Regions and cities as an assembly point for sustainable development efforts

The terminology of sustainable development, as well as certain practices that can be attributed to it, are increasingly entering our lives. A lot is being done at the governmental level, even more on the side of big business. The consumption behaviour of people, especially young people, is changing. Medium and small businesses are becoming more and more involved. Regulation, infrastructure and the system of institutions are being developed. At the same time, there is a discussion of “sovereignisation” of the sustainable development agenda in general and decarbonisation in particular. Indeed, Russia has to find its own way, taking into account the specifics of its energy mix, industry profile, spatial development and national interests. And to a large extent the whole agenda of sustainable development, ESG and climate action is refracted at the level of regions, territories. This is where the efforts of all parties involved come together.

There is no alternative to sustainable development

The concept of sustainable development is a global trend with no alternative. Its basic logic is to manage today in a way that does not harm future generations. In 2015, the UN summit adopted 17 Sustainable Development Goals (SDGs), which are decomposed into more than 200 specific indicators. The principles of sustainable development are designed to reconcile three aspects — economic (business benefits), environmental (preservation of the environment and biosystems) and social (caring for people, including assistance to socially vulnerable citizens).

It is not wrong to say that the SDGs reflect universal values. It could be argued that these are only relatively new terms for principles that all reasonable people and all business leaders try to adhere to. It is a good exercise to compare the 17 UN SDGs with the list of national projects in Russia; we will see a lot of overlap (table 1). And these are only projects with a national status, not including federal projects and programmes.

Comparison of UN SDGs and national projects of the Russian Federation

SDGs		National projects of the Russian Federation
1.	The widespread eradication of poverty in all its forms
2.	Eradication of hunger, achievement of food security and improved nutrition and promote sustainable agriculture
3.	Ensuring healthy lifestyles and promoting well-being for all at all ages	“Health Care”
4.	Ensure inclusive and equitable quality education and promote lifelong learning opportunities for all	“Education”
5.	Ensuring gender equality and the empowerment of all women and girls
6.	Ensuring availability and efficient use of water resources and sanitation for all
7.	Ensuring access to affordable, reliable, sustainable and modern energy for all
8.	Promoting sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all	“Small and medium-sized enterprises and support for individual entrepreneurial initiatives”   “Labour productivity”   “Science and universities”
9.	Build strong infrastructure, promote inclusive and sustainable industrialisation and foster innovation	Comprehensive plan for the modernisation and expansion of backbone infrastructure   “Digital economy of the Russian Federation”   “Safe quality roads”
10.	Reducing inequalities within and between countries
11.	Ensuring openness, safety, resilience and sustainability of cities and human settlements	“Housing and the urban environment”
12.	Ensuring sustainable consumption and production patterns
13.	Taking urgent action to combat climate change and its effects
14.	Conservation and sustainable use of the oceans, seas and marine resources for sustainable development	“Ecology” (“Clean Air”, “Clean Water” and others)
15.	Protect, restore and promote sustainable use of terrestrial ecosystems, sustainably manage forests, combat desertification, halt and reverse land degradation and halt biodiversity loss
16.	Promoting peaceful and open societies for sustainable development, providing access to justice for all and building effective, accountable and participatory institutions at all levels	“Demographics”   “Culture”   “Tourism and the hospitality industry”
17.	Strengthening the means of implementation of sustainable development and revitalizing the global partnership for sustainable development	“International cooperation and export”

 

So, to summarise in simple terms, the SDGs are about making sure that people have a better life and that more people on earth have access to it.

Another important term in the context of sustainable development is ESG. The acronym, as almost everyone has already learnt, stands for Environmental, Social, (Corporate) Governance and refers to a set of principles for business covering environmental care (including reducing emissions, discharges, waste generation and greenhouse gas emissions, i.e. decarbonisation), social measures (in relation to employees, shareholders, residents of host cities, consumers and so on), and transparency and accountability of corporate governance to society. Importantly, ESG is a desirable corridor precisely for businesses that position themselves as responsible and do not aim only to make profits at all costs.

To help businesses move along this corridor, governments and society create ‘sticks’ and ‘carrots’ through regulation, institutions, the financial system, and public acceptance. Different governments configure restrictive measures (‘sticks’) and encouraging measures (‘carrots’) differently.

Companies are getting used to opening up their non-financial reporting, declaring a commitment to responsibility and reporting on the measures they are taking, including their ecological footprint and greenhouse gas emissions.

As business is driven by investment, it is important that financial institutions understand projects and companies and can assess them specifically in terms of sustainability and ESG. To this end, rating and ranking systems, institutions of reporting verifiers and green financial instruments are being created.

Russia’s position and the sovereignisation of the ESG

Apart from the fact that Russia is interested in sustainable development, adopts SDGs and regularly prepares relevant reports, our country has assumed certain international obligations in terms of combating climate change by ratifying the Paris Agreement.

Presidential Decree No. 666 “On Reducing Emissions of Greenhouse Gases” has been adopted and is in force, the President has declared the goal of carbon neutrality for Russia by 2060, a relevant federal law has been adopted and a Socio-Economic Development Strategy until 2050 assuming low greenhouse gas emissions has been adopted. The Operational Plan for its implementation is being finalised (as we can see from the meetings of the interdepartmental working group chaired by First Deputy Prime Minister A.R. Belousov). Sectoral strategies are gradually being aligned with the low-carbon strategy (e.g. the strategy for the construction and housing and utilities sectors). Russia has adopted a taxonomy of green and transition projects.

The Kosh-Agach solar power plant is the most powerful generation facility in the Altai Republic. Photo: Hevel Company

Enterprises whose CO2-equivalent emissions exceed 150 thousand tonnes per year must report them (a corresponding state register has been created), and in the future, enterprises with emissions exceeding 50 thousand tonnes must do so.

Although the principles of sustainability have always been inherent in our government and big business, the terminology and infrastructure of ESG have become new and brought in from the outside. Until a certain time the ESG agenda in Russia was perceived as such and there was a tendency to follow the global ESG movement, building the regulatory framework and the system of institutions similar to foreign countries, primarily European ones.

For certain reasons both globally and partly in Russia there has been a skew towards ESG pillar E, not so much in environmental impact control but specifically in carbon regulation, that is the control of greenhouse gas emissions.

An additional driver was the EU’s decision to introduce Frontier Carbon Management (FCM) for a number of product groups. This mechanism is designed to level the playing field between European producers, for whom the EU has fairly stringent carbon regulation, and importers. However, for Russian enterprises, which are the very importers of metal and other product groups in Europe, the introduction of CBAM is an unpleasant measure, threatening a rise in costs and loss of market share, while also encouraging a reduction in the carbon intensity of production.

As the geopolitical situation has become more complicated, the general trend towards sovereignisation has also affected the ESG agenda. It is recognised that Russia needs to reconsider the topic taking into account its own interests and its own specifics.

For objective reasons, more focus has now been shifted to the social component of social-environmental principles of business responsibility. However, the E-component — the demand for environmental friendliness and climate regulation — has not disappeared, although it has moved away from its priority position.

Russia is creating a market for carbon units — the first 96 were issued in October 2022 and 20 have been sold, meaning that the market will monetise efforts to reduce greenhouse gas emissions.

A carbon experiment has been launched in Sakhalin, where not only incentives but also emission limits are applied. The results of the experiment will be used to make decisions for Russia as a whole. Other Russian regions, apart from Sakhalin, are also actively involved in the sustainable development agenda (primarily Moscow, but other initiatives are emerging). Requirements for regional adaptation to climate change are in place.

There is a need to make project appraisal more objective and transparent. The Russian government is discussing the application of the Best Available Techniques (BAT) concept and the established system of industry-specific BAT Information and Technical Guides (ITS BAT) to evaluate investment projects as an objective metric of business environmental responsibility.

A wind farm of 60 units with a capacity of 2.5 MW each was built in the Republic of Adygea. Photo: JSC NovaWind

Territories — the assembly point of sustainable development efforts

The implementation of the SDGs, as well as the transformation of businesses in line with ESG principles, is primarily in the interest of territories — regions, cities and towns.

Each of us is judged by the environment that surrounds us. How clean the air is, how accessible the drinking water is, what is the quality of soil and local products, the quality of infrastructure, fees, quality of public spaces, housing, and so on. It is a question of competitiveness and attractiveness of the city (region) for residents and investors.

All stakeholders are interested in sustainable development — regulators (federal and regional executive authorities), businesses, and the public. And all of them are making certain efforts for this purpose.

The territory (municipality, region) is the meeting point of all the parties involved. This is where interaction, dialogue, agreements on joint actions, projects and investments are possible. This is where their results can be seen. Here is the first line of feedback from the inhabitants, whether all is well or, on the contrary, there is dissatisfaction.

With limited local budgets and no administrative levers to manage the enterprises in the area, the more important is the role of the municipality as mediator of the sustainable development agenda and organiser of appropriate interaction.

The first examples of corresponding activity of Russian regions already exist, and it is not only Moscow. Perhaps this is the new competitive advantage in the new environment.

Achieving technological sovereignty in Russia is impossible on old principles and outdated technology stack; experts talk about “sovereignisation of ESG”, i.e. creating one’s own regulatory system that meets national interests and takes into account Russian specifics.

With the decline in private investment in Russia, the issue of state participation, and therefore the principles of its distribution, becomes particularly acute in order to ensure long-term development.

Conclusion: The situation needs to be monitored in terms of what is happening globally and in Russia, timely knowledge of the laws and regulations that are being prepared and adopted, and the opportunities available. The role of the regional regulatory framework is great, and so is the role of the RLI, especially for the Sverdlovsk region as a region more vulnerable to environmental and climate impacts of economic activities.

Cover photo: Yuliya Shauerman / iStock