ESG reporting – a new reality for business in Uzbekistan

In the international capital and insurance markets, companies and projects are under increasing scrutiny from stakeholders who assess the reliability of partners based on their environmental performance, level of social responsibility and corporate governance performance (ESG criteria).
One of the universally recognised ways for businesses to demonstrate their progress in the ESG field is to publish annual sustainability reports. From 2025 in the Republic of Uzbekistan, issuing such reports will become mandatory for many large taxpayers, and in order to meet the upcoming deadline, many companies need to adjust or supplement their business plans now, mobilise resources and find partners for professional support during the annual ESG reporting cycle.
For the companies that are planning their first steps in this area, the key challenges will be:

• defining the reporting boundaries – legal, in space and in time (the choice of significant ESG aspects will depend on which assets will be covered by the reporting);
• selection of reporting standards, which will influence its content and verification peculiarities;
• detailed planning of the first annual cycle of preparation, verification and disclosure of ESG-reporting with distribution of functionalities and resources between the company's structural divisions and external partners;
• adaptation of the company's management system with integration of ESG aspects into it;
• parallel audit of the company's ongoing and planned activities, taking into account ESG criteria of its assessment by stakeholders;
• transformation of the company's stakeholder engagement system towards greater openness, taking into account the changes caused by the ESG agenda of the first reporting year (in particular) and the subsequent period.

Over decades of implementing the global ESG agenda, universal criteria and practices for managing environmental and social aspects of operations have been developed and have taken the form of standards. The following conditions of their application in Uzbekistan should be taken into account by companies when forming their own ESG profile.

With the support of a number of international organisations and within the framework of several international agreements, Uzbekistan is successfully integrating into the global agenda for biodiversity conservation and prevention of adverse climate change. Practically, this is realised, in particular, through the expansion of the network of protected natural areas, increasing the requirements for assessing the impact of planned and monitored economic activities on the environment, accounting for the emission of pollutants (including greenhouse gases), and improving environmental legislation.

Regulatory and legal conditions of economic activity in the Republic of Uzbekistan are being transformed towards greater transparency, environmental friendliness and accountability for violations of environmental legislation. In particular:

• In 2024, the institution of public environmental control with broad powers for all interested citizens is legislatively established.
• Against the background of a number of national initiatives of environmental orientation (e.g. the Yashil Makon project), from 2024 a number of legal norms have been adopted that establish financial liability not only for cutting down, uprooting, damaging or destroying trees and shrubs, but also for the development of project documentation that leads to the above consequences.
• Also in 2024, as part of a set of measures to improve the environmental situation in Uzbekistan, the creation and cultivation of “green belts” on the territory of industrial enterprises is outlined.
• At the end of 2024, it is planned to launch the online platform of the National Transparency System and its integration with the online platform “Green Economy”.

Ensuring the availability and quality of water resources, the scarcity of which is a constraint to the transition to a “green economy” is of particular importance in the environmental and social agenda of Uzbekistan.

For many territories and large water bodies of Uzbekistan there is a problem of accumulated historical pollution inherited from the times of the USSR, when economic activities were carried out without taking into account and preventing unfavourable environmental consequences.

The impacts of many large projects are transboundary and require international efforts to resolve. The same applies to some recipients of impacts, whose significance may differ across national borders (e.g. depending on the conservation status of an area or a particular plant and animal species).

The need for disclosable ESG reporting will incentivise companies to be more transparent: many will need to develop, publish and subsequently discuss with stakeholders a wide range of material on their existing and proposed activities, including the results of impact assessments of their projects and environmental monitoring of their areas of influence.

It is important to realise that a well-prepared sustainability report is only the tip of the corporate ESG-iceberg: it can demonstrate the level of environmental and social responsibility of the company and thus contribute to strengthening its position in the market, but even more important is the “underwater” part – the company's environmental and social management system, the effectiveness of which depends, among other things, on the successful choice of professional consulting partners.