ESG: eco-trends in industry and business
Taking a cue from their foreign counterparts, several major Russian companies have increasingly been adopting ESG (Environmental, Social and Governance) standards in their work. Companies are now publicly disclosing their social, environmental and governance initiatives in their sustainability reports.
Sustainable development is a concept for the development of society, where humanity’s current needs are met without detriment to future generations.
By adopting ESG standards, a company pursues the goal of not only caring for nature and society, but also of commercial interest. International companies are more willing to cooperate with socially responsible issuers and giving them additional lending opportunities. In addition, special legislation and taxes are being adopted all over the world to encourage companies to actively move in this direction.
The implementation of ESG standards will gradually become the responsibility of businesses. For example, more than 3,000 institutional investors who manage assets in excess of $100 trillion have signed the UN Principles for Responsible Investment Agreement. Under this agreement, they will reduce their investments in securities of issuers with low ESG-characteristics. To receive investments, companies will have to control greenhouse gas emissions, recycle waste, restore forests used in their operations, avoid wasting natural resources, including water, etc.
Consulting firms have already started calculating the ESG index for Russian companies. The ESG index should allow investors to choose a company that cares not only about its profit but also about society. For example, according to RAEKS-Analytica, as of 15.07.2021, the leaders of the ESG ranking of Russian companies are:
The main ESG trends in companies include the following.
The first trend: waste disposal
Waste recycling and disposal will become one of the main trends in 2021. According to the national development goals of the Russian Federation, by 2030, the country will have created a sustainable system for handling municipal solid waste, which will ensure waste sorting and halve the volume of waste sent to landfills. The main elements of this system will be separate waste collection, commissioning of facilities for sorting and recycling, the creation of modern landfills, the introduction of extended producer responsibility.
The Russian government approved a roadmap for separate waste collection in June 2020. Seventy-one regions have already introduced separate waste collection. As of December 2020, there were almost 80 thousand container sites in the country equipped for the separate accumulation of solid municipal waste.
Also, Russia is implementing a state policy of increasing the energy efficiency of the electric power industry based on the use of renewable sources for the period until 2024.
The second trend: green offices and clean technologies
Industrial companies are increasingly involved in environmental care and the modernization of production facilities to reduce harmful emissions. Businesses are introducing resource-saving technologies in their industries, creating green offices, converting their premises into energy-efficient green spaces, with separate waste collection and various sensors that enable using less energy and resources, ultimately saving money. Also, among recent trends, experts note the environmental responsibility of company staff and the introduction of green standards in business.
The third trend: eco-movement in business
Russian businesses are increasingly organizing environmental movements to promote and create a sustainable company image. Being eco-friendly is not only fashionable now, but also strategically beneficial for every company. Green technologies yield excellent results for positioning a business in the market.
Not only business deals with environmental issues but also ordinary people. For example, a few years ago, a superhero appeared in Chelyabinsk — Chistoman (a pun on existing superhero names, meaning “clean man” or “cleaning man”), who removed trash from public spaces and then posted on social media. This was his way of drawing people’s attention to the problem of garbage and making his city clean. And this was not a one-off campaign. For several years, Chistoman and environmental activists carried out raids in many cities across Russia: Kopeysk, Zlatoust, Magnitogorsk, Yekaterinburg, Perm, Samara, St. Petersburg and Sochi.
The fourth trend: transparent policy
Openness and transparency of a company’s information policy in waste management and modern monitoring IT technologies are now important mechanisms for creating a long-term competitive advantage for a business.
Environmental performance reports can often be found right on the home pages of company websites. Companies use this data to create the image of a transparent business that has nothing to hide and has something to be proud of in such a trending topic as greening.
Greening should be understood not as a goal but as a long-term process that will take place progressively. If the company does not want to deal with this issue itself, customers will soon stop buying their products, citing the huge amounts of CO2 emissions during their production. Such projects are already being prepared in the USA and Europe.
Examples of ESG changes in companies
Apple claims on its website that it is carbon neutral and that all of its products will be the same by 2030. Apple plans to achieve carbon neutrality by 2030 by using recycled materials in its products and reducing the amount of energy they use. In retail stores, offices, data centres and manufacturing, Apple is focused on energy use and is committed to using renewable energy — including solar and wind power — throughout the entire production cycle. In addition, Apple is upgrading manufacturing processes in factories and the supply chain to avoid greenhouse gas emissions, and investing in the restoration of natural ecosystems and forests.
SIBUR has begun the construction of its own solar power plant. This will increase the share of green electricity in the company’s energy balance and reduce the carbon footprint of production. The solar power plant will be built at the POLIEF plant in Bashkiria, which is the largest producer of terephthalic acid and PET in Russia. In the future, it will also provide electricity to another POLIEF project — the production of “green” PET granules containing secondary raw materials. The design capacity of the power plant is about 4.9 MW, the total area of the solar panels is 8 hectares. Completion of the solar power plant and its integration into the company’s energy supply chain are expected in January 2022.
Mikron has implemented an environmental management system, which has reduced electricity consumption by 27 %, heat by 15 % and consumed electric power by 27 %. The introduction of energy-efficient equipment allowed the company to optimize costs without reducing the quality of equipment operation and the functioning of production processes.
EVRAZ NTMK uses secondary sources to generate electricity. To this end, the company commissioned a top-pressure recovery turbine, which will operate in conjunction with a blast furnace. The launch of the unit will allow the plant to increase its own electricity generation by 11.6 MW per hour and reduce the amount of electricity purchased from external suppliers. The turbine does not use fossil fuels to generate energy; this technology meets high environmental standards. The turbine converts the blast furnace gas overpressure to the general shop level. The energy from the conversion rotates the turbine and generator rotors, thereby generating electricity. The converted blast furnace gas is then fed to the combined heat and power plant and to the heating furnaces of rolling shops. The operation of the turbine is fully automated and requires almost no human intervention. All rooms are equipped with gas analysers, fire extinguishing systems and CCTV.
Conclusion
Experts believe that Russian businesses will not be able to develop sustainably in the coming years if they do not prioritize green initiatives. Therefore, companies should think about introducing environmental principles into their operations right now.
Many countries are beginning to introduce a carbon tax, which forces companies to adjust their business processes to reduce their ecological footprint. Ultimately, the modernization of production and the introduction of efficient technologies will not only help in the fight against climate change but also increase the profitability of businesses.
