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ARTICLE: «SUSTAINABILITY REPORTING
in KAZAKHSTAN COMPANIES»
A sustainability report is an organizational report that gives
information about economic, environmental, social and governance performance[1].
Corporate
sustainability reporting has a long history going back to environmental
reporting. The first environmental reports were published in the late 1980s by
companies in the chemical industry which had serious image problems.
Many companies
now produce an annual sustainability report and there are a wide array of
ratings and standards around.
Stakeholders want
information on an organization’s economic, environment and social performance.
Further, as society's awareness of the importance of sustainability issues has
increased, especially around climate change, so too has the importance of
reporting. There are various names given to such reporting - the most commonly
used are sustainability reporting, non-financial reporting, corporate social
responsibility (CSR) reporting and triple bottom line reporting[2].
Companies produce
corporate sustainability report (CSR) for many reasons. There is seldom a
single reason and the rationale for producing the report can change over time.
Motivating
factors include:
· Providing information about challenges and achievements to shareholders,
employees, the public and other stakeholders;
· An internal commitment to environmental and social responsibility;
· As a marketing tool, associating the company with sound environmental
management and sustainable activities;
· Tracking progress on integration of sustainability principles into
company planning and programs;
· Taking first steps towards doing things in a more sustainable way;
· A successful pilot project persuaded decision-makers to take the
initiative company-wide; and
·
A commitment to
remaining competitive while becoming a world leader in sustainability[3].
Preparation of sustainability report in the context of globalization,
the integration of Kazakhstan into the international community and with the
growth of foreign capital become an important place in the financial sector of
the economy. Examples of Kazakh companies who have successfully practiced
preparation of sustainability reports are as follows:
- ENRC
- Karachaganak Petroleum
- Chevron Kazakhstan
Preparation of sustainability report is an indicator of sustainable,
socially responsible business, based not only on maximizing profits and meeting
the needs of shareholders, but also is an indicator of the fulfillment of
obligations towards environment and society.
At the moment, one of the important questions are – «Whether local
companies need the sustainability report? Whether our local companies are ready
to prepare sustainability report?
After analyzing economic growth
rate, particularly in sectors such as oil and gas, mining, ferrous and heavy
metals, it can be concluded that Kazakhstan companies need sustainability
report. Advantageous
geographical location and rich mineral resources of our country strongly
attracts foreign investors and capital. Appearance in Kazakhstan market of such
international giants of the industry as ENRC, KEGOC, Karachaganak Petroleum,
Kazakhmys B.V., Procter & Gamble, Coca-cola was the reason for the
application of sustainability report.
Preservation of nature and the
interior takes not the last place in the economy. Each entity’s understanding the extent of its
responsibility in preserving the environment, harmonization of business not
only with the laws of the market, but also the nature, shows the readiness of
companies to prepare sustainability report.
After making analysis of current
situation, I can say that local Kazakhstan companies are ready for making
sustainability report. The government creates a conducive and favorable business environment and
prosperity of the domestic company. As shows foreign countries’ practice it is
necessary for Kazakhstan companies to come to the preparation of sustainability
reports by their own . Many African countries like South Africa, successfully
practices and implements the sustainability report. There should not be
coercion, and legislative approval to require local companies to make on an
annual basis sustainability report.
Examples: Sustainability report in ENRC
ENRC has committed to improving sustainability
performance over the long term. They already operate to the standards consistent
with the best practice in Kazakhstan and as they develop their
international presence, they strive to achieve the best practice of
international standards across all of their operations, including safety,
health and environment.
The Group reports sustainable development performance in compliance with
local legislation and international best practice. In 2009, they continued to
develop a transparent reporting system based on the Global Reporting Initiative
(‘GRI’) Metals and Mining Supplement and the International Council on Metals
& Mining (‘ICMM’) Sustainable Development Framework, and internal reporting
in compliance with GRI environmental indicators expanded by 60%.
ENRC has interests in Kazakhstan, China, Russia, Brazil and Africa (the
Democratic Republic of the Congo, Zambia, Mozambique and South Africa). The
Group’s strategy is to build on its long-established Kazakhstani operations to
become a diversified natural resources group with world class assets.
ENRC’s five key sustainable development priorities are:
1.
To
consume less, to produce more;
2.
To
integrate sustainable development into investment decision-making;
3.
To
make reputation and brand one of the Group’s principal assets;
4.
To
build key stakeholder relationships in all countries in which we operate; and
5.
To create
leadership and embed the behaviours of sustainable development values across the Group [4].
Coca Cola’s New Sustainability Report: Commitment 2020 and the Carbon
Footprint of a Diet Coke
Coca-Cola has released its fourth
company-wide Corporate Responsibility and Sustainability (CRS) Report,
titled “Our CRS
Journey…Delivering on Our Commitments.” The 48-page report
announces an initiative the company is calling “Commitment 2020,” a new set
of goals for its five strategic CRS focus areas.
Coca-Cola’s
Commitment 2020 goals include:
v Energy
Conservation/Climate Change
Reduce the overall
carbon footprint of the company’s business operations by 15% by 2020, as
compared to a 2007 baseline.
v Water
Stewardship
Establish a
water-sustainable operation to minimize the company’s water use and have a
water-neutral impact on the local communities in which the company operates, by
safely returning the amount of water equivalent to what is used in the
company’s beverages and their production to these communities and their
environment.
v Sustainable
Packaging/Recycling
Reduce the impact
of packaging, maximize use of renewable, reusable, and recyclable resources,
and recover the equivalent of 100% of the company’s packaging.
v Product
Portfolio/Well-Being
Provide refreshing
beverages for every lifestyle and occasion, while helping consumers make
informed beverage choices.
v Diverse
and Inclusive Culture
Create a culture
where diversity is valued, every employee is a respected member of the team,
and the company’s workforce is a reflection of the communities in which it
operates.
From the report, I also learned that in 2008, Coca-Cola made a big
effort to get a handle on its carbon footprint. The company
analyzed the emissions of operations in each country where it does business, as
well as for the corporation, as a whole. Coca-Cola’s overall footprint was
approximately 6.1 million metric tons of CO2 emissions in 2007. 71% of that
total is Scope 3 emissions that derive mostly from sales and marketing
equipment[5].
Coca-Cola also partnered with the Carbon Trust to calculate the
first-ever certified carbon footprint of a sparkling beverage in Great Britain.
As a result, we now know that a 500mL plastic bottle of Coca-Cola has a carbon
footprint of just under 250g of CO2. Interestingly, the carbon footprint of
Diet Coke is slightly less because there are fewer emissions associated with
the production of sugar than with artificial sweeteners. (See the full report
for a chart that has other comparisons, as well: glass v. plastic bottle, Coke
Zero v. Diet Coke, e.g.)
Based on personal observation I can assume the main factors that are
prerequisites for the preparation of sustainability report are the following:
1.
Kazakhstan
is one of the most rapidly developing countries of the former Soviet Union,
which has attracted more 136 billion U.S. dollars direct investment over the
years of independence. In particular, for the further successful attraction of
potential investors, local companies must have a competitive advantage and be
more attractive to other countries[6].
2.
The
favorable geographical location and rich natural resources that attract large
investors. Further, these investors are potential users of sustainability
report and can create necessary conditions and transfer of experience and
knowledge of Kazakhstan companies in the preparation sustainability report
3.
Stable
economic indicators and position
4. Political factors. For example, stable
government and situation in the country designed for international standards
and appropriate legislation.
5.
All
over the growing number of Kazakhstan companies that are entering not only
domestic markets but also international.
6.
Environmental
degradation, depletion of mineral resources, which adversely affects the
ecological appearance of the state.
Taking into account that in the near future Kazakhstan is going to increase
its production of mineral resources like oil, gas, coal, copper, nonferrous
metals, and etc will arise a need for constant control and environmental
monitoring of natural resources, as well as timely monitoring of large
companies whose business activity strongly influences economics, politics,
environment and quality of life in the whole country and the importance of
preparation and application of sustainability report will only increase.
Based on the SWOT analysis, I identified some advantages and disadvantages
of making sustainability report by Kazakhstan companies and tried to answer the
following questions: «Will be there any demand for sustainability reports in
Kazakhstan?», «Are the local companies ready to use and preparation sustainability reports?
SWOT analysis
|
Strengths |
Weaknesses |
|
·
This report provides a qualitative assessment of the business and the impact on the environment, and vice versa ·
Sustainability report prepared on the basis of IFRS and is a clear indicator of effective management of the company, the implementation of its strategic objectives ·
Strengthening of the role and image of Kazakhstan companies both domestically and in world markets ·
The emergence of competitive advantage over other companies, in terms of openness and transparency in business ·
Increased confidence in the company ·
Improved communication between companies, government agencies, environmental
organizations and society |
·
Not
understanding the importance of this report in the implementation of
strategic, tactical view of the company ·
Lack
of professional training and little experience in the preparation of
sustainability reports ·
Imperfect
accounting and financial system ·
Not
complete transfer of Kazakhstan companies to IFRS ·
Neglect
and lack of respect for nature, ignoring environmental regulations |
|
Opportunities |
Threats |
|
· Allows the company to identify the weaknesses of your business and improve the company's strategy · Improving social and environmental
responsibility of business before the state, the environment · The company by identifying its weaknesses, will build its business with a smaller damage on the environment · Possible provision of more favorable tax and other benefits by state and inspection
bodies · Increase the attractiveness of Kazakhstan in the face of potential foreign
investors and the public |
· The impact of political and economic
factors · High level of corruption in the financial
and legislative sphere ·
Not correct the
disclosure
and description of the event due to lack of experience
and knowledge in
the preparation of
sustainability reports · Lack of qualified personnel, which will
prepare sustainability report · Lack of competence of top managers, managers of
Kazakhstan companies when using information from the report · Failure to apply the recommendations of the
report in the life and remove the comments and deficiencies identified during
the inspection and preparation of sustainability report · The mentality and the dismissive attitude to
nature, to resources. |
In summary, I would like to
note that Kazakhstan formed quite favorable environment for preparing
sustainability report. Demand for sustainability reports by Kazakhstan
companies is quite possible, as evidenced by the rapid development and
globalization of the economy, accounting based on IFRS and compliance with
international standards of business, disclosure and transparent business
practices, the establishment of public and open company, focused on cooperation
with the environment.
In conclusion, I would like to give some recommendations in terms of
transition and preparation of
sustainability report by Kazakhstan companies:
·
Bring
in compliance the legislative in accordance with international financial
reporting standards.
·
Increase
the interest and value of making this kind of reporting along with the
financial statements.
·
Create
an environment where local companies can make decisions connected with the
preparation of sustainability reports, eliminate the
"voluntary-compulsory" principle of the report.
· Create local independent companies, which only will
prepare sustainability reports and explain the procedure, methods of
preparation of this report
· To encourage local companies to prepare sustainability
report through fiscal, financial and legal instruments, incentives and
mechanisms.
LITERATURE
2.
«A Roadmap for Sustainable
Consumption» By Lawrence Hutter > Peter Capozucca and Sarita Nayyar
3.
Sustainability: A New Era for
Enterprise Value?,” Deloitte Dbriefs webcast, September 24, 2008.
4.
www.enrc.com
5.
www.coca-cola.com
6.
www.skc.kz – website of JSC «Samruk-Kazina»