Sustainable Development reporting: 8-11 October 2013, Athens Greece international and Russian experience research Measurement of progress towards sustainability Olga Efimova, Professor, Financial University under the Government of the Russian Federation Economic Analysis Department 8-11 October 2013, Athens Greece

Project Objectives Identifying SDR trends in Russia in comparison with the global trends to outline possible ways of improving and developing the practice of sustainable development reporting

Evaluation of available data and information SDR published on official websites of the largest Russian companies. International corporate reporting best practice (based on analytical reviews prepared by leading consulting companies and analytical agencies, such as KPMG (200 biggest Russian companies), PricewaterhouseCoopers, E&Y, Russian Union of Industrialists and Entrepreneurs. SD Index provided by Interfax-Era (Russia) was used for purpose of comparative analysis.

Why Report Sustainable Development Practices Sustainable development reporting fosters a number of tangible and intangible benefits: a growing body of research shows a positive correlation between company sustainability and financial performance SDR provides financial value and drives innovation, reflecting the idea of “what gets measured gets managed.” companies discover new opportunities for business improvement by analyzing their SDR data and developing continuous improvement programs to effect lasting change.

WHAT ARE THE BENEFITS OF ACTION? Improved company or brand image; Cost savings; Competitive advantage; Employee satisfaction; Product, service or market innovation; Business model or process innovation; New sources of revenue or cash flow; Effective risk management; Enhanced stakeholder relations

Methodological criteria of SDR analysis availability; transparency and completeness of SDR; application of international standards and guidelines; an independent assurance; disclosure of information on environmental issues activities and related risks.

Research results

Research results

Research results Industry Share in total, % Energy 26% Oil and gas 19% Finance and insurance 11% Chemicals, petrochemicals and perfume Mining and metals 9% Food manufacturing Telecommunications 6% Other services Total 100%

Methodological problems The undeveloped state of: a conceptual system, information database, analytical tools, the lack of a commonly accepted integrated reporting standards

Companies` problems Absence of the approach to management of long- term sustainability, Shortage of information for analysis and decision-making; The benefits from SDR that the company can get in the future are not clearly understandable .

The problems of information and analytical support complex methods of analysis are not developed; the integration mechanism of financial and non- financial reporting is not perfect; difficulties in the success achieved analysis.

Russian aspects: research results Insufficient use of international SDR standards reduces competitiveness of Russian companies in the international market. Companies have not paid attention to the development of "green” production and the SD issues of the supply chain. Small part of companies disclose greenhouse gas emissions in full amount: only 8% of the study participants conducted by KPMG disclosed data on total emissions. Only about 11% of SDR have the conclusion of the professional auditors (The KPMG survey). Russian companies should develop a system of governance for sustainable development including strategy, processes of information collection and analysis of the progress towards sustainability

Sustainability Reporting Regulation: Is the Mandatory Approach Better than the Voluntary One? According to survey respondents the biggest drivers of corporate sustainability investments: government legislation, consumer concerns, employee interest in sustainability.

Voluntary reporting VS mandatory reporting In Russia sustainability reporting is represented by voluntary disclosures. Although the progress in SDR is positive, there is an immediate risk associated with “self-regulated” reporting guidelines. For some companies, competition and reputation motives may not be strong enough to adopt sustainability reporting. In case when sustainability reporting is voluntary, it may easily be seen by companies as non-essential and therefore be either reduced or fully abandoned. Reports provided under “self-regulated” guidelines can not be used for comparison of companies sustainability effectiveness. It is difficult to audit voluntary disclosures. The Government do not have effective tools to monitor companies effectiveness in field of sustainability

Sustainability Reporting Regulation: conclusion Without proper monitoring and enforcement, reporting could be rendered meaningless and result in a waste of resources for all parties. Establishing firmer minimum requirements to sustainability reporting may be an effective way to mitigate the shortcomings of both mandatory and voluntary approaches, but also improve the quality, standardization and comparability of SDR.

Sustainability Ratings Russian Information Agency Interfax International Group presented a fundamental efficiency appraisal rating for 100 major Russian companies in the real economic sector (http://interfax-era.ru/reitingi-predpriyatii), and for 3,774 enterprises in Russia, Kazakhstan and Kyrgyzstan (http://interfax-era.ru/reitingi- predpriyatii).

Interfax-era SD rating The companies were grouped into regional rating lists (http://interfax-era.ru/reitingi- predpriyatii/po-regionam), depending on the region they are based in, so the regional leaders could use the results of the work done to best advantage. The final rating was drawn up on the basis of four criteria: Eco-energy efficiency; Technological efficiency; Efficiency dynamics; Transparency of eco-energy reports.

ERAX — Russian ecological market Index (http://interfax-era.ru)

The primary results of the research: 1. The project had outlined that the most part of Russian companies can be more effective in SD strategy disclosure. 2. Transparency of the companies in the field of sustainable development is growing - 40% of the largest Russian companies report on their activities in this field. 3. Almost all providing SDR companies include aspects of economical use of natural resources. At the same time the issues on reducing the harmful environmental impact should be not just shown but evaluated in their reports. 4. Expected positive correlation between company sustainability and financial performance. 5. GRI standard is applicable and useful for SDR in the Russian context.

Thank you for your attention