Russian business is taking steps to recover its reputation after the disastrous post-Soviet privatisations of the early 1990s

To most people the terms “Russian business” and “corporate responsibility” would appear to be mutually exclusive. Russia’s private sector still carries the reputation it gained in the 1990s: of being the wild east, where the important thing was making a fast buck, no matter what the wider social cost.

Yet last year the first Russian sustainability awards were held; an increasing number of Russian companies are producing corporate responsibility reports; and the number of conferences and seminars on the topic are steadily increasing.

Things are changing, but corporate responsibility in Russia is developing a distinctive mood and tone. Russian corporate responsibility is beginning to learn from international examples, but cannot be understood out of the context of the country’s recent history.

The importance of the country’s Soviet legacy cannot be overestimated. Until 1991, it was taken for granted that companies would provide wider social and community benefits. Soviet workers derived from their employers not just a job, but also holidays, healthcare, housing, sports facilities and much more: in fact, every necessity of life. The Soviet model was compounded by Russia’s huge geography where, even today, large towns and cities exist around industrial facilities.

For Russians therefore, the idea that a company should provide wider societal benefits was a given, and the fact that, for many in the country, living standards are so low is a legacy of many industrial facilities no longer being able to provide the wider benefits that they once did.

Assets grabbed

It was the effort to avoid such a wrenching transformation that Russia’s privatisation process was devised, with each citizen receiving vouchers to enable them to share in the ownership of the country’s assets. Instead, what occurred was an asset-grab by the select few now known as the oligarchs. As Peter Neev of BP’s Russian operation TNK-BP argues, popular opinion of the corporate sector remains “negative because of fixed opinion that all the large corporations have obtained their assets illegally as a result of unfair and lawless privatisation”.

However, unlike in the west, popular disenchantment with corporate behaviour has not translated into pressure on companies and their bosses. Again, the reasons for this lie in the nature of Russian society: the entities that in Europe and the US have led to changes in corporate behaviour have much less momentum in Russia.

For a start, in Vladimir Putin’s Russia, non-governmental organisations, whose activities in other countries have claimed many corporate scalps, find their activities severely constrained. Likewise, the Kremlin’s creeping control has all but put paid to a free media, which elsewhere is another source of pressure on misbehaving companies. Finally, as the recent election process made clear, public demonstrations are difficult to arrange – unless of course you are supporting Putin, or his preferred successor, now president-elect, Dmitry Medvedev.

Ironically, it is arguably the long arm of the Kremlin that obliged at least some of Russia’s large companies to start to take their wider responsibilities seriously, albeit in a philanthropic way. Although Putin’s moves against the oligarchs have been driven largely by a desire for political control over potential rivals, they have also had the effect of forcing these men to put something back.

Neev explains: “The government supports the process of increasing the level of social responsibility of Russian business. Putin has repeatedly appealed to the companies to raise the level of social responsibility in Russia.”

As a result, Chelsea football club owner Roman Abramovich, for example, is estimated to have invested at least $1 billion of his own money into the Chukotka region, of which he is governor.

International expectations

However, were this the Russian corporate sector’s only motivation, then corporate responsibility would not have moved beyond charitable giving. What appears to be the key driving force in corporate responsibility in Russia is the growing need to play by international rules as Russian companies begin to expand globally, and to seek listings on western stock exchanges. Aluminium producer Rusal, for example, is looking to list in London or Hong Kong and has recently commissioned a report to compare its corporate responsibility with that of its international peers.

Russian firms considering listings in London or elsewhere are worried about a “Russia discount” that they might suffer from western investors concerned about their corporate governance performance. Neev says the development of corporate responsibility in Russia “coincides with its development on the international scene”.

Russian companies’ forays overseas led, in the 1990s, to the gradual spread of internationally accepted accounting standards among them. And the world is now seeing the use of internationally accepted standards of corporate responsibility reporting. According to Alexei Kostin, executive director of the Corporate Social Responsibility Russian Centre, as of early 2007, 40 Russian companies reported on corporate responsibility matters. Of these, 15 reported on corporate responsibility as a separate section in their annual reports; 18 produced social reports; eight reported on sustainable development and four issued environmental reports. Thirteen of these documents were prepared on the basis of GRI and AA1000S standards.

Forty companies may not sound many, but considering that this number includes big names such as Norilsk Nickel and Yukos, it is possible to appreciate how far Russian business has come in the past decade. How far it can go will depend on the degree to which these and other companies continue to engage with, and be engaged by, their international peers.

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