ESG - Part 4. Assessment of companies by the degree of disclosure of ESG information

One of the most important areas of ESG principles implementation is the disclosure of information in accordance with approved international standards. These reports allow us to assess the efforts companies are making in the field of sustainable development.

In the last part of the study, SBS Consulting experts share the results of the assessment of the largest Russian companies in the oil and gas, mining and telecommunications industries by the degree of openness of ESG information.

Key ESG reporting standards

GRI (Global Reporting Initiative) :

• Agenda: All Sustainable Development Goals (SDGs)
• Applicability: Universal standard for all industries
• Acceptance among Russian companies: Used mainly by energy and mining companies
• Target audience: All stakeholders (shareholders, lenders, counterparties)

SASB (Sustainability Accounting Standards Board) :

• Agenda: All SDGs
• Applicability: 77 industries
• Target audience: Shareholders and lenders

CDP (Carbon Disclosure Project) :

• Agenda: Climate action only
• Applicability: 18 industries
• Target audience: Shareholders and lenders
• Publication: The CDP assessment is published on the CDP website and may be included in the company's annual report

TCFD (Task Force on Climate-related Financial Disclosures) :

• Agenda: Climate action only
• Applicability: Universal standard
• Target audience: Shareholders and lenders

ESG disclosure scores of Russian companies

General data :


• Number of companies: In 2020, 56 Russian companies disclosed ESG information in accordance with the GRI standards.
• Industry structure: The largest share of companies using GRI is represented in the fuel and energy complex (42%) and extractive industry(13%).

ESG disclosure score by industry

Fuel and Energy Complex (FEC) :


• Disclosure level: Russian FEC companies disclose about 59% of ESG indicators in compliance with GRI, which is 4 percentage points lower than similar companies in the US
• Companies: Lukoil, Gazprom, Rosneft
• Disadvantages: They fail to disclose information on energy consumption outside the organisation, negative environmental impact in the supply chain, parental leave and other important criteria
Extractive industry :


• Disclosure score: ESG disclosure score is 56%
• Companies: Norilsk Nickel, Alrosa, Evraz
• Disadvantages: They fail to disclose information on new suppliers screened for environmental criteria, negative environmental impact in the supply chain, and other relevant aspects.

Telecommunications industry :

• Disclosure score: Russian telecom companies disclose about 39% of ESG information
• Companies: MTS, Beeline, Rostelecom
• Disadvantages: Insufficient information on energy consumption outside the organisation, energy content, energy efficiency initiatives and other criteria.

Examples of best practices

Lukoil :

• Disclosure score: Discloses about 71% of ESG information
• Features: Maximum disclosure score in the Environmental segment (E)

Norilsk Nickel :

• Disclosure score: The highest disclosure score among mining companies (71%)
• Features: The best disclosure score in Governance (G)

Rostelecom :

• Disclosure score: The leader among telecom companies (58%)
• Features: Significant gap in terms of ESG information disclosure score

General conclusions

• Insufficient disclosure: Russian companies on average disclose only 50% of ESG information in accordance with GRI.
• Concentration: The industry structure for GRI reporting among Russian companies is quite concentrated in contrast to the top 8 countries.

Recommendations

1. Increase in the scope of disclosure: Increasing ESG information disclosure, especially in the social and environmental dimensions.
2. Improvement of reporting quality: Detailed disclosure of data according to all criteria of the GRI standard.
3. Training and professional development: Conduct training and seminars for company employees on sustainability and ESG reporting.
4. Development of internal standards: Creation of internal corporate standards on ESG information disclosure.
5. Use of international experience: Implementation of international best practices and ESG reporting standards.

Conclusion

The study emphasises the need to improve the level of ESG information disclosure by Russian companies to improve their investment attractiveness and sustainable development. Key areas include increasing the scope and quality of reporting, employee training and implementation of international standards. Effective management of ESG factors will help companies achieve their long-term sustainability goals and improve their international competitiveness.