Responsible Business Conduct for Sustainable Infrastructure in Kazakhstan, Mongolia and Uzbekistan

Infrastructure investments are central to the sustainable development of Kazakhstan, Mongolia, and Uzbekistan. Top-level policies in each country such as Kazakhstan’s Strategy 2050, Mongolia’s Vision 2050 and Uzbekistan 2030 foresee a significant expansion and modernisation of energy generation and transmission, roads, and railways. Mining and industrial transformation are also high on the agenda. The countries’ ambitious carbon neutrality and green transition strategies and commitments also require large investments in renewable energies, while infrastructure construction and operation must be energy efficient. Moreover, better regional connectivity of energy and transport infrastructure is needed for increased intra-regional trade and better integration in global value chains.

Greater attention to responsible business conduct (RBC) can help avoid and address adverse impacts of infrastructure and attract quality investments. RBC due diligence helps infrastructure companies understand which adverse impacts they risk creating and identify priority responses based on meaningful stakeholder engagement. Governments can put in place an enabling environment, with clear RBC expectations of businesses, incentives through economic policy and a framework for state-owned enterprises to lead by example. In turn, this helps bring on board foreign and domestic private investors who are integrating RBC principles in their core business and can contribute positively to sustainable development. Their investments are essential for mobilising the necessary resources for sustainable infrastructure development in Kazakhstan, Mongolia, and Uzbekistan.

In all three countries, adverse impacts of infrastructure has affected people and the environment, limiting infrastructure benefits. Key concerns include insufficient respect for land rights and livelihoods, and the protection of workers; limited powers of labour, inspections, as well as high greenhouse gas emissions, environmental degradation and pollution. For example, in Mongolia herders and their livestock can be affected by development of mines and roads, while in Uzbekistan concerns are raised regarding the protection of land rights and in Kazakhstan regarding workers’ occupational health and safety in infrastructure sectors. Green transition infrastructure such as renewable energy can also affect issues such as land and biodiversity and requires careful planning and implementation safeguards.

Kazakhstan, Mongolia, and Uzbekistan have taken important steps to promote RBC in infrastructure development, with opportunities for learning and exchange. They have enhanced legal frameworks to further align expectations of businesses with international standards on labour rights, the fight against corruption, and the protection of the environment. State-owned enterprises are enhancing their business practices, encouraged by public owners. There is a strong dynamism in sustainable finance, leading to growing attention on RBC in infrastructure financing. While challenges are broadly shared, the countries have made progress in different areas. For example, with the National Contact Point under the OECD Guidelines for Multinational Enterprises (OECD MNE Guidelines), Kazakhstan has a lead institution to promote responsible business conduct. It is also promoting best available techniques (BAT) for environmental protection. Mongolia has adopted a National Action Plan on Business and Human Rights and is introducing social aspects in impact assessments. Uzbekistan has a dedicated strategy to promote Environmental, Social, and Governance (ESG) risk management in state-owned enterprises and is stepping up monitoring and enforcement of environmental standards. This provides ample space for peer learning and exchange.

The governments of Kazakhstan, Mongolia, and Uzbekistan can undertake key actions to promote RBC in infrastructure development. A critical first step is to raise awareness of RBC in infrastructure development across government and businesses. Effectively applying existing standards of business conduct in each country would substantially improve identifying risks through impact assessments and ensuring businesses address those risks in line with regulation. Given the strong role of state-owned enterprises in each country’s economy, expanding their leadership in RBC could have important knock-on effects for commercial enterprises. Governments can also provide stronger incentives for RBC through clearer expectations in their procurement, investment policies, and public-private partnerships. They can also encourage businesses to engage meaningfully with stakeholders. Governments need to consider how their energy policies can better incentivise investments in energy efficiency and renewable energy. Finally, regional infrastructure development and connectivity are high on the regional political agenda, all three countries can also promote RBC in regional dialogue and co-operation.

Aligning with OECD standards can help attract companies that strive to meet RBC expectations as strong partners for sustainable infrastructure development. OECD standards, notably the OECD MNE Guidelines and the various Due Diligence Guidances, underpin policy initiatives in an increasing number of jurisdictions across the globe and requirements set by investors and stock exchanges. This is also the case for the minerals sector, which is highly relevant to the economies of Kazakhstan, Mongolia, and Uzbekistan. Aligning with OECD standards can therefore help Kazakhstan, Mongolia, and Uzbekistan to create an enabling environment for RBC that connects with international partners and investors.