Of all the hundreds of foreign companies to exit Russia in response to its invasion of Ukraine, French ones have been particularly slow in doing so.
In some respects this is unsurprising, since Europe and North America have been the largest source of foreign investment to Russia over the past 30 years – but of all Western-based companies, those from France have been the slowest to exit Russia, proportionately speaking.
This is why Ukrainian President Zelenskyy has been so publicly critical of French businesses, urging them to leave Russia in his video address to the French parliament in late March: “[Carmaker] Renault, [supermarket chain] Auchan and [DIY chain] Leroy Merlin have to stop being the sponsors of the Russian war machine – values are more important than profits.”
Of the 57 French companies in Russia, just 5% have completely withdrawn from the Russian market, while 44% have suspended business activity (to varying degrees). An enormous 51%, therefore, have done absolutely nothing. Meanwhile, of the 277 US companies in Russia, 37% have completely withdrawn from Russia, while 56% have suspended business activity. Only 6% have done nothing. To reiterate the glaring discrepancy: 51% of all French companies in Russia have done nothing to withdraw, compared to just 6% of US companies.
This embarrassing contrast gets even starker, however. Of the 17 US companies that have not taken any action in Russia, almost all have fairly small consumer profiles (which somewhat helps them hide from public criticism). Meanwhile, of the 29 French businesses that have not withdrawn from Russia, most are household names (in Europe, at least) such as Société Générale and Lacoste – hence the public backlash that most of these have faced.
A case of profits over principles?
It should be noted that French companies are Russia's biggest foreign employer, providing jobs for 160,000 people across a diverse range of sectors, but especially energy, wholesaling and the food industry, according to figures from the French Economy Ministry.
French businesses in Russia tend to be active in more labour-intensive services sectors than their US, German and Italian counterparts.
"Practically speaking, it is more difficult for certain companies to leave than others," says Klisman Murati, founder and CEO of Pareto Economics. "It is easier to pull out when your business in Russia is small."
France's Leroy Merlin alone, for instance, has roughly 100 stores and 45,000 employees in Russia. Major French companies such as Merlin have made the argument that it would be unethical for them to abandon their thousands of employees, or claim that divestment from Russia would only benefit the Russia state, since it would expropriate its assets (as the Kremlin has threatened).
However, divesting completely from Russia is only the most extreme option. Why don't these companies join the ranks of most in suspending part of their business activity?
“Sanctions do not work if applied half-heartedly [and], except for the pharmaceutical sector, the non-Russian companies left in Russia are putting money before morals and profit before people," Daniel Clarke, an analyst at GlobalData, told Investment Monitor this week.
"Some companies have said that they are remaining in Russia because they have a moral responsibility and obligation to consumers. This is a tone-deaf response to the concerns of consumers worldwide. As important as the Russian market may be, doing business there will impact corporate reputations and see companies lose stakeholder loyalty and fall behind their competitors on ESG," he added.
Others voice an even stronger opposition to the idea that some companies are staying in Russia because they feel ethically drawn to not letting go of their huge workforce.
“They haven’t left because Russia represents a high degree of their market, so they are worried about losing their profits," Daniel Bilak, former chief investment adviser to the prime minister of Ukraine, told Investment Monitor this week.
"They are not worried about their employees. They hire and fire people all the time, but they should think about their employees getting killed in Ukraine, or the children getting bombed in their sleep. Are they trying to make an ethical comparison with that? That is just pathetic. It is inhuman. You are just enabling a mass murderer because you don’t have moral clarity or the courage of your convictions.”
It is certainly easier for companies to do the right thing, so to speak, if the Russian market means very little to their margins (unlike many French businesses), which is why Bilak has so much respect for those companies that exit Russia (fully) despite their deep penetration in its market.
As a final point, it may also be that French companies have felt more vindicated than others to 'wait and see', due to French President Emmanuel Macron's ongoing efforts to reason with Putin (more so than other major Western leaders).
Whatever their motivations, if the social and political backlash against French businesses continues to grow stronger, and the war in Ukraine drags on, corporate decision makers in France will come under inexorable pressure to take action. This only seems like a matter of time, so why delay the inevitable and incur indelible reputational damage?