In an era where global politics is constantly shifting, businesses are facing new challenges that go beyond simply making profits. Geopolitical events, such as international conflicts or political changes, can disrupt how companies operate and also affect their reputation.

The days of ignoring global political issues are over. Having a good grasp of geopolitical trends helps companies make smart decisions that align with what their customers and partners expect. This means staying informed about global political changes, understanding different cultures, and being able to predict potential risks.

Employee advocacy

One of the central drivers of this phenomenon is that employees are becoming more vocal about global issues such as the climate crisis and geopolitical conflicts, pressuring businesses to take a stance and act. For instance, last year in Seattle, more than 1,000 Amazon staff protested over the company’s lack of measures to tackle its carbon footprint.

By engaging with employees early on these issues, companies can prevent potential reputational damage. Open communication is key – when employees feel heard and respected, it can turn a potential crisis into an opportunity to show leadership and ethical commitment.

The importance of ESG in global politics

Environmental, Social, and Governance (ESG) issues are also putting more pressure on companies to take a stand on geopolitical matters. For example, when geopolitical issues tie into broader social and ethical concerns, like inclusivity or human rights, there’s a stronger demand for companies to speak out.

To add to this, if a company’s actions don’t match its public statements, it can come across as insincere or hypocritical. This was the case when several Western companies, including Avon Products and Air Liquide, backtracked on their Russia exit plans despite making announcements at the start of the war that they would cease trading in the country. As a result, the companies have faced accusations of moral inconsistency and scrutiny from investors and the public.

Embedding ESG principles into business strategies not only strengthens a company’s reputation but also meets the rising expectations of consumers, investors, and regulators. Companies must ensure that their positions on global issues and how they communicate about them are consistent with their commitments to ethical business practices.

When to speak out and when to stay silent

Deciding when to make a public statement on a geopolitical issue and when to stay silent is crucial. Businesses generally receive positive feedback when they speak out on widely agreed-upon issues and back their words with action. However, on more divisive topics, choosing not to provide commentary can sometimes be the wiser choice to avoid controversy.

When Nike chose to publicly support Colin Kaepernick, it was a calculated decision that had significant impact. Although the company faced boycotts from some consumers and a temporary hit to its stock price, Nike ultimately determined that Kaepernick’s popularity and the alignment of his message with the brand’s values would benefit their bottom line in the long run. This decision highlights an instance where taking action on a divisive issue proved to be advantageous for the company, despite initial backlash.

Businesses should carefully consider how their statements might affect all stakeholders and the broader public. While speaking out can boost a company’s reputation when there’s a clear ethical or social reason to do so, more measured or neutral communications can also be of value.

Navigating geopolitical risks

The landscape of geopolitical risks is complex and constantly changing. Companies must be prepared to deal with these ongoing challenges and the impact on their business. This means continuously monitoring global events, assessing how they might affect operations but also determining the impact on the company’s external profile. Knowing when to speak out, what to say, and crucially, matching your statements with actions, is nowadays essential for protecting a company’s interests and maintaining the public’s trust.