How to pilot businesses through political challenges

Recent times have seen many calls for boycotting products, services, brands and even countries. The latest has been the Maldives boycott by Indian tourists. Just prior to that, the Palestine-originated BDS (Boycott, Divestment, Sanctions) movement promoted boycotts, divestments and economic sanctions against Israel for their continued attack on Gaza. The BDS movement, which seeks to pressure Israel to change its policies towards Palestinians through various forms of economic and political pressure, gained international attention in the early 2000s.

The current BDS movement included all entities that supported Israel covertly or overtly – Nestle, Burger Kind, Disney, Siemens, HP, Puma, Carrefour and AXA are some of the brands that came under the BDS wrath.

Even governments have started doing this. Turkish parliament withdrew Coca-Cola and Nestlé products from parliamentary restaurants due to their support for Israel. India had done things more subtly when it wanted to express its anguish over Chinese invasion of its border states and over Maldivian minister’s remarks against Prime Minister Narendra Modi.

Although Starbucks was not on the official BDS list of 2023 until October, after it sued a labour union over its pro-Palestine remarks, the brand got pulled into the list a second time since the origin of the movement. Since mid-November 2023, Starbucks lost $11 billion in market value perhaps partly because of the BDS. Other brands may not have taken that much hit, but the brand value erosion may not be that insignificant in the medium term, unless they address it appropriately.

Boycotts and sanctions can have significant repercussions for businesses, and has caused serious damage to many companies across the world. Caterpillar, the American construction equipment manufacturer, faced criticism and boycotts due to the use of its bulldozers in Israeli military operations. Activists argued that the equipment was used to demolish Palestinian homes. The company’s reputation and sales suffered as a result.

G4S, a British security services company, was banned for its alleged services in Israel involving alleged human rights abuses. The company eventually sold its Israeli subsidiary, G4S Israel.

French companies Veolia and Orange both faced BDS-related pressure for their involvement in Israeli infrastructure projects and telecom services in the West Bank. Consequently, both companies announced a change in their business operations in the region.

Airbnb faced backlash and a boycott call from the BDS movement in 2018 for listing properties in Israeli settlements in the West Bank. While initially resisting the pressure, Airbnb eventually reversed its policy and delisted properties in Israeli settlements in response to the boycott calls.

In 2021, Ben & Jerry’s, the ice cream company owned by Unilever, announced that it would no longer sell its products in Israeli-occupied territories, citing the BDS movement as a reason. This decision generated significant controversy and calls for boycotts of the brand, both from supporters and opponents of the BDS movement.

The impact of movements like the BDS varies from company to company but it is clear it will not be as insignificant as one might imagine. Some brands may suffer reputational damage and financial losses, while others may choose to adapt their strategies or exit certain markets to address the concerns. The effectiveness of BDS campaigns can also differ based on factors like public sentiment, government support, and the specific actions taken by the affected companies in the line of fire.

Enterprises today need to navigate many challenges: political, social, and economic. What responses can they undertake to manage BDS-like situations?

• Understand the landscape: It is essential for enterprises to have a deep understanding of the geopolitical and social nuances of the geographies they operate in. Starbucks had run into the BDS situation way back in 2004 too and struggled to grasp the nuances of its implications for their business. A proactive approach to monitoring and analysing such movements is crucial.

• Clear communication: Effective communication within and outside is a key element in managing a crisis. Starbucks faced criticism for its initial responses, which were perceived as vague. Enterprises should acknowledge the concerns raised and outline the company’s position, values, and actions.

• Engage stakeholders: Starbucks recognised the importance of engaging stakeholders (employees, customers, and investors). Enterprises should exhibit a culture of open dialogue, involve all relevant parties, and consider their perspectives in the decision-making process.

• Adapt business practices: Starbucks adjusted its business practices to address the concerns raised by the BDS movement. Enterprises should evaluate consequences and develop a risk heat map for scenarios. They must be willing to adapt their operations in response to the needs.

•Build resilience: Starbucks’ experience highlights the need for enterprises to build resilience and diversify their business operations. Reducing over-reliance on a single market or region can help mitigate the impact of boycotts or sanctions.

While the BDS movement affected Starbucks’ reputation and sales in some regions in the early 2000s, it recovered and continued to grow. Its revenue for the fiscal year 2005, when the BDS movement gained significant traction, was approximately $6.4 billion. By 2022, Starbucks reported annual revenue of over $26.7 billion, demonstrating its ability to navigate through the challenges posed by the boycott calls and other factors. The 2023 accidental slippage into the BDS list seems to have caused bigger consequences, albeit short term.

Enterprises that stick to their values and philosophy will always assess any crisis against that and take a stand that is consistent with the same, even if it results in financial or market value erosion.

Dr M Muneer is a Fortune-500 adviser, startup investor and co-founder of the non-profit Medici Institute for Innovation. Tweet @MuneerMuh

• Opinion