“As we progress with the methodological recommendations, the subsequent phase provides for creating a more comprehensive and detailed Standard,” said the expert. “While these recommendations themselves don’t exert regulatory impact, they signify the priorities of the government regulator and business community.”
The development of the Standard is being orchestrated by VEB.RF, by mandate of the Ministry of Economic Development. At the “Strong Ideas for New Times” forum in June 2023, VEB.RF presented to the President its alternative to ESG — ‘5C’: consistent strategic development, consideration of employee and family welfare, social programs, environmental care, and dedication to the homeland.[26]
According to Denis Bokov, Managing Director of the VEB.RF Government Agent Block, in the context of evaluating the achievement of sustainable development goals, it is imperative that the indicators be qualitative. This approach is essential for accurately measuring the effectiveness of efforts in these domains. “We incorporate these principles in our operations,” the expert disclosed when questioned, “although other companies continue to adhere to the international ESG standard.” It is challenging for a single entity, VEB.RF, to rapidly overhaul established practices and redirect them onto domestic tracks. However, I must point out that within the corporation this is happening, and in terms of social impact projects, we’ve been successful.” The objective is not to alter the paradigm, but rather to refine the language within the existing paradigm, to broaden it slightly and make it more precise, Bokov contends.
There is also an alternative approach to this issue from the Agency for Strategic Initiatives: the “Business Social Capital Standard,” designed to coordinate elements of established corporate practices in the field of responsible business conduct and sustainable development, based on a platform solution, to eliminate contradictions, and to provide a universally recognized mechanism for assessing and accounting for the contribution of organizations’ activities to improving the quality of life in Russia.
Alexander Sinitsyn, the head of the ASI Sustainable Development Project Office, noted a significantly greater flexibility of this standard as a key difference from the documents prepared by state regulators. “The documents issued by governmental agencies have very strict requirements, and they should not allow for any interpretations, so only iron-clad confirmed indicators are included in such standards,” explains Sinitsyn. “However, the market is, of course, raising questions about the flexibility of assessment models. And that’s where we come in, as the operator of our standard is an NGO that serves the role of a public institution. Consequently, we can afford to be more flexible, meaning we can foster the development of methodologies and take into account factors that aren’t yet so clearly defined and standardized as to be included in the documents of state regulators.”
A unique feature of the “Business Social Capital Standard” is that it does not merely disclose what goals the company has achieved, but also evaluates the extent to which the results align with the broadest possible range of sustainability indicators. This includes both quantitative economic indicators, based on methodological recommendations from the Ministry of Economic Development, the Central Bank’s directives, and common practices, as well as qualitative management indicators. Plus, what sets it apart from global ESG practices is its emphasis on contribution to national goals and the reinforcement of the country.
“It’s essential to recognize that we’re assessing dynamics,” says the expert. ”For this, we’ve developed a system encompassing quantitative and qualitative blocks, feedback tools, and a specific methodology that aligns with the overall approach to sustainable development assessment. The qualitative assessment block is extremely important because the field of sustainable development is not yet so established that everything can be accurately and uniformly quantified for everyone.”
Evaluation is an ongoing narrative because the subject varies from company to company, industry to industry, and a one-size-fits-all accounting system has not been set up. Sinitsyn quotes examples such as employee health issues, which different companies may address in various ways, from on-site doctors to comprehensive medical insurance plans, sick pay supplements, and so forth. These practices are not yet standardized, so they are continuously monitored and updated.
To achieve the Sustainable Development Goals and implement a nationally customized list of relevant indicators, the authors suggest incorporating the ASI approach into the Standard. This approach assesses whether results comply with specified criteria. Specifically, they recommend partially integrating the “Business Social Capital Standard” into the overall framework of the official document currently being drafted by Russia’s Ministry of Economic Development.
Other original approaches exist, such as the increasingly popular ‘ESG Rating of Responsible Business,’ developed by the Financial University under the Government of Russia in collaboration with the Mendeleev Institute of Taxation, and supported by the Federal Tax Service and the Accounts Chamber of Russia. This approach is in line with the ESG acronym — environment, staff, and government — and takes into account almost 100,000 businesses throughout the country.[27]
We sought commentary on this approach from Anastasia Gorelkina, Deputy Chairman of the Board of Directors of the Siberian Business Union Holding Company and Co-Chair of the Commission on Social Responsibility and Corporate Communications of the Association of Communication Agencies of Russia (ACAR). Anastasia Gorelkina is confident that all initiatives motivating companies to pursue sustainable development are a positive signal for our society. All the existing major projects — ‘Sustainability Reporting Standard,’ ‘ESG Rating,’ and ‘Business Social Capital Standard’ — advocate the same principle: to demonstrate success not merely from a financial performance perspective but also in terms of social responsibility. The more information a person has about how a company cares for him, his loved ones, society, and the nation, the more peaceful and harmonious their life becomes.
“Now, several projects have emerged that are rethinking global challenges, placing more emphasis on social responsibility, and even adding an element of ‘competition’ through the ‘ECG Rating’,” says Anastasia Gorelkina. “Ultimately, this will have a positive impact on businesses and their approaches to both project initiation and quality. Indeed, everyone aspires to achieve a high ranking, and to attain that, it’s essential to align with the most effective practices.”
The expert notes that the list of basic indicators for sustainable development reporting, published by the Ministry of Economic Development last November, currently includes only financial indicators in the social block, such as “expenditures on organizing and conducting social, fitness, and medical events for employees and their families.” This needs to be more detailed, showcasing the number and scope of the programs, and who they are intended for. It is also necessary to broaden the block of social indicators, considering new forms of care for employees, their families, overall demographics, and to provide data on inclusion, talent development and support, and programs aimed at fostering spiritual and moral values. Additionally, Gorelkina emphasizes the importance of communication in social projects, as sometimes even people within companies are unaware of such projects’ existence. Businesses often are not informed that they can promote their social projects using governmental support such as social advertising. Integrating communication metrics would greatly complement the existing indicators.
26
President of Russia. (2023). ASI “Strong Ideas for New Times” Forum. Retrieved from: http://special.kremlin.ru/events/president/transcripts/71554 (accessed: 26.03.2024).
27
ЭКГ-рейтинг. рф. (2023). ESG rating of responsible business. Retrieved from: https://xn-etbbhpfd3axw8i.xn-p1ai/. (accessed: 26.03.2024).