&G and its counterparts are sponsoring Russian missile attacks on Ukraine with one hand and helping their victims with the other. However, packages of sanitary pads and razors are of little consolation when the missile attacks on Ukraine were funded by the company’s work in Russia.
Curiously, despite continuing business as usual with Russia, Procter & Gamble continues to work freely in Ukraine and even maintains an image of being loyal to Ukraine.
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