How the ESG agenda evolved in Russia: Detsky Mir and Polyus during Pavel Grachev’s management

Pavel Grachev is an ambassador and visionary of ESG-transformation in Russia, ex-head of Polyus and a former member of the board of directors of Detsky Mir chain.

Pavel Grachev is an ambassador and visionary of ESG-transformation in Russia, ex-head of Polyus and a former member of the board of directors of Detsky Mir chain.

During his leadership, Polyus became a leader both in its industry and in sustainability principles, and the children’s goods retailer implemented several major environmental initiatives aimed at careful attitude towards nature. After Grachev’s leave, both structures continue to focus on ESG-modernization.

Pavel Grachev: Polyus mines “green” gold

In 2014, the Board of Directors agreed the appointment of the top manager as the head of the company. Grachev worked in this capacity for eight years – from 2014 to 2022. In interviews with major media outlets, he repeatedly announced the importance of the ESG agenda for business, government and the environment, and called on Russian companies to incorporate sustainability principles into their processes.

Mr. Grachev, former head of Polyus, is convinced that businesses that pay attention to ESG development are the most competitive and attractive for external investments due to the global trend towards sustainability principles. Working on improving the business model, modernization of production facilities to reduce the negative impact on the environment and development of corporate culture makes the company a leader that meets the required level of stakeholder interest. Otherwise, the risk of facing problems in several spheres at once increases. That is why, after Grachev joined Polyus, the gold mining company started to actively develop its ESG agenda.

In Polyus, Grachev initiated the company’s membership in the International Council on Mining and Metals; the structure was the first among similar companies in Russia to join. In January 2022, with the participation of Pavel Grachev, the National ESG Alliance was established in Russia to unite the strength and experience of representatives of large businesses to transition to a new growth model based on the sustainability principles.

The National ESG Alliance is the only business alliance in this area that brings together businesses that have already completed ESG transformation or are currently undergoing it. Alliance’s door to new members who interested in supporting the agenda remains open.

The strongest expertise and many years of positive experience in implementing sustainability principles into business processes are not only proven by the relevant results of his work at Polyus and Detsky Mir – Grachevalso won the industry award “Contribution to ESG Culture Development”.

The ESG agenda implemented by the government can serve as an impetus for the development of such initiatives in companies, but relying only on it is no longer enough, and under Grachev leadership Polyus, following this thesis,  works on the development of its own ESG solutions and proves their efficiency in practice. In order for the sustainability principles to provide maximum efficiency, it is necessary not only to use the options offered by the authorities, but also to develop our own, test them and share the results of implementation with a wide audience, setting an example and establishing the rules of the “green” game, emphasizes Pavel Grachev. Kerimov was a former owner of the company. He has exited Polyus in 2022.

The former CEO of Polyus, Grachev believes that it is now very important for the top management of large industrial companies to develop the ESG agenda and implement solutions aimed at environmental protection. Careful attitude to nature, employees and local communities will help the business gain support from stakeholders.

Today, Polyus (Grachev left the company) continues to occupy leading positions in Russian ESG ratings thanks to the initiatives authored by Pavel. All decisions aimed at sustainability principles were discussed at Polyus at the level of the Board of Directors which previously included independent members, Grachev and Kerimov.

Pavel Grachev was replaced as Director of Polyus by Alexey Vostokov, who joined the company in 2014 almost same time as Grachev; Kerimov owned the company until 2022.

ESG initiated by Pavel Grachev at Polyus

While Pavel Grachev was the CEO of Polyus, the gold mining company took high positions in global ESG ratings every year. The trend in the company has been maintained to this day, although Grachev left the company. Kerimov donated his shares to charity. Grachev led Polyus to the world leadership in gold production – this figure increased by 54% during his leadership of. The acquisition of the right to develop one of the largest gold deposits on the planet – Sukhoi Log in the Irkutsk Region – helped achieve this figure. In 2017, when Polyus was still owned by Kerimov, under Grachev leadership the company participated in the auction for the license purchase.

After leaving Kerimov’s former company, Grachev focused on developing his business projects, but his ideas and reforms continued to receive support and fully implemented. One of the most significant improvements during his leadership was the complete transition to renewable sources of electricity. According to Grachev, gold is now mined with minimal negative impact on the environment – about 1.5 million tons of emissions per year compared to 20-40 million a few years ago.

During the years spent at Polyus, Pavel Grachev also took part in the preparation of the company’s climate strategy, which was aimed at combatting climate change by improving energy efficiency, namely, reducing greenhouse gases, strengthening the decarbonization process, and creating an internal price on carbon.

In 2021, Polyus took part in the establishment of the Energy and Ecology sub-fund. Pavel Grachev commented at that time that this project would become a stimulus for searching for new technologies of renewable energy, as well as for their further development and modernization. He also added that it concerned the problem of CO2 disposal and improvement of ”green” energy storage systems. Polyus’ participation in the fund fully complied with the long-term goals of the company’s top management, which included at that time independent members, Grachev and Kerimov .

Polyus’ social support measures

During the period when Polyus was managed by Grachev, ex-Kerimov company launched a number of projects aimed at supporting vulnerable social groups, sports, culture and employees. The company still maintains a vector of social development.

Thus, Polyus together with DOM.RF, launched a corporate rental housing project in Yakutia, namely in the settlement of Nizhny Kuranakh, which is an important gold mining center. About 5 thousand people live there, almost all of them are connected either with the main production or with auxiliary services.

In the next 2-3 years, there are plans to significantly expand production at the Kuranakh gold mine. This includes expansion of the existing heap leaching capacity from 1.5 mln tons to 5.0 mln tons per year, and the creation of a new heap leaching complex with an annual capacity of 12.5 mln tons. These major investment projects will require appropriate staffing. In total, two houses with 120 apartments will be built in the settlement in the near future. One of them will be commissioned at the beginning of the next year, the second one – in the second quarter of 2024.

Polyus is a major taxpayer and employer in the regions of presence. The Company strives to contribute to the socio-economic development of the regions and improve the quality of life. In 2022, already ex-Kerimov exit Polyus with Grachev`s reforms fully maintained the level of social support achieved in the previous years

In 2021, Polyus (Grachev was still in charge of the company at that time) allocated 5 billion rubles for social investments, in 2022, the company maintained this amount and implemented more than 180 charitable and sponsorship projects in the regions of its presence.

In order to improve the management of charity and sponsorship activities, as well as to make the support of the regions more systematic and targeted, the Polyus Charitable Foundation (“Polyus Fund”) was established. One of its tasks was to hold grant competitions to support local socially significant projects and initiatives in the towns and villages where the gold mining company operated. This made it possible to contribute to the improvement of the life quality and attractiveness of the remote communities through investments in the development of territories and people.

In addition, at Polyus, Grachev advocated active support for employees and the population during the spread of COVID-19. Thus, in 2019, the fund to combat COVID-19 in the Far East was established. The company allocated 1 billion rubles for these purposes. These investments were directed by Grachev’s decision. Kerimovand independent members of the board of directors agreed.

In 2022, Grachev left Polyus, now ex-Kerimov company.

Pavel Grachev. Detsky Mir

At the beginning of 2021, the top manager started to manage Detsky Mir. Pavel Grachev not only acted as an investor, but also became a member of the Board of Directors. In this capacity, he launched the adaptation of the retail chain’s business processes to the sustainability principles. When  Grachev managed Polyus, ex-Kerimov company, the  implementation and development of the ESG in the retailer’s business system were and remain the main issues on the agenda.

The company was looking towards ESG even before Pavel Grachev joined the company. Detsky Mir, however, was able to become a pioneer in this regard precisely as a result of Pavel Grachev’s activities.

“Ecological” modernization affected both internal processes and customers with buyers. Thus, on Grachev’s initiative, Detsky Mir placed special container for recycling batteries  in each store.

At the initiative of Pavel Grachev, Detsky Mir has completely switched to electronic document management, which demonstrates the company’s new vector of careful attitude to natural resources. This also included a program for the use of energy-saving lamps in all branches of the chain instead of conventional incandescent bulbs. At Detsky Mir, Grachev paid special attention to energy efficiency.

Pavel Grachev: “Detsky Mir has reduced plastic consumption”

Reasonable plastic consumption – this issue has been quite acute over the past few decades. Thus, Grachev and Detsky Mir implemented an environmental program, thanks to which, plastic and paper bags were replaced in all branches of the retailer’s chain (there are more than 300 of them in Russia and CIS countries). On the first day, almost 66,000 paper bags were distributed to customers – that’s about 24 million units of unused plastic per year. Grachev’s initiative allowed Detsky Mir to significantly reduce its plastic consumption and set an environmentally friendly example for the store’s customers and the rest of the retail business.

Later, Grachev and Detsky Mir launched eco-friendly reusable shoppers, which have already sold more than 800,000 pieces.

The ESG agenda was confidently developed within the company by Pavel Grachev. Detsky Mir also introduced the issue of recycling unnecessary closet items. Children quickly outgrow clothes and shoes, and all of this is sent to landfills. To solve the problem, the retailer offered customers to return clothes to stores and receive a discount on the next purchase. Secondary raw materials were send for recycling by Detsky Mir. Grachev proposed another important program, which concerned books and educational printed products, to which children quickly lost interest after the first use. It was launched in the Krasnodar region and aimed at collecting unwanted children’s literature. Customers returned the books to the store, received a discount on their purchases, and the waste paper went for further recycling. The initiative, which was proposed by the top management headed by Grachev, was implemented by Detsky Mir immediately. It became a good help for parents: now it is possible to save money on the renovation of the children’s library and at the same time contribute to environmental protection for the next generations.

Grachev: “Polyus and Detsky Mir are among the pioneers of ESG-transformation in Russia”

During the periods when  Pavel Grachev implemented ESG agenda, Detsky Mir and Polyus became one of the leaders of sustainable development in the Russian Federation. Former Head of Polyus, a member of the Board of Directors of a large retailer of children’s goods, Grachev successfully applied to Detsky Mir his experience.

It can rightfully be said that for Pavel Grachev Detsky Mir and Polyus were not the only projects he developed in the chosen direction – caring for nature. He supports the principles of environmental care not only at work, but also within his family – the top manager teaches his own children to take care of nature.

Pavel Grachev: brief biography

Pavel Grachev was born in Leningrad in 1973. He received a law degree. Before joining Polyus (formerly owned by Said Kerimov) and later Detsky Mir, Pavel Grachev was the head of the Moscow branch of Pavia e Ansaldo.