It is the social focus that differentiates the Russian approach from the widely accepted international ESG practices, which Russia has also been following until recently.
The authors believe it is logical to enhance the Reporting Standard with principles that form the basis of the “ECG Rating of Responsible Business.” This enhancement would enable the final document to be highly aggregated and visualized, reflecting the perspectives of all stakeholders involved.
Upon reviewing all initiatives and the documents at our disposal, it became evident that all these approaches share a common weakness. Namely, the assessment approach itself is quite limited and is based on the provision of data on financial and non-financial indicators without taking into account the actual social impact and its influence on sustainable development.
For example, in the draft standard from the Ministry of Economic Development of Russia and VEB.RF, there are specified requirements for the allocation of funds to projects recognized as social, environmental, and the like. However, the evaluation of these investments is not mandated and falls on the initiator, which almost inevitably leads to formal assessments conducted merely for the sake of reporting.
Metrics are measured in terms of money spent, percentages, the number of people reached, or even the frequency of board of directors and audit committee meetings and their attendance.
Plus, the developers of the document emphasize the voluntary nature of its implementation, making this reporting initially non-mandatory. It is expected that in Russia, major corporations that set the tone in finance will, in this case on a national scale, adhere to the official standard. If the standard lacks a mandatory requirement for assessing the social impact, it would be very easy to align the implementation of social projects with PR or similar corporate needs, without genuine concern for achieving real social impact.
The closest to the truth, in our opinion, have been significant stakeholders with direct beneficiary interests such as IRI, AVC, ANO “Equal Opportunities Space,” and others. Previously, they were not involved in drafting the standard, but at our request, they offered significant amendments and additions to the current project.
First of all, it was suggested to disclose the organization’s activities in terms of achieving social impact and influence in the short, medium, and long term. It was also recommended to report both expected and actual social effects and impacts, including those that were unplanned, to conduct analysis and disclose reasons for the outcomes, and to back assessments with qualitative and quantitative indicators supported by valid and evidence-based data.
It is also advised to describe the problematic situation requiring change, list the target audiences affected, and explain how and why each group is connected to the issue. For substantiation of the choice of the problem selected, its causes, target audiences, and their relation to the issue, as well as the action plan, the use of statistical data from reliable sources is recommended. Desk research with various data sources can also be used, including media publications and academic papers, citing them as necessary. Additionally, data can be drawn from expert surveys, as well as from one’s own conducted empirical research with disclosure of information about the research. The experience of key projects and/or organizations addressing the issue over the past three years will also be useful.
“The standard should create a trend, set the tone for the future,” believes Igor Novikov, Director of ANO “Equal Opportunities Space” and a member of the Presidential Council for Civil Society and Human Rights. The way we write it will determine what kind of companies we will see in a few years. Thus, the final document should reflect not only those aspects of organizations’ activities that they are accustomed to reporting on but also those that are yet unknown within the companies.”
According to the expert, the project critically lacks several aspects. Whereas previously companies were expected to merely report good deeds, now a key aspect of business activity (including that of the government and NGOs) has become learning and impact. Since business drives development, the society expects to see resilient companies capable of overcoming challenges and learning and innovating through the process. “Such companies are perceived as sustainable,” Novikov is convinced. “One of the key lessons in the BANI[28] era is the ability to establish strategic partnerships with the government, NGOs, and other companies for systemic problem-solving across the community.” Maintaining balance is key to collaborating effectively in partnerships with different problem-solving cultures, and this pertains more to civil society than to corporate accolades for “social breakthrough of the year.” Every successful product manager knows that a “lone wolf” strategy does not lead to value creation and product management will fail; companies must learn to work as teams, and this should be reflected in the standard.
Also, a crucial aspect is the engagement (or inclusion) of vulnerable and marginalized groups. Currently, inclusion is conventionally seen as a means to achieve diversity within teams. Those who are compelled to keep pace with the times, study demographic forecasts and the like, are actively trying to cover the deficit in organizational capability to involve “not like everyone else” in the value creation chain and the consumption of goods. Therefore, the standard should include more coherent and near-future oriented requirements for the involvement of vulnerable groups (people with disabilities and special needs, young professionals, individuals with migration experience, women with young children, the elderly, etc.). “The conversation should not just be about the simple demonstration of hiring metrics (though it would be good if companies start to disclose this data), but about organizational and other innovations,” Novikov emphasizes.
Understanding the need for significant revisions to the standard, the expert speaks of being ready to engage in its adjustment and supplementation, because the practice of conveying information about a company’s activities cannot be developed once and for all; it is an iterative process. Given the dynamics with which the world changes, it is necessary to quite frequently revisit ideas and the specific ways of their implementation in reports. “We need to understand that conveying information about the company’s activities in sustainable development and other areas requires not just temporary working groups but a community of constantly active experts,” concludes Novikov.
Undoubtedly, all existing methodologies are commendable in their own right, and the mere existence of such initiatives is a big advantage. However, when talking about sustainability, it is essential to address indicators directly related to this concept in terms of social impact. When reports contain only quantitative metrics, they fail to correlate with promises of analyzing or forecasting systemic qualitative changes. What is missing is a transition formula or an explanation of correlations. Hence, there is a clear understanding of the need to expand the list of indicators, including assessments of social impact, as well as topics of corporate volunteering, inclusive practices, and media influence as evaluation indicators.
Following the strategic session “Sustainable Development Reporting Standard as a tool for the development of volunteering and social involvement,” a resolution draft was created based on the discussion outcomes, which we believe should be presented below unchanged.
“To add to the original list of suggestions:
• Finalization of the social effect assessment section;
• In reporting, show not quantitative characteristics of indicators and metrics, but social effects based on them;
• Increase focus on quality indicators;
• The list of indicators should be based not only on international standards and national SDG targets, but also on national projects;
• Include community and partnership development and non-profit sector development in the assessment;
• Include