CORPORATE SOCIAL RESPONSIBILITY

Corporate social responsibility

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In 2005, OAO RAO "UES of Russia" acceded to the Social Charter of Russian Business initiated by the Russian Union of Industrialists and Entrepreneurs (Employers). The underlying principle of interaction among all the Charter’s members is the recognized commonality of entrepreneurial interests and economic and social responsibility. According to these principles, the Company assumes responsibility for the quality of its services, compliance with labour rights and business ethics values, respecting the tax discipline, and minimizing the adverse environmental impacts. The social responsibility is not an optional extra to the Company’s operations, but an integral part of the business decision making process.

The corporate responsibility of OAO RAO "UES of Russia" is broader than that of an ordinary joint-stock company. The reason is that the Company plays a vital role in ensuring reliability and accessibility of the electricity industry as part of the public infrastructure, and the need to implement the sector reform. As the Parent Company, OAO RAO "UES of Russia" is responsible for the compliance of its SDCs with the principles of socially responsible business.

Based on that premise, the Management Board of OAO RAO "UES of Russia" approved in 2005 a number of fundamental documents with regard to the implementation of corporate social responsibility. These documents are the Concept of Non-Financial Risk Management incorporating the proposals of the Company's SDCs, the RaEL Association, and the All-Russia National Electricity Trade Union; and the Concept of Environmental Policy Implementation. Also, the Management Board broadly approved the Concept of corporate policy on charity and sponsorship.

In 2005, OAO RAO "UES of Russia" developed approaches to managing non-financial risks and created the organizational and methodological framework:

	the Commission for Non-Financial Risk Management was set up;
	a priority risk list was made to take prompt risk mitigation measures;
	a range of professional development events was organized to develop new understanding and skills among the Holding Company’s employees;
	a number of pilot projects are being implemented at subsidiaries with regard to certain categories of risks and building non-financial risk management systems.

In 2006-2007, the Company and its SDCs will work together to analyze and incorporate the non-financial risks into the energy companies’ development strategies.

The social responsibility reporting is an essential element of the non-financial risk management process. In 2005, OAO RAO "UES of Russia" issued its first corporate sustainability report. The report for 2004-2005 was prepared on the basis of international standards, primarily, the GRI Sustainability Reporting Guidelines; the relations with consumers, suppliers, and local communities have been presented taking into account the requirements of the AA1000 Stakeholder Engagement Standard (AA1000 SES). OAO RAO "UES of Russia" is the first Russian company that applies the standards and actively contributes to their improvement. The Company’s representatives are members of the Task Force for the preparation of the GRI Energy Protocol. The report presents the information on the Company’s contribution to the country's economic development, its social and environmental impacts; it also analyzes the link between the Holding Company’s corporate policy, governance, and performance, the practical aspects of relationships with customers and suppliers, and other aspects of non-financial risk management. The full text of the report has been posted on the website of OAO RAO "UES of Russia".