Richa Naidu and Jessica DiNapoli

NEW YORK/LONDON – As pressure mounts on multinational corporations to stand up against Russia’s invasion of Ukraine, makers of daily staples like Dove soap and Pampers diapers are treading carefully.

McDonald’s Corp. (NYSE:) announced Tuesday that it would close its Russian restaurants, including the iconic Pushkin Square store in Moscow. PepsiCo, Coca-Cola (NYSE 🙂 Co and Starbucks Corp (NASDAQ) also announced that they have stopped selling their most popular products in Russia.

The world’s largest producers of packaged food and household necessities have fallen short of some retail stores, financial institutions and oil and gas firms. Russian consumers rely heavily on the products of consumer goods companies.

Procter & Gamble (NYSE:) Co and Unilever (NYSE:) Plc said this week they are continuing to sell essential products in Russia, but are ending any new capital investments and are no longer advertising in the country. Unilever suspended imports to and exports from the country.

Nestle SA (SIX) is a packaging company that makes packaged foods, while Danone SA(OTC:), a dairy company, uses similar methods.

Jeffrey Sonnenfeld of Yale School of Management, who tracks major company withdrawals from Russia, said that “they deserve credit.” “The more comprehensive the pullout, the more you’re advancing the prospects of world peace.”

Sonnenfeld stated that it was wrong to attempt to limit the Russian population’s suffering by continuing to provide basic necessities.

He said, “There is no middle ground.”

Cadbury chocolate maker Mondelez International Inc (NASDAQ) and Kimberly-Clark Corp. (NYSE:), both Huggies diaper producers, have not announced any plans to cut production in Russia.

“It’s not about pure profits,” said Katie Denis, a spokeswoman for the Consumer Brands Association, a trade group representing companies including P&G and Mondelez. “It’s about, are you going to continue producing things people need? It’s different than what companies who came out earlier are dealing with.”

IS IT WORTH THE RISK

Also, companies don’t want to appear as if they are putting Russians out of work.

At least six major fast-food companies – including Yum Brands Inc’s KFC and Restaurant Brands International (NYSE:)’s Burger King – run more than 2,500 restaurants in Russia, mostly through franchisees, and employ tens of thousands more people, according to a Reuters tally that does not include McDonald’s. None of these companies have yet announced any plans to leave Russia.

New York State’s pension fund wants companies to evaluate whether it is worth continuing business in Russia.

Federated Hermes, an asset manager (NYSE:), is urging companies to openly and transparently disclose what they are doing in Russia and to share their “decision-making processes” regarding working in Russia, Hannah Shoesmith from the firm’s director of engagement. Shoesmith stated that Federated Hermes targets consumer product companies as part of its outreach.

Shoesmith explained that it would not be fair to ask Russian companies to abandon Russia and without asking them how the impacts on human rights will affect their business. There’s always a compromise that companies must make. The tradeoffs are not always straightforward.

Shoesmith stated that companies should also consider their tax position in relation to Russian taxes.

She said that there are efforts to find good tax solutions. What are their options to pay the Russian tax?

Shoesmith stated that companies paid equivalent amounts to their taxes to aid organizations in the past military coups or refugee crises.

‘CORPORATE SUICIDE’

Jack Martin (investment manager at Oberon Investments), which owns shares in Unilever said, “There is a huge move in our sector to focus on companies that have strong corporate governance, ethical standards, and that means social issues.” Diageo (LON 🙂 Plc. Burberry Group (OTC 🙂 Plc. LVMH Moet Hnnessy Louis Vitton SE. (OTC :). It’s corporate suicide to stay in the area at this time.

Joe Sinha in San Francisco is Parnassus Investments’ chief marketing officer. However, he said the firm does not have any direct exposure to Russian businesses. The company will reach out to U.S. companies with over 2% of their revenue to Russia, to find out more about the thinking behind whether they are staying or leaving the country.

“We’re not being prescriptive, we’re trying to understand their roles and choices,” Sinha said. Parnassus believes in sanctions against Russian banks and tech firms that are close to the military. However, Sinha said that it could differ for companies serving consumers.

“For certain goods and services it would harm individual citizens who don’t have anything to do with the regime,” he said. “There are gray areas.”