1 June 2020

Raising the quality of life

‘The amount of financial and non-financial expenses shows not so much SUEK's generosity but more the extent of issues that need to be addressed’
Interview with SUEK's Deputy CEO, President of the 'SUEK to the Regions' fund Sergey Grigoriev

The question I wanted to be answered in this interview was very simple: why do large companies all over the world, including in Russia, strive to observe UN standards aimed at sustainable development of territories? Do they only follow generally accepted rules, or is it because companies need to be in harmony with their employees and the cities and towns where they do their business? The answer is that social responsibility is a real policy consisting of hundreds of activities, from publishing newspapers and financing hospitals to assisting in the establishment of new businesses, and it improves the quality of life in Russia.

–I would like to begin with the most general issue: why do large companies take social responsibility projects so seriously? Why do they need this, apart from meeting certain standards, politeness and other formalities?

–At this point, we should touch on the history of the domestic coal industry. A quarter of a century ago, the situation was rather problematic. In the late 1990s, the government decided to privatise the entire industry. By the way, this turned out to be the best privatisation example in Europe. Even our colleagues from the former Soviet Union became interested in our experience. "How did you do this?" they asked. Moreover, this was done by the supposedly conservative government headed by Yevgeny Primakov, where the former head of the USSR State Planning Committee, communist, Yury Maslyukov, was in charge of economics. Privatisation was so successful that the largest coal companies have been owned by virtually the same people since then. It took place in difficult times, so the state and companies agreed that the latter should take responsibility for the development of mono-industry mining towns. This is important because all Russian coal companies actually operate in such towns. The biggest problem of mono-industry towns, against the backdrop of unpaid salaries and production decline, was the social environment. It was obvious that, for the industry to develop, social issues needed to be addressed. Otherwise, people would simply leave. People needed to be inspired, stimulated and provided with normal living conditions in order to stay and understand that they and their children had a future in their hometowns. This is important because in such a way companies may count on qualified, thoughtful and stable family workers.

–Did all this happen in 1999-2000?

–The privatisation of coal companies in general ended in 2002. The industry quickly started to grow, coal producers found their export niches and resilient sales markets within the country; this contributed to the development of companies in our industry. Therefore, the foundations of our social policy were laid. Although crises came later and coal prices fell from time to time, the tradition remained. In challenging years, we preferred to do without some things, setting more ambitious social goals. At the same time, we always understood that we should not be a substitute for the state.

–Why is it so important not to be a substitute for the state?

– I came to SUEK in 2007. It was clear that city, municipal and regional authorities could already receive funding from budgets of all levels to deliver many social programmes. However, they did not know how to spend this money and how to invest the received funds. We drew on the proverb saying, ''If you want to help someone, do not give them fish. Only give them a fishing rod.'' At that moment, it was important to abandon the former approaches, when the state simply had no money and private companies needed to 'patch the holes' by themselves. Local and regional authorities needed to be shown how to deal with money from budgets of all levels and how to invest it in a better quality of life without reducing expenses on social programmes and charity.

–Do you want to say that, in the first decade, the company invested in social programmes and charity, and later your efforts were focused on teaching local authorities to spend money from the federal budget and create business plans?

–Yes, and we started to invest more in slightly different things, in improving the quality of life through personnel retraining and reviving local communities. We invested in publishing newspapers and in holding contests; we offered grants for people to be active and not to sit and wait for a generous businessman to come and finance their needs. They had to learn how to set up the necessary processes and how to engage in social entrepreneurship. Of course, when there was not enough money or in case of emergencies, we helped in a more direct way. However, in regular situations, we try to spend money primarily on organising the activities of local communities, which, of course, does not eliminate the need to solve pressing social problems through the financial participation of the company.

–As for emergencies, now, in the context of the COVID-19, what are you focusing on?

–Back in mid-March, we contacted medical institutions in our regions, and, from that moment on, we have been trying to provide all possible assistance. Additionally, we stay in close contact with regional authorities, as our assistance should meet the immediate needs of the regions. The focus of assistance in recent months has been on the purchase of personal protective equipment and other equipment, which is handed over to hospitals. In some cases, we buy petrol for ambulances. Using special equipment for suppressing coal dust in warehouses, we created special-purpose road trains for disinfecting public spaces in our cities and towns. They received expert approval. In three regions, our service units initiated the production of indoor air disinfectants. All in all, we are doing what is really needed at this particular moment.

At SUEK, dozens of volunteers have joined the #WeTogether initiative, and, working in contact with the All-Russia Popular Front, municipal administrations and doctors, they offer help in the most critical areas. Sometimes they deliver food, fruit and hot meals to medical workers. Sometimes doctors ask for help with their rest time. All these people, because of the situation, live in hospitals for weeks. Our volunteers bring TV sets to break rooms in hospitals or equip showers with booths. Everything depends on the particular needs. We even held an online competition for the manufacture of protective non-medical masks. As a result, almost 2,200 masks were made.

–Talking about the quality of life, on some basis, is there a reasonable ideal, a level where people feel comfortable? I remember the first time we covered regional medicine and went to Tyumen, where there was a maternity hospital popular across the country. Does your company have an ideal standard of living, a way of life in your mono-industry towns, and how do you measure it?

–Our top managers say that we need not only a reasonable ideal, but a garden city. However, most importantly, our ideal should meet the expectations of the people who live in these mono-industry towns. Because you cannot just come and say, ''Now I will make everyone happy.'' This cannot be done overnight. Maybe people want something completely different, not what we think. For example, in Sagan-Nur (Buryatia) they wanted a swimming pool, in Drovyanaya (Zabaikalye) they asked for a sport palace with a multi-purpose sport ground, and in Borodino (Krasnoyarsk region) people needed a winter sport palace. Therefore, we communicate with local residents, with those living in our cities and towns, to understand what they want. What is on the agenda right now?

–What do they want?

–It depends on the social and economic development of a particular territory, on the quality of roads and on the remoteness from the regional centre. It also depends on the quality of medicine, on the opportunities to spend free time and do sport. In successful years, everyone wanted swimming pools. Before that, people asked for skating rinks. Of course, we could not build ice palaces everywhere by ourselves, without assistance from the state. Nevertheless, together with Gazprom Neft (they invested much more, as this originally was their project), we built a wonderful ice palace in Leninsk-Kuznetsky. It is suitable for professional hockey teams and federal level figure skating competitions. This cannot be done everywhere, but we are quite capable of building a rink with a heated locker room. Why is there such a demand now? Many towns have reached a new requirement level. People want to engage in sport. Gyms and outdoor and roofed stadiums are typical now. However, a lot depends on the territory. In the Krasnoyarsk region, there is Borodino, a town with the Olympic Reserve School for our biathlon team. There, they first needed a state-of-the-art shooting range for achieving high results and a ski track. When the ski track was ready, everyone asked for a swimming pool. Now, they have one pool, but need another one. However, it is important to understand that, in addition to sport, there are also basic things such as education or medicine. I will say a seditious thing: it seems to me that the state underperforms a bit, first of all, with regard to schools and the quality of education. We have to make significant efforts to retain and motivate teachers.

–It happened when teachers’ salaries were cut?

–Yes. We immediately witnessed the loss of personnel. We had to stop it and succeeded. Various approaches, including competitions among teachers with prizes for the winners, helped us to do so. There was a similar problem with doctors. By the way, SUEK's very first major social project in the Krasnoyarsk region was the commissioning of a modern six-story hospital facility in the town of Borodino. It was a delayed, Soviet-era construction project, and we invested in completing the construction and equipping the hospital. Medicine is a sore spot for the regions in general. This is true of both treatment and diagnosis. We solved this problem in a variety of ways. For example, the company signed a long-term agreement with the Children's Medical Centre affiliated to the Presidential Administration. There is a children's rehabilitation centre called 'Polyany' near Moscow. Every year, we bring youngsters from mining regions there. Many of these children would not have visited Moscow otherwise. They come back with vivid impressions: city tours, museums… In addition, they are diagnosed, treated and given instructions on how to continue their treatment; if needed, the doctors are ready to consult with them again. We even brought doctors to our regions, where there are no relevant medical professionals, and they received patients. Adults, miners and industry veterans are also taken to the Presidential Administration Rehabilitation Centre. We hold workshops for doctors. They come to Moscow and learn from the experience of the best medical workers. Of course, within reasonable limits, we also purchase medical equipment for local hospitals. One time, we equipped a health centre for miners in Leninsk-Kuznetsky. It is now equivalent to any advanced federal centre. We delivered ambulances there, and to Primorye and the Khabarovsk and Krasnoyarsk regions. However, you cannot solve all the problems like this. For example, there is a hospital in the town of Chegdomyn (Khabarovsk region), completely re-equipped, with nice apartments for doctors. However, they simply have no personnel in a number of health professions. You need to travel 14 hours by train from Khabarovsk into the depths of the taiga in order to get there. Therefore, people still have to be transported to Khabarovsk for treatment.

–In his memoirs, Henry Ford describes the episode of creating his own hospital for workers. Why is the company, the main employer in a town, unable to build a private medical facility?

–Firstly, even for the country's largest coal company, this entails very high costs. Secondly, medicine is not our field. In Soviet times, the Ministry of Coal Industry had its own health resorts and summer camps, but now such an approach is impossible. It is better to finance those projects that already exist as part of a partnership between business and government.

–Ford eventually set up a hospital that turned out to be cost-effective... It did not need financing.

–How do you imagine that? We are not Henry Ford; we do not have a car factory city... Instead, we have 27 mono-industry towns, and if we build hospitals everywhere, our network will be the largest in Russia. In this case, we will not invest in production, process equipment, occupational safety or the environment. You should also understand that the state often has enough budget for medicine. We have no reason to substitute it. Nevertheless, we feel a special responsibility not just for the quality of life in our cities and towns, but also for maintaining social and economic stability in them. The question of stability is, first of all, the question of keeping high-quality jobs. Obviously, it all depends on people. In Leninsk-Kuznetsky, the Chief Medical Officer is Vagram Agadzhanyan. He established the Shakhter Health Centre. We know him very well. He is an amazing person, a doctor well-known across the entire former Soviet Union. When he undertakes a task, everything will be done in a very effective way. He came to us and gave an account of every penny. You will not find such a person everywhere... Similar up-to-date medical facilities exist in the Krasnoyarsk region. They include polyclinics, health posts at production units and a health resort in a pine forest with a swimming pool and rehabilitation training devices, treatment rooms and equipment that cannot be offered by any health centre in the region. Employees, their families and retirees, while relaxing there, often say, "Why should we go elsewhere, when we have such a pearl nearby?" In Buryatia, in Sagan- Nur, we opened a very good modern outpatient clinic. Sagan-Nur is located far from Ulan-Ude (regional centre), in the Mukhorshibir district, still, despite all the logistical difficulties, we delivered the project at a high level and are proud of it.

–How much does a good town outpatient clinic cost?

–With the equipment, it cost approximately 100 million roubles [$1.5m]. We financed the construction together with regional authorities. The price included a building with all the necessary equipment and a number of departments for various health issues. Doctors for this outpatient clinic were readily available, since the regional government paid attention to that beforehand. We also helped with the swimming pool, but the residents then said, "Everything is fine, though we still need a normal recreation centre." We answered, "You have a hall." They said, "This is a small hall, and we need a large recreation centre." So we began to build a centre. Thank goodness, the project also received funds from a federal programme. We co-finance, but the major share comes from the state. That is, Maslow’s hierarchy of needs always stays true. When I joined SUEK, no one spoke about swimming pools. We were focused on schools and hospitals, repaired roofs and asphalted main streets. Then fountains at town squares came into fashion. We began to shape central squares with enough room for fountains. Town squares naturally became centres of gravity. Then people demanded stand-alone playgrounds. Our CEO, while driving around Moscow, took photographs of playgrounds built by Sergey Sobyanin, Moscow City mayor. We tried to do it decently, in a creative fashion, and held competitions for the best development in this field.

–That is, you have your own standard of a good town.

–Yes. We can give an example of at least several towns with a very good quality of life: Leninsk-Kuznetsky in Kuzbass and Nazarovo and Sharypovo in the Krasnoyarsk region. We built several modern high-rise buildings in Dubinino, a miner's town near the Berezovsky open-pit mine. These towns boast nice houses, well-equipped playgrounds, libraries and recreation centres. We have Borodino, the mining capital of Krasnoyarsk, our trademark. In recent years, this city has been transformed beyond recognition and now features modern landscaped areas, new shopping centres, a beautiful recreation centre, a renovated library, a winter sport palace… We have managed to slow down migration.

–You were the first company to start making all-round investment plans for local towns.

–Yes, later the Mono-Industry Towns Development Fund recommended them for all mono-industry towns. Thanks to Viktor Basargin and this fund, in my opinion, we quite easily overcame the 2008-2009 crisis. It was then that Viktor Basargin, the Minister of Regional Development at the time, set up the fund. During the crisis, it distributed money among those requesting it for production diversification, as production declined. I went to the Ministry to present our projects, and I saw the leaders of the largest companies coming there as well. Together with the Kemerovo regional administration, we presented a road project. It resulted in an amazing road and cut the driving time from Leninsk-Kuznetsky to Kemerovo down to forty minutes. In Borodino, in cooperation with the local administration and the Ministry of Construction of the Krasnoyarsk region, we improved the historical town centre, the central square, the town park and the adjacent territory. It now hosts a museum unique for the region: a town history alley and an open-air museum of the largest open-pit mine in Russia, Borodinsky, with modern art objects, installations and landscaping. Later we presented our CIPs, that is, comprehensive investment projects that develop local territories and improve the quality of life across all aspects. The fund liked this idea and renamed CIPs master plans. At the Skolkovo Innovation Centre, the fund initiated training in master plan development for town mayors and their teams.

–Do all these community-focused investments ultimately affect migration? Have you stopped the outflow?

–In recent years, there has been only a minor outflow of local people, which is statistically confirmed. Nevertheless, the problem remains. We have an initiative called 'SUEK’s Work Teams'. Up to now, 17,000 active senior secondary school volunteers have made their contribution. Children from a Far Eastern district, where our branch was then in a critical condition, once came to the meeting of these work teams. Local coal reserves were over and the production was declining. Some employees were transferred to other units, but some stayed there. So these volunteer girls arrived. I asked, "How do you see your future?" They said, "You know, we've got to go. Everything is closing down; no good will come of it. If the town has no large companies left, all life will be gone." Of course, we eventually solved the problem in the Far East by purchasing a land plot with a coal seam from a company that owned it but did not start mining. We saved our unit and the mono-industry town. In the Krasnoyarsk region or Kuzbass, the young say, "We will receive our degrees and come back. Life is no worse here." Although all the same, the temptations of big cities exist. Small business is attractive for graduates.

–In the US, large businesses heavily support small companies in the regions where they operate. They believe it is important for the resilience of cities and towns. Our latest ratings show that, out of five areas such as the environment, charity, infrastructure, labour relations and the development of small and medium-sized businesses, the latter is still underdeveloped. Do you support small and medium companies?

–We try to do that. We ran relevant programmes for Kuzbass and the Krasnoyarsk region. A lot was done there. However, all this can be achieved only in cooperation with the authorities, and not only with regional ones, but also with municipal ones. What was the original idea behind such projects? We had to find occupants for the ground floors of residential buildings. But where? The locals often lacked qualifications. Then we began to teach the spouses of our employees how to be hairdressers and restaurateurs and how to open and manage shops. It has all worked out. Not at once, but nonetheless, it has. In Nazarovo, buildings in the town centre are now occupied by tenants, including shops, clubs and karaoke bars. However, their infrastructure is completely different; they even have three television companies. Unfortunately, in other places the situation is different. We still have towns where everything is not so good, but we are working on it. In this context, the main problem of mono-industry towns is the problem of professionals with university degrees. In the USSR, workers who graduated from Moscow universities used to be sent to Siberia and the Far East. Men came with their wives and came full of hope. Then wives faced the absence of jobs; they had nothing to do while their husbands were at work. Six months later, they started to pack and then left for their hometowns. Their husbands were left alone and began to drink, and even good salaries were unable to motivate them. Therefore, the main task is to involve the spouses, including university graduates, in business and public life. Because the locals settle down on their own, while newcomers need help for their spouses and family members to get everything right.

–These new small businesses are usually service companies?

–Of course, first of all, this is the service sector. SUEK was among the first in the country to develop programmes supporting social entrepreneurship. This area first drew our attention in 2013. It has an intermediate position between charity and entrepreneurship development and can solve a number of problems that are relevant for the regions. Now, we see that all these projects have made our lives better, more comfortable. Graduates of our School of Social Entrepreneurship offer residents a whole range of new services, including teaching infants swimming, football training for pre-schoolers, family tours to a mobile planetarium and many other vital and popular services in the field of education, medicine, culture, sport and social welfare.

–Is it possible for local people to set up a small factory or plant?

–This task is difficult without the assistance from our company. A few days ago (in early May), Sergey Tsivilev, Kuzbass Governor, visited our company Sib-Damel in Leninsk-Kuznetsky. Thanks to investments from the Mono-Industry Towns Fund and SUEK, the company started the production of motors and spare parts and offered maintenance services. Today, Sib-Damel is turning into a large business by regional standards. However, all this would be impossible without engineering assistance from SUEK, without our business relations and without the ability to supply these products to SUEK's plants throughout the country.

–In a few words, what is SUEK's annual spending on social responsibility? How is it related to your profit? How generous are you?

–SUEK's investments in social and public projects in 2019 exceeded one and a half billion roubles [$26m], 3.7% of the company's net profit. Add non-monetary, 'in kind' assistance, numerous 'good deeds' including repair, construction and installation work, children’s playgrounds and sports grounds, landscaping, cultural events, holidays, fairs and festivals. These things are also done by our company.
Source: Expert
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