On ESG

I recently spoke at a corporate governance forum, where we discussed the role of ESG. I offered a view that is not entirely popular, and I would like to share it here on my own accounts.

First, there is a great deal of talk about ESG in our country, but almost always in the context of the green economy, where we try to compete with the world's leaders: carbon neutrality, water problems, the transition to renewable energy, and so on. These are sound initiatives. But in the logic of ESG itself, environmental protection comes last, after the development of governance principles and corporate social responsibility.

Second, in developed countries the environmental agenda gained strength only after they had built up corporate governance and social responsibility. When Western countries speak of ESG, they take it as given that governance and social responsibility have already been settled. In our case, the last two are not nearly as smooth as we would like. We need to understand that social responsibility cannot be built without corporate governance, and that there is no point in turning to environmental issues until the problems of people are resolved. There is little use in worrying about emissions when people are dying at our plants and mines for lack of elementary working conditions.

The tragedies at ArcelorMittal and Kazakhmys, the cancer patients in the country's industrial regions, and the statistics on workplace injuries clearly fall short of what high corporate social responsibility would look like. We are still at the stage of wild capitalism, when workers' rights carry little weight and can be skimped on to maximize profit. I have worked at uranium deposits, and once I travelled to Canada to visit its largest mine. In Canada, people have no contact with the ore at all: robots and automation do everything, masks are everywhere, and ventilation and dust extraction are very powerful. At our mines, ventilation and dust extraction are more often a formal attribute than a necessary part of how a mine operates. In the West, such a mine simply would not be allowed to open. The same applies to almost all our mines, plants, combined heat and power plants, and so on.

Corporate governance in Kazakhstan is likewise more of a formality than a necessity, and the institution of independent directors is still in its infancy. Perhaps only the banking sector can boast a more or less well-built corporate environment, and it cost the country tens of billions of dollars.

So, as far as ESG is concerned, I would like us to start by developing corporate governance in large businesses and the quasi-public sector, then move on to working conditions and social responsibility, and only after that turn to the green economy.