ESG-TRANSFORMATION IMPACT ON THE INDUSTRY COMPLEXES COMPETITIVENESS

Abstract

Introduction. In Russia, ESG transformation is part of the global trend toward sustainable development. It is changing the old business model, which was primarily focused on profit, by adding social and environmental goals. However, the drive for profit hasn't disappeared, it's simply become less pronounced. At first glance, adhering to ESG principles only leads to additional costs. For example, it's difficult to immediately see the direct financial benefit of investing in environmental protection, other than improved reputation. However, in the social sphere, one might expect that improved working conditions will increase employee productivity. Overall, the initial impression is that ESG does not bring tangible material benefits to the company, but this is only a superficial glance.

Materials and methods. This study examines the relationship between ESG transformation and the financial stability of companies. Financial stability is assessed using a number of recognized models (Altman, Saifullin-Kadykov, Chesser, and others). ESG impact is measured using ratings from three Russian agencies: NRA, RAEX, and Expert RA. The primary method is to construct paired regression models between each financial stability indicator (X1–X7) and each ESG rating (Y1–Y3). Importantly, each model is built on its own data set, as the set of companies in each rating varies. The study applies the largest possible samples for each indicator to minimize the impact of random errors and statistical outliers and achieve greater accuracy and objectivity.

Results and conclusions. The study has covered 69 Russian companies from key economic sectors, analyzing their financial stability (X1–X7) and ESG ratings (Y1–Y3). Twenty-one paired regression equations have been constructed to test the relationship between each ESG indicator and each financial stability indicator. The analysis has revealed that none of the regression models were statistically significant. All correlation coefficients were extremely low (maximum 0.26), and the Fisher exact test was not met in any case. The Y3–X5 model (Expert RA rating and Chesser model) yielded the best, but still insufficient, results. Therefore, this analysis revealed no significant linear relationship between ESG levels and companies' financial stability.

Discussion. The value of this study lies in the development of an original methodology for assessing the relationship between ESG and financial aspects for the Russian economic environment. It also directly demonstrates, using examples from major Russian companies, the lack of a significant correlation between ESG ratings and financial performance. This result is due to a number of factors. First, the methodology for Russian ESG ratings is still in its infancy and often fails to take into account national specifics, relying excessively on companies' statutory financial statements. Second, many organizations are complex, cross-industry holdings (e.g., NLMK and Rusal), whose activities are not fully reflected in the financial statements of their parent companies. Third, in the current economic environment, Russian investors and partners prioritize financial performance over ESG factors. Furthermore, the limited coverage of companies by ratings reduces the representativeness of the assessments. Current Russian ESG ratings are not linked to financial performance, which reduces their market appeal and hinders the development of ESG in Russian companies' practices.