Business and geopolitics: the end of the illusion of neutrality? Perspectives from Luc de Rancourt and Theresa Reinold (EDHEC)

Are geopolitical upheavals leading companies to adopt ways of thinking previously associated with the military?

Theresa Reinold: We need to distinguish between two questions. Firstly, are companies already doing this? Secondly, if they are not, should they be? On the first point, there are clear signs: friend-shoring, for example, involves relocating certain activities to countries deemed to be more politically reliable, even if this means accepting higher costs. Securing supply chains is therefore becoming a decision-making criterion in its own right. We are also seeing the rise of scenario planning and wargaming: the examination of several possible futures and their implications for business operations.

Luc de Rancourt: What characterises military reasoning is that it operates in an uncertain, even hostile, environment. An army constantly seeks to preserve its freedom of action by maintaining a strategic understanding of potential adversaries who will seek to hinder its operations.

Businesses have long analysed their competitive environment. But what is changing today is that market dynamics are no longer sufficient: value chains, supply chains and infrastructure can be exploited for geopolitical ends. We must therefore move from a competitive understanding to a strategic understanding of the environment. Strategy is, in a sense, the science of the other. This does not mean transforming the company into a military organisation, but rather incorporating greater foresight, redundancy, resilience and reversibility into decision-making.

At what point does a company become a party to a conflict?

Luc de Rancourt: A company becomes a party to a conflict from the moment its activities become a factor in the strategic calculations of the parties involved, whether it wishes to be or not. Operating in a country at war exposes it to conflict, but this alone is not enough to make it a party to the conflict.

Several thresholds can be distinguished: exposure to conflict; active contribution to its dynamics, when the company’s activities affect the freedom of action of the protagonists; and, finally, its potential legal liability. The geopolitical threshold often precedes the criminal threshold. The company becomes a party to the conflict when it ceases to be a mere bystander.

Theresa Reinold: I would add that a distinction must be made between participation and the responsibility that stems from it. There are several degrees of participation, and responsibility varies according to that degree. Claude’s example is interesting. Anthropic’s model was used by the United States during the operation in Venezuela that led to the capture of Nicolás Maduro. Anthropic was unaware of this and had not authorised it. The company therefore participated unwittingly. What responsibility does this entail? It is a complex question, but it shows that participation and responsibility can take very different forms.

Luc de Rancourt: This requires careful consideration in advance and the development of a strategy based on various scenarios: up to what point can I continue my business? At what point must I cease operations? In these grey areas, I believe it is essential to establish objective criteria to aid decision-making.

Luc de Rancourt: This case illustrates the difficulties faced by a company caught up in a conflict involving multiple actors, in an area where the dominant actor changes several times, whilst seeking to continue its operations and protect its employees. There was then a gradual shift, until the point where continuing operations led to the maintenance of financial flows that benefited Islamic State.

To avoid this, a company must have a geopolitical understanding of its environment and a clear policy. This also raises the question of the relationship between head office and subsidiaries: to what extent can a parent company consider that decisions taken locally are beyond its control? A geopolitical mindset must therefore permeate all levels of the organisation.

Theresa Reinold: In my view, the Lafarge case marks the end of the myth of neutrality. Companies operating in war zones cannot remain neutral. Lafarge wanted to continue its operations and protect its factories: it was an opportunistic choice, but it had a considerable political impact and legal consequences.

We are seeing companies operating in ethically and politically complex situations being held to account. They must make decisions, be transparent and communicate more effectively. This transparency is also part of geopolitical literacy.

When economic choices give rise to strategic dependencies, how can the interests of businesses be reconciled with the state’s power imperatives?

Luc de Rancourt: The State and business operate according to two different rationales. Business seeks competitiveness and the growth of its operations. The State must ensure national continuity, security and the exercise of sovereign functions. Their interests do not automatically coincide, but they can no longer be ignored. If a business’s operations create a critical dependency for the country, the State must be able to identify this. Conversely, if the state asks businesses to increase their stocks, diversify their suppliers or invest in their resilience, this comes at a cost. The issue is therefore not one of businesses being generally subordinate to the state, but of strategic coordination.

Theresa Reinold: I couldn’t agree more: this geopolitical literacy must be an integral part of corporate culture. It is all the more necessary as relations between businesses and states are themselves becoming more complex. Whilst, as a general rule, their interests are driven by different considerations, certain recent developments show that the line between public and private interests can also become blurred.