Russian companies are coming late to the modern way of doing business, but pressure is growing both at home and abroad for them to shape up to international expectations
Strong Russian policy on anti-corruption and bribery, human rights and the environment could act as an influential lever on the conduct of business while enhancing Russia’s international economic competitiveness.
But such policy all too often does not exist, or lacks either carrot or stick to move responsible business forward.
Russia’s most clear-cut attempt to begin to tackle one of its biggest blocks to more responsible business practices and sustainability came in 2008, when the National Anti-Corruption Plan of the President was launched. If implemented properly, the plan could have had a far-reaching impact on levels of unethical business practice.
In spite of a few high-profile, possible politically motivated cases, the Medvedev-Putin government hasn’t sent clear signals to the business community that the anti-corruption plan was the start of a new era.
“Companies recognise they need codes of conduct, but the actual implementation is not always enforced,” says Jane Buchanan, senior researcher with Human Rights Watch. “It drives to the lowest common denominator. Companies say to us, ‘why would we take that on, if no-one else is?’ The government perpetuates this attitude. If a company doesn’t face potential repercussions for unethical or abusive behaviour, why should they change?”
Buchanan applauds increased fines for companies illegally hiring migrant workers, “but I don’t see that coupled with a policy to help protect workers trapped in that situation”.
At a time when Russia is keenly intent on becoming more accepted in the global community, international authorities can have a significant influence on corporate social responsibility.
Jane Buchanan says: “Countries in the EU, and the European Union itself, have tremendous leverage to hold Russia to human rights commitments but we don’t see them fully using that power. There is a false dichotomy set up between energy and human rights in that, because Europe is dependent on Russia for much of its energy, it cannot raise issues such as human rights.”
Often, says Maria Kanevskaya, director of the Human Rights Centre in Moscow, international institutions that attempt to intervene in areas such as human rights are perceived by the state to be interfering with the sovereign rights of Russia.
Incentivising standards
As far as the environment is concerned, observers both in and outside Russia say the government has the power to move business practice from the current system of “permissive” natural resource use, to one in which businesses must adhere to environmental standards or face strictly enforced penalties – and, for good behaviour, enjoy economic incentives, such as tax benefits.
WWF Russia is among those behind a voluntary mechanism for environmental responsibility, involving international certification schemes and reporting. The Russian president recommended in 2010, and again in 2011, that state-owned companies should join sustainability or non-financial reporting mechanisms with audits by independent parties, and Russian companies should participate in internationally recognised voluntary certifications schemes.
“Any type of mechanism, even if voluntary, can help fight corruption and strengthen environmental standards,” says Evgeny Shvarts, director of conservation policy at WWF Russia. This is particularly the case in a country where state environmental regulations are often viewed as a serious administrative barrier to business and economic development, he adds.
He is confident that companies will adopt the president’s recommendation. “We may not see serious improvements, but move rather a few steps ahead,” he says. “Companies that don’t adopt such measures or don’t report honestly or accurately face direct reputational effects.”
Veronika Kabalina, long involved with corporate responsibility issues in Russia, thinks the problem is not so much a lack of adequate environmental standards but rather the enormous investment required by Russian companies to modernise Soviet-era infrastructure.
“Many top managers realise this is a problem but they cannot solve these problems overnight. It is a long-term investment,” says Kabalina.
Shvarts of WWF Russia believes the most important lever will be the market. Glaring gaps in human rights or environmental performance emerge when Russian companies launch their shares on foreign stock exchanges, or seek loans from international institutions which carry requirements to uphold social and environmental standards.
“When negative issues come to light, it can have a real impact on the success of Russian companies’ expansion abroad,” Shvarts says.
Buchanan agrees. “Russia doesn’t want to be seen as terribly behind. They want to protect their image. From our perspective it is unlikely Russian companies would be leading on the CSR agenda. The pressure has to come from outside. As Russia’s energy boom starts to wane, it has to set some sort of baseline on these standards.”
Amy Brown, based in Washington DC, has written sustainability and integrated annual reports for Novo Nordisk, Electrolux and Ericsson. She’s also written extensively for the International Herald Tribune on sustainability issues and was editorial consultant for the World Business Council for Sustainable Development’s 10th anniversary publication Walking the Talk.