Environmental protection and issues surrounding ESG discussed at EEF 2022

8 September 2022

Environmental protection and issues surrounding ESG discussed at EEF 2022

On 6 September, the Eastern Economic Forum 2022 hosted a panel session entitled “Ecology: How to Save the Planet in a World Without Trust?” The wide-ranging discussion covered measures to protect the environment and issues surrounding ESG. Among those to speak at the event were Konstantin Tsyganov, First Deputy Minister of Natural Resources and Environment of the Russian Federation; Aleksey Uchenov, Deputy Minister of Industry and Trade of the Russian Federation; Andrey Betin, Deputy Governor of Nizhny Novgorod Region; Elena Boitsova, Deputy Chief of Staff of the Accounts Chamber of the Russian Federation; and Irina Makanova, Director of the Department of State Policy and Regulation in the Development of Specially Protected Natural Areas at the Ministry of Natural Resources and Environment of the Russian Federation.

A number of conclusions were reached at the discussion. The environmental agenda continues to be of importance both to the government and the public. This is particularly true for the younger generation and the army of volunteers that has formed in the country. Step by step, young people in Russia are driving change in favour of responsible consumption. However, as a whole, businesses and the public are not sufficiently motivated to even change their attitude to issues regarding rubbish, which affect everyone without exception. Despite the sanctions imposed on Russia, and the need to replace imports with domestic alternatives, the government is continuing to implement ambitious environmental projects, such as the Clean Air programme. That said, it will not be possible to simply stop producing and using coal, and some environmental targets will have to be pushed back following the onset of the current geopolitical turbulence. There is a degree of scepticism surrounding the concept of ESG, which has only increased in the new reality. On top of this, government auditors harbour doubts as to the validity of ESG indicators, and whether they correspond to reality – both now and in the future.

KEY CONCLUSIONS

The overall course remains the same and environmental projects continue to be implemented; however, geopolitics have had an impact

“In the international arena we are suffering specifically because of the current geopolitical tension we are experiencing. The things we discussed yesterday are in doubt today. This is of course a most serious challenge when it comes to addressing and overcoming the environmental problems we face today,” Tadzio Schilling, Chief Executive Officer, Association of European Businesses (АЕВ).

“It appears as though a great deal has changed since 24 February. The system of drivers which pushed forward the ESG agenda in the country for a couple of years has changed. However, it should be said that new ESG drivers are rapidly taking shape, and that the government is the primary actor behind them,” Tatiana Zavyalova, Senior Vice President for ESG, Sberbank.

“We have listened to businesses and are shifting certain indicators to the right. However, this does not mean that we are in principle extricating ourselves from the environmental agenda and that it is now taking a back seat. One way or another, we are adapting to today’s conditions. In terms of export-based industries, decarbonization issues will remain on the agenda regardless. Before long, sanctions will be lifted one way or another regardless. We will look for alternative markets and select friendly countries. In turn, friendly countries will enter those same European markets, and will have to contend with lower CO2 threshold requirements. And our contribution – the contribution of our suppliers – will be very tangible in this regard. It will simply be an indicator of product competitiveness,” Aleksey Uchenov, Deputy Minister of Industry and Trade of the Russian Federation.

People have had an enormous impact on the environment, but there is now a growing sense of responsibility

“Do you remember the axiom, ‘We are all children of nature’? Well, it’s true! So, has something changed? We have, I’d say, become managers of nature, and nature has become our stepmother. And when we shift roles again, and go back to how things were, we will probably accomplish the things we want. That’s because the fear of an environmental disaster is a fairly big factor, but it is short-lived. Some kind of other programme is needed,” Andrey Grachev, Vice President for Federal and Regional Programs, Norilsk Nickel.

“Russia is home to more than a fifth of the world’s forests, and is second in the world in terms of drinking-water resources. There are four climatic zones and a unique biodiversity. These are the national treasures we have, and we are responsible for them. For people, issues related to ecology and protecting the environment are among the most important ones that exist today. People consider it vital to be able to live in a comfortable and safe environment,” Konstantin Tsyganov, First Deputy Minister of Natural Resources and Environment of the Russian Federation.

“Forty-two per cent of young people under the age of 25 pay attention to goods, products, and anything else they buy to check how environmentally friendly they are, and how ethically they were made. There’s major growth here, which is clear for all to see. If we pay attention to this, then just 5–7 years will pass, and it will become the main driver of growth. Today, however, the government needs to assume the burden in the main. The government needs to invest in kick-starting things, so that we can reach cruising speed and handle these tasks. Overall, we have all the potential to become global leaders in relation to the ESG philosophy,” Andrey Betin, Deputy Governor of Nizhny Novgorod Region.

Many Russians don’t understand what ESG stands for

“I have asked my friends if they know what ESG means. And you know, an awful lot don’t even understand the acronym! I try to explain the English meaning of it, and they say, ‘No, Elena, I still don’t get it’,” Elena Boitsova, Deputy Chief of Staff, Accounts Chamber of the Russian Federation.

PROBLEMS

ESG reporting is raising questions among government auditors

“We’re currently experiencing an issue in relation to calculating ESG indicators. At times, for example, ESG indicators are not calculated using actual data, but forecasts of some kind – targets that an organization is working towards. And they use this data to make the corresponding calculations, which is absolutely the wrong approach. It’s all visible if you look under the carpet, so to speak. But if you don’t have an auditor capable of bringing all this to light, then nobody is any the wiser – neither the company management, nor the government, nor the international market,” Elena Boitsova, Deputy Chief of Staff, Accounts Chamber of the Russian Federation.

Doubts exist as to whether ESG indicators offer genuine insight and can serve as effective reference points

“The problem lies with the indicators that are analysed as part of the ESG reporting procedure. We have colleagues who in all likelihood draw up ESG reports. But here’s the question: are all the indicators set out in the report of interest to them as managers, and to us as stakeholders? That’s a really big question!” Elena Boitsova, Deputy Chief of Staff, Accounts Chamber of the Russian Federation.

The ESG agenda is portrayed as a sham by some in the media

“As the situation has changed, we have seen an awful lot of new ideologemes appear along the lines of ‘We need to do away with the environment aspect’, or ‘Lower the requirements.’ In some places, you hear that the whole thing is fake news. And did you know that they even called it that in the media?” Andrey Grachev, Vice President for Federal and Regional Programs, Norilsk Nickel.

The people responsible for protecting Russia’s nature reserves are fully dedicated to their jobs, but have salaries which leave much to be desired

“Guarding and protection is a specific aspect. The state protection service employs most of the people responsible for guarding our specially protected federal nature reserves – around 4,500 people in all. These are people who can find themselves in some incredibly difficult situations as they tackle poaching and malevolent visitors, and protect the borders of these reserves. These people perform a huge number of different roles. And unfortunately, until recently, their salaries left much to be desired. As of this year, we have been able to increase salaries, and even raise it to a decent level compared to average salaries in individual regions. That said, salaries still remain fairly low in certain places. These people have families and children to feed. The only thing that prevents them from leaving their jobs at the moment is the fact that they wholeheartedly and unconditionally love what they do. These are absolutely fanatical people,” Irina Makanova, Director of the Department of State Policy and Regulation in the Development of Specially Protected Natural Areas, Ministry of Natural Resources and Environment of the Russian Federation.

Russia has no option to give up coal, but is scaling up its programme to clean the air

“We’re talking about the Clean Air programme. What started with 12 cities has now been rolled out to cover 41 cities. Twenty-seven of these cities have a direct connection to coal or the use of coal for energy. One could say that this accounts for more than half of all aspects related to Clean Air. And as we see it, there is no option of just saying ‘Hey, let’s stop using it.’ That’s because there are at least 140,000 miners working in the coal sector here alone. Coal accounts for 40% of rail transport, and that’s another 200,000 people. And when you factor in the coal-based energy sector, that’s another 100,000 people. These 400,000 people largely live in the East of our country, i.e., the Far East and the whole of Siberia. And these 27 cities use a quarter of the coal supplied to the domestic market. The links don’t stop there. Coal is Russia’s fifth biggest export, but a quarter is tightly linked to domestic supplies,” Stepan Solzhenitsyn, Chief Executive Officer, SGC; Member of the Board of Directors, SUEK.

SOLUTIONS

Russia is studying the ESG requirements of countries which have recently become partners

“Of course, we are now paying special attention to ESG requirements as they pertain to our new international partners. This is so we can understand for ourselves how they are structured and what new requirements exist in these countries. We can then help our clients work with them,” Tatiana Zavyalova, Senior Vice President for ESG, Sberbank.

Some environmental targets are being shifted in recognition of the need to replace imports with domestic alternatives

“Given the altered economic situation in the country, the government has taken steps to support businesses. These include efforts to replace imports with domestic alternatives. In 12 cities, the timeline for implementing the Clean Air programme has been extended to the end of 2026, and the date for launching the initiative in new cities has been shifted to September 2023. This does not mean the projects have been halted. We are merely addressing issues related to import substitution on a point-by-point basis. That said, we are maintaining the time frame for achieving target indicators for companies which rapidly attain technological independence,” Konstantin Tsyganov, First Deputy Minister of Natural Resources and Environment of the Russian Federation.

Import substitution is being used as a term more and more widely; however, the industrial sector’s environmental agenda has not gone anywhere

“Despite the fact that it would appear that the spotlight is on another area – specifically, technological sovereignty and a new form of import substitution – environmental issues have not been removed from the agenda. And in fact, we consider them to be inextricably linked issues, because as a rule, modern production methods comply with all ecological requirements. And as a rule, if an enterprise is modernized using cutting-edge equipment, it meets all the requirements set out by environmentalists. For our part, we will keep our finger on the pulse, and businesses are focusing on becoming environmentally friendly,” Aleksey Uchenov, Deputy Minister of Industry and Trade of the Russian Federation.

A million people in Russia have already become volunteers, and help with picking up litter and planting trees

“Volunteers are getting more involved and playing an increasingly major role in a lot of areas. Every year, more than 1 million people help clear away rubbish from our shores in 16,500 events which take place right across the country. Almost 1.5 million people take part in two tree-planting initiatives: Memory Garden and Save the Forest. More than 5,000 volunteers do various kinds of work in specially protected nature reserves. We have schools which train environmentalists, and volunteer camps. Volunteers help build new walking trails, monitor areas, provide assistance to the local population, and even get involved in scientific research,” Konstantin Tsyganov, First Deputy Minister of Natural Resources and Environment of the Russian Federation.

Biologists, hunting inspectors, and foresters are to be joined by professionals specializing in nature reserves

“There is no national educational standard pertaining to managing nature reserves. People are trained to become biologists, hunting inspectors, and foresters. These are all professions which we are in need of. However, there is also another area connected specifically with education, raising environmental awareness, and eco-tourism. We could call this area nature reserve management. We are currently working to develop this standard, which we are of course greatly lacking at the moment,” Irina Makanova, Director of the Department of State Policy and Regulation in the Development of Specially Protected Natural Areas, Ministry of Natural Resources and Environment of the Russian Federation.

The lack of interest among Russians in environmental matters demonstrates the need to raise awareness

“Who is going to work out in the field? And another question: what needs to be done specifically? A great many organizations have ESG strategies... But you know, when you say to them, ‘OK, you have a strategy, but what specifically are you going to do? Let’s say you’ve got your team together – what happens next?’ That’s when a big question arises. We have slogans, but what direct steps need to be taken? That’s the big question! The final thing is, what is this all for? There’s a big question in terms of motivation. I understand how things are with large companies. But how about medium-sized enterprises, small enterprises? What about the public? What do they need all this for? It’s a kind of complication. In my opinion, our aim should be to explain to everyone in simple terms why rubbish should be separated, and why entrepreneurs should not use plastic plates and cutlery,” Elena Boitsova, Deputy Chief of Staff, Accounts Chamber of the Russian Federation.

Environmental protection and issues surrounding ESG discussed at EEF 2022

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