Is the largest country in Europe dragging its feet on green issues or ready for take-off?
Sustainability is becoming more and more integrated into the strategic agenda of corporations across the globe as pressure comes from investors and rating agencies for businesses to operate in a more sustainable way.
Financial analysts are paying closer attention to environmental, social and governance (ESG) risks and value-drivers, while governments and stock exchanges are introducing new sustainability directives and standards. On top of this, global societal trends are making customers and employees more environmentally and socially aware.
Faced with these pressures, companies have little choice but to gradually integrate sustainability into their key business and governance processes.
In Russia the drive for sustainability is having a growing impact, particularly on large businesses, which see it as a usable tool for managing their reputational and compliance risks, as well as upholding their ‘social license’ to operate.
Pursuing the sustainability agenda helps to reinforce their image as a responsible business partner in foreign markets, particularly for export-oriented companies.
It also plays a key role for businesses who are working with federal and regional authorities on national projects, where it often enables them to benefit from tax breaks.
However, compared to the many best practices found across the world, Russian corporate sustainability practices are usually a couple of steps behind, particularly in terms of how deeply sustainability principles are incorporated into the organisation’s DNA – its strategy, business model and everyday operations.
So, while sustainability is definitely increasing on the agenda in Russia, it has yet to become business as usual and part of everyday conversations for senior management and those responsible for governance.
One of the key hindering factors for this is the relative underdevelopment of Russian sustainability legislation. In fact, there is currently no specific sustainability legislation in Russia that targets companies.
Of course, there are a number of environmental and other specific laws, which are fairly successful in terms of day-to-day regulation, but don’t help to drive a new managerial mindset.
However, a federal law on public non-financial reporting, which will regulate sustainability reporting for the largest state and private companies, is widely expected to be adopted during 2020. This will hopefully be a good starting point.
Despite the lack of specific sustainability regulations, many Russian companies already voluntarily integrate sustainability practices into their operations.
Many tend to align with the UN Global Compact Principles and UN Sustainable Development Goals, and implement commonly accepted environmental and sustainability standards like ISO 14000, ISO 26000, ISO 45000 and, in terms of reporting, follow Global Reporting Initiative (GRI) standards.
Companies such as Norilsk Nickel and Polymetal in the metals and mining sector; Rosatom and FGC UES in utilities; Rosneft, Lukoil, Sakhalin Energy in oil & gas; MTS and Rostelecom in telecommunications; and X5 in retail are some of the most progressive in Russia in terms of focusing on sustainability issues.
One particularly good example of a Russian company embracing sustainability is Segezha Group, one of the world’s top-three producers of packaging paper. In 2018 the company updated its corporate strategy with sustainability as one of its four key strategic development pillars up to 2023.
Significantly, it now follows sustainable forest management principles and promotes the principles of sustainable forestry among its peers in Russia. Now, all its timber harvesting operations have been FSC-certified and in the past three years the company has increased annual reforestation by 49% to 23,000 hectares per year.
In addition, all of its key subsidiaries in the paper and packaging, and plywood segments are certified to the relevant ISO standards.
This radical shift toward sustainability not only aligns Segezha with government projects and programmes in forestry, but has provided market advantages and increased customer loyalty in Europe.
So, the benefits of embracing sustainability are increasingly being recognised by leading Russian businesses and significant progress is being made, but there is still some way to go before it becomes business as usual for every company.
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Date: January 2020