A Shift in Green: ESG in Russian Businesses
Government Seizing Control of Environmental, Social, and Governance Standards
The energy crisis of 2021-2022 and the greenwashing scandals have caused a clash between energy security objectives and the contemporary ESG agenda, long promoted in the West. Initially, some domestic business figures dismissed the ESG agenda as a mere "feed a penguin in Antarctica" formula. However, over time, the importance of sustainable development has become evident to many large corporations.
Western ESG ideas have found fertile ground in Russian companies, particularly flagship enterprises. Besides adopting Western slogans and practices, Russian companies have also developed innovative, "green" approaches. Initially, Western companies operating in the country served as catalysts for integrating Russian and Western ESG perspectives. However, in the past two years, the situation for Russian companies on Western markets has changed. Discrimination in accessing new technologies, even for "green" projects, has become a significant challenge for domestic enterprises. Despite being concentrated in the Russian Arctic, our Arctic zone continues to serve as the "climate kitchen" for the entire planet.
"Sustainable development reporting is now known as sustainable development reporting. It is supplemented by a climate change report and a human rights compliance report. The E (ecology) agenda is implemented in the company through the so-called 'sulfur program.' Production modernization allowed us to close a very old enterprise in Norilsk in 2016 and reduce sulfur dioxide emissions," said Vladimir Zhukov, Vice President for Investor Relations and Sustainable Development at MMC "Norilsk Nickel."
Slowdowns in ecological modernization plans due to technological constraints, production complexities, and financial difficulties have redirected Russia's climate agenda towards more pressing green priorities, including combating landfills and air pollution. Today, special emphasis in projects to reduce greenhouse gas emissions is placed on increasing energy efficiency in industrial enterprises and residential sectors, as well as the growing relevance of reforestation and combating wildfires.
Starting in 2020, the Russian labor market underwent significant changes, with social issues taking center stage for domestic businesses. Companies constructed hospitals, purchased medical equipment, supplied fuel for emergency vehicles, and cared for the most vulnerable, such as pensioners and large families. The specific demographic situation in the country led to a shortage of personnel and record-low unemployment rates in the Russian Federation.
Changes in the labor market have become an additional factor driving the social aspect of ESG agendas, enhancing the competitiveness of companies like "Norilsk Nickel." The high demand for qualified labor in many industrial sectors has always posed challenges for companies operating in harsh climates, due to the outmigration of populations from northern regions. The shift in generations has led to changed expectations and requirements from employers. For the twenty-somethings entering the workforce, working and living conditions in the regions where they operate are more important than ever. "If we want people to come to us, we need to create comfortable conditions, with clean air and so on. Sustainable development has become part of our company's DNA," notes Vladimir Zhukov.
While transparency is crucial for ESG, things are not yet falling into place. Russian companies are concealing data about their management teams to avoid having their leaders fall under sanctions. Compared to 2021, the number of leaders of the Russian economy included in the RSPS Index of Sustainable Development has decreased by only four, notes Elena Feoktistova, Managing Director for Corporate Responsibility, Sustainable Development, and Social Entrepreneurship, Deputy Chair of the RSPS Council for Non-Financial Reporting, ESG Indices, and Sustainable Development Ratings.
ESG adoption remains inconsistent, with only 35% of Russian companies having formal ESG risk management frameworks. Limited access to advanced green technologies and a regulatory environment that complicates cross-border ESG compliance also pose challenges for Russian firms. The global ESG landscape is shifting toward stricter standards, which may pressure Russian firms as international ties evolve.
Despite these challenges, the national ESG agenda is being promoted as a basis for negotiations with BRICS partners. The success of implementing these principles depends on the quality of life in the country and the intensity of the effects of climate change on the planet. Collaboration opportunities, particularly in carbon capture and partnerships with China, offer avenues for progress. Advocacy for "Emerging Market ESG Core Indicators" and leveraging Sino-Russian alliances for low-carbon innovation could also help bridge the gap between global and local priorities.
- Vladimir Zhukov, Vice President for Investor Relations and Sustainable Development at MMC "Norilsk Nickel", stated that sustainable development reporting is now known as sustainable development reporting, supplemented by a climate change report and a human rights compliance report.
- The E (ecology) agenda is implemented in the company through the so-called 'sulfur program.'
- Despite being concentrated in the Russian Arctic, our Arctic zone continues to serve as the "climate kitchen" for the entire planet.
- Slowdowns in ecological modernization plans due to technological constraints, production complexities, and financial difficulties have redirected Russia's climate agenda towards more pressing green priorities, including combating landfills and air pollution.
- The high demand for qualified labor in many industrial sectors has always posed challenges for companies operating in harsh climates, due to the outmigration of populations from northern regions.
- For the twenty-somethings entering the workforce, working and living conditions in the regions where they operate are more important than ever, as the shift in generations has led to changed expectations and requirements from employers.
- ESG adoption remains inconsistent, with only 35% of Russian companies having formal ESG risk management frameworks.
- Collaboration opportunities, particularly in carbon capture and partnerships with China, offer avenues for progress in promoting the national ESG agenda and bridging the gap between global and local priorities.
