The gargantuan effort companies in Uzbekistan are taking to close the ESG gap with developed economies should be recognised.
One of the most complex areas of Environmental, Social, Governance (ESG) reform is corporate governance – the “G” in ESG. Corporate governance is “the structure of rules, practices, and processes used to direct and manage a company”. It therefore sits at the very heart of how a company functions.
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I was previously a Senior Vice President at Samsung Electronics, founded in 1938. Over almost a century, a comprehensive system of checks and balances has been developed. This has been a long process of trial and error, organic evolution and integration of best practice from peers.
Coming to Uzbekistan, I am working with a country at a nascent stage of its corporate development. Due to tax restrictions, most large companies were not even consolidated entities before 2019, meaning conventional organisational structures were difficult to achieve.
Artel Electronics LLC is Central Asia’s leading home appliance manufacturer and one of Uzbekistan’s largest companies. It was only after its 2020 consolidation that the company could start reforming its corporate governance. I joined as an independent supervisory board member as part of this transformation.
It has been a process spanning over two years. The company has used international legal, financial and management consultants to overhaul its business structures. It has introduced anti-corruption codes, whistleblowing functions and audit committees, both organically and thanks to recommendations.
Our supervisory board sits regularly to analyse, control and guide the company’s operations. I have attended several trainings, educating employees from top to bottom of the company about business operations and responsible management. These practices are becoming steadily embedded in regular business.
Yet it takes time to understand why these changes matter. Good corporate governance provides comfort to all stakeholders. Investors and partners see a collaborative and balanced decision-making process. Employees trust in their organisations And boards can plan strategically thanks to strong, internal communications and robust oversight of operations and the regulatory environment.
There are challenges, of course. In a market unused to organisation, a regular board meeting can be difficult to pin down. Chinese walls between business functions that sit side by side must be over-zealously enforced, especially when information flows are informal and fluid.
Yet early investment means a company like Artel will reap rewards in the future. It will profit as it generates trust and contributes towards increased responsibility within the international business community.
Emerging markets may still lag behind developed economies, particularly in relation to these blanket ESG “indicators”. But, when rapid and genuine improvement can be witnessed, this should be heralded as a great success.
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