Sustainability Report / 2024

The telecommunications sector is not a major source of global greenhouse gas emissions, accounting for an estimated 1.8–2.8% ⁴. However, with the development of the industry, emissions are growing: from 530 million tCO₂-eq in 2002 to 800–2,300 million tCO₂-eq in 2020.

International organizations, including ITU, GeSI, GSMA, and SBTi, are actively developing a climate agenda and standards for reducing emissions. For example, GSMA reports that 29 operators serving 30% of global mobile connections have adopted emission reduction targets in line with the ITU standard, calculated for 2032.

In Uzbekistan, as part of the regulation of the telecommunications sector, as well as the environmental and social aspects of the companies’ activities for the period from 1992 to 2023, the following regulatory acts have been adopted and are in force:

Strategic documents:

Decree of the President of the Republic of Uzbekistan «On the Uzbekistan-2030 Strategy» №-158 dated September 11, 2023.
Decree of the President of the Republic of Uzbekistan dated October 5, 2020, № 6079 «On the Approval of the Strategy «Digital Uzbekistan — 2030» and Measures for Its Effective Implementation» №-6079 dated October 5, 2020.
Decree of the President of the Republic of Uzbekistan dated March 4, 2024, №-112 «On measures to ensure the unconditional implementation of agreements between the Republic of Uzbekistan and the People’s Republic of China and further deepening of comprehensive strategic partnership relations» №-112 dated March 4, 2024.
Decree of the President of the Republic of Uzbekistan dated September 11, 2023, № PP-300 «On measures to ensure the high-quality and timely implementation of the «Uzbekistan-2030» strategy in 2023» №-300 dated September 11, 2023.

⁴ More emissions than meet the eye: Decarbonizing the ICT sector , available at: 2023_07_04_Decarbonization-ICT.pdf

Sector regulation:

Decree of the Cabinet of Ministers of the Republic of Uzbekistan «On measures for the further development of the telecommunications infrastructure of the Republic of Uzbekistan»№-699 dated November 19, 2021.

Environmental regulation:

Law of the Republic of Uzbekistan «On Environmental Protection» №-754 dated December 9, 1992.
Law of the Republic of Uzbekistan «On Air Protection» №-353 dated December 27, 1996.
Law of the Republic of Uzbekistan «On Waste» №-365 dated April 5, 2002.
Law of the Republic of Uzbekistan «On Environmental Expertise» №-73 dated May 25, 2000.
Law of the Republic of Uzbekistan «On Water Supply and Water Disposal» №-784 dated November 3, 2022.

Resolution of the Cabinet of Ministers of the Republic of Uzbekistan «On measures for the certification of products and services to ensure environmental safety» №-318 dated December 26, 1997.
Decree of the President of the Republic of Uzbekistan №-46 «On measures to accelerate forest exploration in the republic and more effective organization of tree protection» №-46 dated December 30, 2021.
Resolution of the Cabinet of Ministers of the Republic of Uzbekistan «On measures to further improve the efficiency of work in the field of household waste management» №-787 dated October 2, 2018.

Social regulation:

Labor Code of the Republic of Uzbekistan №-517 dated December 21, 1995.
Law of the Republic of Uzbekistan «On the Protection of Consumer Rights» №-221 dated 26.04.1996.
Law of the Republic of Uzbekistan «On Equal Rights and Opportunities for Women and Men» №-640 dated September 2, 2019.

According to the program of measures for the implementation of the «Digital Uzbekistan — 2030» Strategy, the main directions for the development of information technologies and telecommunications networks have been identified, including:

In 2024, the Company analyzed key environmental and social legislation in Uzbekistan, as well as the requirements established by the Asian Infrastructure Investment Bank (AIIB). The analysis identified areas for reducing risks in the field of environmental and social responsibility. The table below lists the necessary measures.

E&S assessment and management (in accordance with AIIB recommendations)

ESS for E&S assessment and management (in accordance with AIIB recommendations*)

Uzbekistan laws and regulations

Gaps

Measures to compensate for gaps

ESS 1

The Law on Nature Protection (№ 754-XII, 1992) and CM Resolution № 491 (2001) require an EIA, including an assessment of the impact on the environment and human health. However, climate risks and changes are not considered.

Consultations with stakeholders are often formal, without meaningful involvement. Climate change is not taken into account.

Introduce climate risk assessment as required by the AIIB. Organize transparent consultations with the involvement of all stakeholder groups.

ESS 2

The Law of the Republic of Uzbekistan «On Local Self-Government of Citizens» (№-637 of 2019) requires consultation with local communities when installing telecommunications infrastructure, including antennas and masts.

In accordance with ESS2 requirements, no forced resettlement is envisaged. Equipment will be located on land and in premises owned by JSC Uzbektelecom JSC.

In accordance with Article 214 of the Civil Code of the Republic of Uzbekistan⁵, all land is owned by the republic, and the right to dispose of land plots intended for the installation of towers or the laying of cables belongs to Uzbektelecom JSC.

ESS 3

In Uzbekistan, indigenous peoples are not officially recognized as a category. There is no relevant legislation to protect their rights or provide for mandatory consultations.

According to the preliminary classification assigned to category B by the ESP Bank, the application of ESS 1 and ESS 2 standards is required. ESS 3 is not applicable as there are no groups in the country that meet the definition of indigenous peoples as specified in ESS 3.

At present, the implementation of measures under ESS Standard 3 is not applicable to financed projects.

Monitoring and reporting on environmental and social commitments, including regular reporting, is required.

The Environmental Control Act (№-382, 2013) regulates environmental monitoring.

Social aspects are regulated in accordance with the Law on Public Control (№-474 of 12.04.2018).

Social risks and regular reporting on them are not provided for in the legislation.

Implement a social risk monitoring system that meets AIIB requirements. Include regular reports on the environmental and social aspects of financed projects.

⁵ Civil Code of the Republic of Uzbekistan dated March 1, 1997

In 2024, the Company began conducting a preliminary analysis of climate risks and opportunities in order to better manage such risks, taking into account the possible financial consequences, as well as an analysis of opportunities for the telecommunications industry in the context of implementing a carbon neutrality strategy and exploring additional opportunities for timely optimization of the business model.

Based on the analysis of climate risks and opportunities, the Company has identified key risks that may affect its operations and has identified prospects for the telecommunications sector. The following figure and Table 18 present the main climate risks and opportunities that the Company will take into account in its future planning and decision-making to reduce the impact of climate change and optimize its business model.

Diagram of key climate risks

Risks

Physical Risks

Chronic Risks:

Droughts: Continuous droughts lead to a decrease in water resources and worsening economic conditions for rural areas where the Company operates.

Rising Temperatures: Gradual increases in temperature have a long-term impact on the climate and overall public health, including the health of the Company’s employees.

Soil Erosion: Improper land use and uncontrolled irrigation result in gradual soil erosion, which negatively affects agricultural conditions and economic activity in the regions where the Company operates.

Acute Risks:

Floods and torrents: Cause significant destruction to infrastructure and crop losses.

Dust storms: Can severely degrade air quality, harming the health of people in rural regions of Uzbekistan where the Company operates, as well as disabling the Company’s equipment.

Financial Impacts

Increase in operating expenses due to the need for replacement (repair) of damaged assets (equipment)

Increase in operating expenses due to the replacement of damaged assets

Risk Management

To manage chronic physical risks, the Company is developing an Energy Efficiency Plan aimed at reducing electricity consumption, along with a program to expand the use of renewable energy sources (RES).

Specifically, the Company is reducing electricity consumption by operating solar panels with a total capacity of 2,712 kW.

To manage this risk, the Company plans to account for the need to create reserves and additional insurance for assets in regions (branches) vulnerable to such impacts. Additionally, the Company plans to develop and approve a climate strategy.

In Uzbekistan, a service for notifying the population about emergency situations is being developed. The Company is involved in efforts to inform the public and plans its operations to counteract emergencies, including through its branch network.

Risks

Transition Risks

Regulatory Risks:

Price increases for certain products and services due to direct or indirect taxes or fees on CO₂ emissions (energy, transportation, etc.).

Market Risks:

Increased operational costs due to higher CO₂ prices.

Reputation Risks:

Rising demands from stakeholders (analysts, investors, customers) and increased costs for compensating CO₂ emissions.

Financial Impacts

Increase in operating expenses due to the implementation of taxes.

Increase in operational costs

Risk Management

Considering that the risk of tightening regulatory requirements related to climate change may affect the Company’s supply chain, potentially jeopardizing deliveries, the Company is developing joint projects with its suppliers and other companies in the telecommunications sector that share the goal of transitioning to a low-carbon economy.

It is necessary to implement: a long-term energy efficiency improvement plan, a renewable energy usage plan, and to develop a methodology for internal carbon pricing.

Risk management will be carried out through transparent communication, commitments at all organizational levels, and the creation of alliances with key stakeholders, which helps meet environmental expectations and comply with legislative requirements.

More detailed information on climate risks for the Company and the need for mitigation is presented in the table below.

Analysis of the Company’s climate risks

Aspect

Detailed description of climate risk

Risk management

Droughts and water shortages

Persistent droughts lead to a reduction in water resources and worsening conditions for rural regions where the Company operates

1. Optimization of energy consumption

Rising temperatures

Gradual temperature increases have a long-term impact on the climate and overall public health.

1. Underground cable laying
2. Use of heat-resistant materials

Forest fires

The increase in the number of forest fires destroys ecosystems, worsens air quality, threatens health and the economy, and poses a threat to companies through damage to infrastructure, operational disruptions, and financial losses.

1. Use of fire-resistant materials
2. Control of vegetation around BS to prevent the spread of fire

Separately, the Company has begun to assess the opportunities arising from Uzbekistan’s transition to a low-carbon development model. The financial effects and approaches to managing these opportunities are presented in the table below.

Financial effects and energy consumption management

Opportunities

Financial Effects

Opportunity management

Resource efficiency:
Optimization of network and operational costs through improved energy consumption management.

Reduction in operating expenses.

Improved energy efficiency will give Uzbektelecom JSC a significant competitive advantage in this sector, as it will increase the efficiency and sustainability of its networks and allow it to decouple the growth of its operational business from energy consumption.

Products and services:
Internet connectivity and digitalization solutions are fundamental to the decarbonization of other sectors of the economy and enable Uzbektelecom JSC to access new business opportunities.

Revenue growth is linked to increased demand for internet connectivity, products, and services that contribute to the decarbonization of the economy.

Digital services based on broadband connectivity, the Internet of Things, cloud computing, and big data can optimize resource consumption by Uzbektelecom JSC ‘s customers and thus reduce their environmental impact. The technology division of Uzbektelecom JSC is promoting the development of digital services to achieve greater scale and integration of leading digital solutions that will help Uzbektelecom JSC ‘s B2B customers move towards a more digital and sustainable business model.

Energy sources:
Reduced exposure to energy price volatility and savings in electricity operating costs through the use of renewable energy sources as opposed to traditional energy sources.

Reduced operating costs.

One of the strategic goals of Uzbektelecom JSC is to transition to renewable energy sources and achieve carbon neutrality by 2050 (optimistic scenario) in accordance with the national development strategy. by 2060 (pessimistic scenario), provided that the share of electricity consumption from renewable sources reaches 30% of the Company’s total energy balance by 2035. The renewable energy plan may include all types of solutions (independent generation, purchase of renewable energy with guarantees of origin, distributed generation) that will lead to significant savings in electricity costs for Uzbektelecom JSC.

Sources of sustainable financing:
Access to new sources of financing:

Capital markets and bank financing.
Diversification of instruments used (bonds, hybrids, loans) taking into account sustainability criteria.

Expansion of the investor base and typology.

Potential improvement in financing conditions.

Uzbektelecom JSC can use green bonds and hybrid green and sustainable instruments to finance projects that have a positive impact on the environment. For example, projects to transform and modernize telecommunications networks, both fixed and mobile, with a view to improving their energy efficiency.

In addition, Uzbektelecom JSC may use other sustainable banking financial instruments, such as loans and credits linked to sustainable development goals, which will enable them to make progress in achieving their corporate goals related to reducing emissions.

Sector-Specific and Climate Agenda

Diagram of key climate risks