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ESG agenda is a possibility to grow business at the rate of cryptocurrency

An interview with the Vice-President for Sustainability Consultancy (ESG] at Schneider Electric in Eastern Europe


ESG agenda or sustainability development principles have become even more relevant in Russia. If a company fails to meet these criteria, it can lose business partners, human resources and investors. Domestic companies have started to actively engage in this "green" race. Vice-President for Sustainability Consultancy (ESG) at Schneider Electric in Eastern Europe shares how an equipment producer has managed to become a leader in the field of sustainable development and why it is important to use digital solutions in this sphere today.

– Sergey, how did you come to the sphere of energy?

I have always enjoyed digital products. At the same time, I wanted to find a way to capitalize them, so I earned a degree both in the field of IT and finance. I applied my skills in an energy company, where I integrated IT solutions to optimize costs for energy infrastructure. Gaining valuable experience there, I continued to develop these IT products in the field of sustainable development and energy efficiency. For several years, I have worked for different companies from Russian providers with public ownership to Schneider Electric. My major task has been to develop new business models based on IT solutions and integrate consultancy into sustainable development and energy efficiency. I believe that a symbiosis of digitalisation and ESG agenda, combined with an understanding of how it can pay for itself, directly affects the company's capitalization, the cost of shares and the IRR (Internal Rate of Return. - Editor’s note) of investment projects.

– Schneider Electric is the leader in producing electrical equipment. Why have you decided to work in consultancy?

We had started to work with the issues of sustainable development long before it became mainstream. By the time our ‘hobby’ turned into a trend, we had been ahead of all other companies in the field. So, we decided to create a start-up in consultancy to help our customers in reaching their sustainable development goals and to show by example that it is possible. This year, Corporate Knights has called us company No 1 in the field of sustainable development worldwide.

– What is unique about Schneider?

It is important for us to develop game changing business models to respond to the market trends. Historically, we share the market of ESG consultancy with the Big Four. We develop strategies for decarbonization, energy efficiency improvement and digitalization. We are also ready to integrate these strategies. By the way, we do not always use Schneider Electric solutions. In other words, we act as an integrator and if there is something interesting and competitive in the market, we remain completely unbiased.

– You mentioned that the company wants to provide results. In other words, it wants to become a service to optimise operating costs. Can you tell us how it works?

We offer not just integrating a solution, but integrating it with a guarantee of achieving certain results. We often provide financial guarantees for return on investment. For example, we implement an energy service contract, under which customers invest 100 million roubles, and we guarantee that the payback period will not exceed three years. If after three years the budget of the company receives back 70 as opposed to 100 million in savings, we will compensate the balance out of our own pocket.

In my opinion, this model of energy performance should be scaled not only within our company, but also within any business. In this case, we can say for certain that we will be able to reach carbon neutrality and the goals on preventing the rise in temperature on the planet by more than 1.5-2 degrees in a given time. There is a lack of similar guarantees in business. Very often companies sell castles in the sky, while we sell spaceships with guarantee.

– Are the issues of energy efficiency and sustainable development a mere tribute to fashion in our country?

It was fashionable 2-3 years ago, when only large companies were engaging in sustainable development under a number of green slogans to follow the example and learn from the experience of those, who pursue this agenda in Europe.

Today, everything has changed, since Europe has set the goal to become carbon neutral and produce zero greenhouse gases by 2050. For example, if a green company buys non-green solutions from old factories that produce tons of carbon dioxide emissions, it is inherently not capable of having a low carbon footprint. Europeans have started to examine their providers. Nowadays, the representatives of Russian business working with foreign companies in the European and Russian market have to follow the ESG agenda and demonstrate that they are also green. Thus, the majority of companies have started not just counting their greenhouse gas emissions, but also introducing events to reduce carbon footprint notwithstanding the payback period.

– In other words, the cost of decarbonisation has ceased to be important giving way to the desire of taking a large market share. Is that right?

Currently, we don't assess the payback of a specific solution. We assess the way, in which this solution will affect potential risks of losing the target market entirely or in which this solution may contribute to increasing additional sales. For example, a company buys green energy considering these investments as a way to win an additional market share. They perform benchmarking to understand, where they are in comparison to their competitors.

– How difficult is it to build this ‘green’ market in Russia?

To be honest, it is quite hard. Although the majority of companies have directors for sustainable development now and we speak the same language with them, it is still not that easy to make the business green. It turns out that often, there are not enough companies to bid for a tender for the development of decarbonisation strategy, for example. Very few players know this market inside out and can calculate the required investments, the payback period and financial indicators to demonstrate a final result to the customer.

Unfortunately, in the Russian market there are few consultancy initiatives that can think not only from the viewpoint of the producer, but also from the viewpoint of the business helping the customer to take the right management decisions.

– Is Russia lagging behind the global community in the issues of energy efficiency?

We work with a huge number of companies all over the world and we see significant growth of energy efficiency in Russia. Almost everyone is involved in it. However, Europe is ahead of us in the share of renewable sources in the energy supply matrix in their countries and in the share of renewable energy sources in the energy consumption of large companies. After many years of work in the industry, I see that our customers have become much more informed. Often, our main competitor in the field of energy efficiency consultancy is the competence of the customer. According to the benchmarking assessment that we perform today, the level of energy efficiency in the majority of Russian companies is as high as that of their colleagues in Europe.

– How actively do we perform digitalization in the sphere of ESG and how important is it?

It is impossible to reach the highest level of energy efficiency and optimal use of energy resources without digital solutions. Linking absolutely all units and technological processes together in a single management system enables us to achieve an additional level of productive efficiency. We will never reach this level, if we keep implementing only standard solutions.

Our task is to help with taking these decisions by means of software developed using the elements of machine learning and artificial intelligence. This software analyses all the processes extremely fast based on the big data collected not only from this factory, but also from similar factories all over the world. This task simply cannot be performed by a human, In doing so, the company can reach a new level of payback from energy efficiency events. The same holds good for carbon neutrality. It is Microgrid Advisor (cloud platform managing energy consumption based on demand. - Editor's note) that takes the right decision when to transition to what energy source and what choice will be cheaper and more cost-efficient. When our factory has the sun, electrical network, gas generator stations and storage units, we should coordinate energy consumption in such a way, so that we don’t just become green. The green energy that we use should be cost-efficient and adequate as much as possible. This is what we call green energy digitalization.

– Schneider Electric has established the Green Light Award in Russia. Can you tell us more about it?

The award is aimed at forming an expert community to share best practices and success stories with other market players to promote growth and development in the field. Today, representatives of medium-size and large business take part in the award initiative. They tell each other about specific projects with visible economic benefits and the barriers they come across. It helps us to promote ESG agenda within the business environment in Russia and change the mentality in the large business. We want to demonstrate that one can look at the ESG not only as an obstacle, but as a possibility to grow business. According to the experience of European companies, the growth of capitalization among ESG leaders already keeps up with that of bitcoin. Applications will be accepted till 31 October on the award website.