Two months have passed since the beginning of the events that changed the life of the country. One way or another, all people, including those engaged in business have made decisions on how to live and what to do next. The ESG (Environmental, Social, and Corporate Governance) agenda that bloomed in Russia in 2020 has taken a huge blow. Experts’ views vary between very pessimistic, pessimistic and moderately optimistic: from “sustainable development is over”, to “it is called sustainable because it can sustain anything.” A few optimists even predicted a certain improvement. Only time will tell who was right or wrong, but the question as to what is going on with the ESG agenda in these difficult times is very relevant.
The agency ESG Consulting has launched a survey asking representatives of businesses at different stages of ESG development to answer a series of questions about measures they have been taking as part of the ESG strategy in the past two months. Over 40 people took part in the poll, with 46.7% being representatives of large businesses, 30% representatives of medium-sized businesses and 23.3% representatives of small businesses. Most companies – 61% – were from the non-financial sectors, including education, machine-building, development, agriculture and others. Another 38.7% of respondents represented the financial sector. 48.3% of respondents were top managers, 42% were ESG experts of various levels and 9.7% line managers.
The survey has shown that 19.4% of companies have long been implementing the ESG agenda, while 35.5% have started doing this relatively recently but have already advanced enough, and 45.2% are at the initial stage of implementation.
Companies with advanced ESG agenda
(These companies employ an ESG strategy, have released a sustainability report for over a 3-year period, and have an ESG department or a commission operating as part of the Board of Directors)
In this group of companies, only 30% of respondents noted the implementation of solely negative measures, most being the adjustment of the ESG strategy towards reducing activities. The remaining 70% show a fairly even distribution of both positive and negative initiatives.
Companies with an advanced ESG agenda are currently engaged mostly in reforming the package of social and environmental initiatives (which includes both reducing current ones and launching new projects), as well as in releasing a sustainable development report for 2021, taking part in green projects, and receiving green and ESG loans to this end.
Notably, none of the participants refused to publish the report or chose to reduce the ESG department personnel, which indicates a rather strong emphasis on social factors during turbulence. Based on the results of the interviews, we can also conclude that large businesses, which constitute the vast majority in the sample representing an advanced ESG agenda, are now in the ‘energy conservation mode’ and awaiting further developments in order to lay out a clearer approach. Companies that have been sanctioned for the first time do not abandon the ESG agenda entirely either, although receiving finances for new initiatives is complicated.
Companies with medium levels of ESG agenda development
(These companies have embraced an ESG strategy only recently or are developing it, have released a sustainability report for a period of less than 3 years, and have a staff member responsible for sustainable development)
In this group, only one company showed an extremely negative development scenario, choosing not to release a report for 2021 and closing its current projects. The others continue moving in the chosen direction. Half of the respondents (55.6%) noted the launch or closure of social or environmental projects as the main focus of their efforts. While only 25% of respondents mentioned reduced budget for the ESG agenda, companies are obviously on the path to cost optimization and investment redistribution. Attracting green finance is definitely not a priority for companies represented in this group, with 11% and 12% refusing to do so – which may have been affected by the new Central Bank interest rate. Just similar to the group with the advanced agenda, none of the survey respondents has chosen layoffs or staff reductions. At the same time, the vast majority (89%) continue to implement the ESG strategy in their companies’ operation. The largest number of selected activities suggests that this group of companies is making major efforts towards sustainable development.
Companies at the initial stage of ESG development
(These companies have their ESG strategy under development or planned to be developed, with a sustainability report prepared for release or released only once, and has a staff member responsible for the company’s sustainability who combines this responsibility with others, such as of a director for development or an executive director)
This segment is dominated by small and medium-sized businesses. The range of answers in this group is extensive; yet, we can note the launch and closure of social or environmental projects (64%), just similar to the group with moderate ESG agenda development levels. Such companies also take efforts to optimize costs through the short-term money principle. Half of the respondents (50%) continue to develop an ESG strategy, 14% hire ESG specialists, and 28% invite consultants to develop roadmaps and policies. We should note these companies’ extremely low readiness for releasing a report for 2021 (7%), as well as the highest levels of abandonment or reduction in finances for ESG development among the three groups (55%). We can conclude that companies which are just getting started on their path to sustainable development are now making decisions based on their internal processes. A company’s stance almost certainly depends heavily on a particular stance of the top executives, which produces opposite results ranging from extremely positive to extremely negative ones.
The purpose of this study was to find out the actual current state of affairs in Russia’s business sector as regards sustainable development. Obviously, companies’ plans depend on the level of ESG development, and the agenda is definitely far from demise or stagnation. Companies with an advanced ESG agenda, which are more dependent on foreign capital, have adopted a wait-and-see approach, while those with a medium sustainable development level continue to advance given the current situation, and emerging companies make short-term planning decisions depending on the current situation.
The ratio of positive measures to negative measures indicated in the survey amounts to 1.3, which shows positive dynamics in this regard. The coefficient in the advanced agenda group is 1, while it stands at 3 in the medium-level agenda group and at 1.5 for the group of companies at their initial stage. We can see that during a period of turbulence, as advanced companies stand still, those with medium level of the ESG agenda serve as a driver of its development.
By Ksenia Vorozheikina, Leading ESG Expert at ESG Consulting