What is ESG?
are a number of principles for implementation in corporate practice.
Compliance with ESG-principles in the context of business activity is reflected in its management model and influence of its products and services on sustainable development of the organization as a whole.
Sustainable Development
Sustainable Development is how we must live today if we want a better tomorrow, by meeting present needs without compromising the chances of future generations to meet their needs.
Sustainable Development Goals
Sustainable Development Goals are a number of targets set by the United Nations (UN) which are aimed to promote sustainable development and improvement of people’s life. They are also known as 17 SDGs for the period after 2015.
National Goals
Sustainable Development agenda is closely related to socio-economic and environmental priorities of the Russian Federation which are formulated as National Development Goals through 2036 and for the future until 2036, and are signed as an Executive Order by President Vladimir Putin.
National Development Goals through 2030 and for the future until 2036 include:
- Preservation of the population, strengthening health and improving the wellbeing of people, supporting families;
- Self-fulfilment of each person, unlocking their talents, and educating a patriotic and socially responsible person;
- Comfortable and safe living environment;
- Ecological well-being;
- Stable and dynamic economy;
- Technological leadership;
- Digital transformation of state and municipal administration, the economy, and social sphere.
The implementation instrument of the National Goals are National Goals of Russia
ESG components
ESG approach to activities realization is aimed to consider and balance environmental, social and economic aspects of the decision making process.
ESG based approach to business contributes to formation of sustainable strategies that lead to long-term success, social wealth and environmental protection which are the fundament of the sustainable development of future generations.
History of Sustainable Development
Key milestones in shaping the global sustainable development agenda.
1948
The International Union for Conservation of Nature (IUCN) is founded
IUCN had set a goal to promote partnership of governmental and non-governmental organizations
1961
World Wildlife Fund (WWF) is created
WWF is working in the spheres related to preservation, survey and rehabilitation of the environment
1968
The Club of Rome is established
It commissions a study of global proportions to model and analyze the dynamic interactions between industrial production, population, environmental damage, food consumption, and natural resource usage
1968
The Intergovernmental Conference of Experts on the Scientific Basis for Rational Use and Conservation of the Resources of the Biosphere is held in Paris
It provides a forum for early discussion of the concept of sustainable development
1969
The National Environmental Policy Act is passed in the United States, establishing the Environmental Protection Agency
The first national agency for environmental protection, it sets the basis for environmental impact assessments
1971
Greenpeace is established
Greenpeace's agenda is to stop environmental damage through civil protests and nonviolent interference
1971
The United Nations Educational, Scientific and Cultural Organization establishes the Man and the Biosphere Programme
The aim of the Programme is to promote interdisciplinary approaches to management, research and education in ecosystem conservation, and sustainable use of natural resources
1972
The Club of Rome publishes "The Limits to Growth"
It predicts consequences if population growth is not slowed and calls for a state of global equilibrium
1972
The United Nations Conference on the Human Environment is held in Stockholm
The Conference leads to the establishment of numerous national environmental protection agencies and the United Nations Environment Programme
1973
The European Environmental Action Programme is launched
This is the first attempt to synthesize a single environmental policy for the European Economic Community
1974
The United Nations Convention on International Trade in Endangered Species of Wild Fauna and Flora is opened for signature
It is an important step in controlling illegal commerce in ivory, furs, and other products of endangered species
1974
World Population Conference is held in Bucharest, Romania
135 countries participated in the Conference
1979
The first World Climate Conference concludes that the "greenhouse effect" from increased buildup of carbon dioxide in the atmosphere demands urgent international action
1982
The United Nations World Charter for Nature adopts the principle that every form of life is unique and should be respected regardless of its value to humankind
It calls for an understanding of our dependence on natural resources and the need to control their exploitation.
1983
The World Commission on Environment and Development is formed
The commission works for 3 years to weave together a report on social, economic, cultural, and environmental issues
1985
The World Meteorological Society, the United Nations Environment Programme, and the International Council of Scientific Unions meet in Vienna
They report on the buildup of carbon dioxide and other "greenhouse gases" in the atmosphere and predict global warming
1986
The Conference on Conservation and Development: Implementing the World Conservation Strategy is held in Ottawa
The Goal of the Conference is to evaluate progress in implementing the World Conservation Strategy of 1980 and to consider proposals for revising it
1987
The World Commission on Environment and Development publishes "Our Common Future", also known as the Brundtland Report
Report weaved together social, economic, cultural, and environmental issues and global solutions; it popularized the term ‘’sustainable development’’
1988
The Intergovernmental Panel on Climate Change is established
The goal of the Panel is to assess the most up-to-date scientific, technical, and socioeconomic research in the field
1989
The Stockholm Environment Institute is established
The Institute is focused on to carrying out global and regional environmental research
1990
The International Institute for Sustainable Development is established
The Institute began publishing the "Earth Negotiations Bulletin" to record international negotiations on environment and development
1991
The International Union for Conservation of Nature, the United Nations Environment Programme, and the World Wide Fund for Nature publish "Caring for the Earth: A Strategy for Sustainable Living"
Strategy os a sequel to the World Conservation Strategy released in 1980, it sets 132 actions to increase human well-being and halt the destruction of the earth's capacity to support life
1992
The United Nations Conference on Environment and Development is held in Rio de Janeiro
Аgreements are reached on Agenda 21, the Convention on Biological Diversity, the Framework Convention on Climate Change, and nonbinding Forest Principles
1992
The United Nations General Assembly sets up the Commission on Sustainable Development
The goal of the Commission is to oversee implementation of Agenda 21 into the programs and processes of the United Nations system
1993
At the World Conference on Human Rights in Vienna, governments reaffirm their international commitments to all human rights
The first United Nations High Commissioner for Human Rights is appointed
1994
United Nations Framework Convention on Climate Change entered into force
1995
The World Trade Organization is established
WTO gives formal recognition to trade, environment, and development linkages
1996
ISO 14001 is formally adopted as a voluntary international standard for corporate environmental management systems
1997
Delegates to the United Nations Framework Convention on Climate Change sign the Kyoto Protocol
The protocol commits developed nations to reducing overall emissions of several greenhouse gases and mechanisms to encourage North–South cooperation on emissions reduction
1997
The United Nations General Assembly reviews the Earth Summit
A special session acts as a sober reminder that little progress has been made in implementing Agenda 21 and ends without significant new commitments
1999
The global sustainability index is launched, tracking leading corporate sustainability practices worldwide called the Dow Jones Sustainability Group Indexes
The tool provides guidance to investors looking for profitable companies that follow sustainable development principles
2000
Carbon Disclosure Project is established
CDP goal is to raise interest among companies to report in relation to their climate activities and related risk management
2000
The United Nations Millennium Summit agrees to a set of time-bound and measurable goals
The goals are combating poverty, hunger, disease, illiteracy, environmental degradation, and discrimination against women. The Millennium Development Goals are to be achieved by 2015
2000
United Nations Global Compact is launched
The Global Compact sets principles for different spheres in relation to human rights, labor, environmental protection and anti-corruption
2002
The Global Reporting Initiative formulates guidelines on how organizations should report on the economic, environmental, and social dimensions of their business activities
2002
The World Summit on Sustainable Development is held in Johannesburg, marking the 10-year anniversary of the United Nations Conference on Environment and Development
The summit promotes “partnerships” as a non-negotiated approach to sustainability
2003
Equator principles are developed
Equator principles represent a framework concept on risk management and is accepted by financial organizations to identify, evaluate and manage environmental and social risks during projects execution
2005
The Kyoto Protocol enters into force
The Protocol legally binded developed country parties to goals for greenhouse gas emission reductions and establishing the Clean Development Mechanism for developing countries
2005
The term “ESG” first appeared in a report titled “Who cares wins"
The subtitle of the report, “connecting financial markets to a changing world”, highlights its intention to provide guidance for financial institutions on environmental, social, and corporate governance issues which are seen to be closely related to sound financial resource allocation.
2006
Principles on Responsible Investment (PRI) are developed
Investment and environmental community published 6 principles which are supposed to be use by institutional investors when assessing ESG aspects
2007
Climate Disclosure Standards Board is established
New guidance on reporting allows to address the influence of risks and opportunities related to climate change on strategies, financial results and conditions of business activities. Later version of guidance included questions related to water resources and forest use.
2007
The Intergovernmental Panel on Climate Change publishes its fourth assessment report on climate change
The report posits that climate change policies are best addressed by integrating them within the broader framework of sustainable development strategies
2009
The 15th session of the Conference of the Parties to the United Nations Framework Convention on Climate Change is convened in Copenhagen
The domestic targets and actions of large emitters such as the United States and the People’s Republic of China take center stage
2010
The 16th session of the Conference of the Parties to the United Nations Framework Convention on Climate Change is held in Cancun
The session calls for the establishment of a Green Climate Fund and a Climate Technology Center and network
2012
The United Nations Conference on Sustainable Development gathers in Rio de Janeiro to mark the 20th anniversary of the 1992 United Nations Conference on Environment and Development in Rio de Janeiro and the 10th anniversary of the 2002 World Summit on Sustainable Development in Johannesburg
The Conference focuses on two themes: a green economy in the context of sustainable development and poverty eradication, and the institutional framework for sustainable development
2015
States adopt Sustainable Development Goals
Humanity’s blueprint for a better future, the 17 goals are part of a new global agenda on sustainable development. Several focus on environmental issues: Life Below Water, Life on Land, Climate Action, Clean Water and Sanitation, and Affordable and Clean Energy
2015
The Financial Stability Board, an industry consortium that makes recommendations on various risks, launched the Taskforce on Climate-related Financial Disclosures (TCFD)
The new group currently works on standards for reporting climate-related disclosures for banks, businesses and investors. It helps price the potential impact of climate risks on a company's bottom line
2015
World leaders sign the Paris Agreement
The United Nations Climate Change Conference, also known as COP21, leads to a landmark climate agreement. At the meeting in Paris, France, 195 countries adopt the world’s first universal and legally binding global climate deal
2017
United States informed on planned cancellation of their participation in the Paris agreement
2018
IPCC launches special report on global warming of 1.5ºC
Requested by governments in 2015, the report examines the risks of a 1.5˚C warmer world, creating unprecedented public awareness of the dangers of climate change and the options for addressing it
2019
Leaders gather for UN Climate Action Summit
The summit aims to speed the global response to climate change and towards meeting the goals of the Paris Agreement
2021
E.U.'s Sustainable Finance Disclosure Regulation is taking place
The European Union's Sustainable Finance Disclosure Regulation imposed requirements on describing funds with specific sustainable investment objectives that promote environmental or social characteristics and those that are non-sustainable
2022
Sustainability standards are consolidated
The International Financial Reporting Standards (IFRS) foundation has maintained accounting standards for most countries, except the U.S. The Value Reporting Foundation (VRF), which managed the Sustainable Accounting Standards Board standards, consolidated into the IFRS to create the International Sustainability Standards Board
2023
EU's Corporate Sustainability Reporting Directive is launched
A new European Union directive specified that EU companies and non-EU businesses operating in the EU will soon be required to make corporate sustainability disclosures relating to their alignment with an EU ESG-related taxonomy and audit sustainability data
ESG Roadmap
Explore the ESG roadmap and unlock the sustainability potential of your business. Step by step, develop a strategy, implement measures and achieve your sustainability goals. Determine what level of sustainability your organization is at.
Deciding on ESG transformation
The need for an ESG strategy with the involvement of relevant departments and senior management of the organization in this process is discussed. An understanding is formulated regarding the purpose of strategy and transformation.
Key questions:
- Why do you need an ESG strategy?
- What is the idea of an ESG strategy?
- How can strategy improve an organization's processes and its market position?
- What resources are needed to develop and implement an ESG strategy?
- Who will be the members of the project working group?
Initial assessment and ESG priorities
Comprehensive analysis of the organization's activities is conducted, associated risks and opportunities are identified, comparative analysis with other companies in the market is done,, review of material topics and consultations with stakeholders is undertaken.
Key questions:
- What has the organization already achieved in ESG, what is its level of maturity?
- What are the priority ESG topics for the organization?
- What threats and opportunities are associated with the implementation of ESG principles?
- Who are the internal and external stakeholders?
- How are other companies applying ESG principles to their practices?
Development of an ESG strategy
ESG factors are included in decision-making processes from strategy development to operational activities, key metrics and KPIs are defined.
Key questions:
- What target ESG results does the organization need to achieve?
- What does the company need to continue, build on and improve?
- What policies and regulations need to be adopted?
- What gaps need to be filled to achieve the goals?
- What quantitative and qualitative indicators measure the goals?
- What is the work plan for implementing the ESG strategy?
Assessment and monitoring
The implementation of the strategy is ensured, roles for the implementation of the strategy are distributed between departments. On a regular basis, progress is assessed and monitored for each ESG indicator, successful experience and possible barriers to the implementation of the strategy are analyzed, and timely adjustments are made to the strategy.
Key questions:
- How often is the status of strategy implementation assessed?
- How is progress data collected and analyzed?
- How do you work on “errors”?
- How is trend analysis implemented and incorporated into strategy improvement?
- How is reporting generated on achieving ESG goals?
Surveys
Frequently asked questions
Does implementing ESG practices reduce risks for an organization?
Ignoring trends and agendas can lead to adverse consequences for the organization, as well as result in the loss of customers, partners and employees.
Among the risks that an ESG approach to managing an organization can reduce are:
- Financial (reducing the threat of tax penalties, attracting additional investments and receiving orders from larger players)
- Reputational (minimizing conflicts and increasing trust in business)
- Marketing (meeting the expectations of consumers and other communities)
How does the implementation of ESG principles affect the value of a company?
Companies that follow the green agenda and implement ESG principles can create higher value for shareholders and for society as a whole:
- Compliance with best ESG practices helps companies explore new markets and expand existing ones. Efficient, transparent and socially responsible companies more regularly receive access to operations and permits/licenses to carry out their activities, which opens up new opportunities for their growth, including financial.
- Along with the opportunity for financial growth, ESG policies help companies optimize costs. Activities aimed at reducing negative harm to the natural environment, including the introduction of energy-saving technologies, as well as the development of human capital and social responsibility programs, transparency and quality management, make it possible not only to slow down the growth of operating costs, but also to reduce them.
- An ESG philosophy based on the values of humanity and care for people helps companies attract and retain the best professionals, increase their motivation, strengthen their trust in their employer, and increase overall productivity. Employees who are satisfied and loyal to the company do their jobs better. The stronger an employee’s motivation to act in corporate and public interests, the higher both his labor productivity and the well-being of the company as a whole.
What does the sustainable development agenda look like today?
Given the difficult current situation for the world and Russia, the sustainable development agenda remains the main strategy for both the UN and many other interstate associations, non-governmental organizations, states, and companies. At the same time, military conflict, disruption of supply chains, inflation and rising prices for energy, fertilizers and food are perceived as tactical difficulties, and the topic of sustainable development is perceived as a long-term strategy.
Growing consumption of fossil fuels, especially coal, in developed countries is perceived not as an opportunity to abandon the climate agenda, but as a burden and an additional incentive to find solutions to reduce the carbon footprint and continue the energy transition.
Since 2019, and especially since 2021, Russia has been developing the national agenda for sustainable and low-carbon development in accordance with accepted international obligations with taking into account country specifics. In 2021, long discussions about the imposition of this agenda on Russia by the collective West and its true essence as a method of unfair competition, disadvantageous for Russia, based on the structure of its economy, ended.
Russia has adopted a Low-Carbon Development Strategy and commitment to carbon neutrality by 2060, laws on greenhouse gas emissions (according to which, from 2023, companies emitting more than 150 thousand tons of greenhouse gases per year will provide a mandatory emissions report, and from 2024 year — companies emitting more than 50 thousand tons), about the Sakhalin experiment (started on September 1, 2022 without transfers), the infrastructure of climate projects was launched (registry, validators and verifiers) and trading in carbon units began, The Bank of Russia issued a number of recommendations on non-financial reporting, began monitoring the scope of ESG ratings, the Government introduced a bill on “green” energy to the Duma (after 3 years of discussion), and confirmed obligations (with slight reductions) on the share of renewable energy sources in Russia by 2030.
In the situation of the occurred conflict after February 2022, the Government of the Russian Federation partially changed the timing of the implementation of a number of measures from the sustainable development agenda, however, in general, this agenda remains relevant, which is confirmed by statements and actions of the heads of the federal executive authorities, as well as the Bank of Russia.
What is an ESG rating and how is it determined?
ESG ratings are compiled by independent research agencies. They evaluate the development of companies according to three criteria — E, S and G — and assign points on a given scale.
There is no unified approach to the formation of ratings and rankings in the market. All agencies analyze open data about companies and calculate scores differently. Therefore, ESG ratings from different agencies may differ significantly from each other.
Russian ESG ratings are compiled by several agencies, including Expert RA, National Rating Agency, Analytical Credit Rating Agency, and National Credit Ratings.
What is the difference between the concepts of ESG and Sustainable Development?
By the late 1980s, there was a new emphasis around the world on the importance of the environment and environmental sustainability. In 1987, the Brundtland report was presented by the World Commission on Environment and Development. In the late 1980s, the World Commission on Environment and Development, chaired by Norwegian Prime Minister Gro Harlem Brundtland, was appointed to study the consequences of global environmental change. He introduced the concept of sustainable development, which ensures that the needs of the present generation are met without compromising the ability of future generations to meet their needs.
The ESG concept uses environmental, social and governance indicators to evaluate an organization in terms of its impact and progress made in the field of sustainable development. In its modern form, the principles of environmental, social and corporate governance (Environmental, Social and Governance) were institutionalized by UN Secretary General Kofi Annan in 2004, when he approached the CEOs of the world's largest companies with a proposal, under the auspices of the IMF, to include these principles in their strategies.
Why is sustainable development important?
Sustainable development in the existential sense and according to the philosophy embedded in it taking care of ourselves and future generations, our children and grandchildren. Issues of caring for ourselves and the environment in which we live have been and remain a hygienic value, the basis and guideline for our safe and comfortable existence in the world and harmonious coexistence with it. Motivation for improving the quality of life is largely determined by the sense of responsibility inherent in a person by nature itself towards those who experience his influence and vice versa. The mission of both a person and an organization as an ecosystem lies in social changes leading to a qualitative transformation of the processes and phenomena that he is able to influence.