System Balance Index as an Indicator of the Russian Gas Industry’s Sustainable Growth

The paper examines an approach to developing a strategy for the Russian gas industry’s sustainable growth based on the system economic theory’s methodology. The aim of the study is to evaluate the current state of the industry by calculating sustainable growth indices. Grey Relational Analysis (GRA) reveals a deep relationship between sustainable growth indices and Return on equity ( ROE ), Lambert Energy Index ( LEI ), Return on environmental investments (ROE_env ), and Return on social investments (ROE_sr ). The system balance index ( SBI ) is calculated, which expresses the intensity of links between the financial, energy, environmental and social subsystems of the gas industry. The results show that the Russian gas industry companies are characterized by a low level of ROE_env or ROE_sr , negatively affecting the SBI value. The authors conclude the importance of environmental protection and social responsibility for achieving sustainable industry growth should not be underestimated. This circumstance should be taken into account when setting strategic goals for companies in the gas industry. According to the authors, applying system economic theory to achieve sustainable growth goals has huge potential to overcome economic phenomena and improve company management practices.

1. Steblyanskaya A., Wang Z., Bragina Z. Financial sustainable growth theory as a result of interaction with energy, environmental and social processes (Evidence from oil and gas industry). Finansy: teoriya i praktika = Finance: Theory and Practice. 2019;23(2):134-152. (In Russ.). DOI: 10.26794/2587-5671-2019-23-2-134-152

2. Higgins R.C. How much growth can a firm afford? Financial Management. 1977;6(3):7-16. DOI: 10.2307/3665251

3. Kornai J. The system paradigm. William Davidson Institute Working Paper. 1998;(278). URL: https://deepblue.lib.umich.edu/bitstream/handle/2027.42/39662/wp278.pdf

4. Kornai J. What the change of system from socialism to capitalism does and does not mean. Journal of Economic Perspectives. 2000;14(1):27-42. DOI: 10.1257/jep.14.1.27

5. Kornai J. The system paradigm revisited: Clarification and additions in the light of experiences in the post-socialist region. Acta Oeconomica. 2016;66(4):547-596. DOI: 10.1556/032.2016.66.4.1

6. Kleyner G.B. State — region — field — enterprise: Framework of economic system stability of Russia. Part 1. Ekonomika regiona = Economy of Region. 2015;(2):50-58. (In Russ.). DOI: 10.17059/2015-2-4

7. Kleiner G. System economics as a platform for development of modern economic theory. Voprosy ekonomiki. 2013;(6):4-28. (In Russ.). DOI: 10.32609/0042-8736-2013-6-4-28

8. Kleiner G.B., Rybachuk M.A. System balance of the Russian economy: Regional perspective. Ekonomika regiona = Economy of Region. 2019;15(2):309-323. (In Russ.). DOI: 10.17059/2019-2-1

9. Pappas E. A new systems approach to sustainability: University responsibility for teaching sustainability in contexts. Journal of Sustainability Education. 2012;3:3-18. URL: http://www.jsedimensions.org/wordpress/wp-content/uploads/2012/03/PappasJSE 2012.pdf

10. Pandey A., Kumar A. System thinking approach to deal with sustainability challenges. In: Proc. Int. conf. on science, technology, humanities and business management (Bangkok, July 29-30, 2016). (ICSTHBM-16). New York: McGraw Hill Education; 2016:81-84. URL: https://socrd.org/wp-content/uploads/2016/08/17BKK125-System-Thinking-Approach-to-Deal-with-Sustainability-Challenges.pdf

11. Senge P.M. The fifth discipline: The art & practice of the learning organization. New York, London: Currency Doubleday; 1990. 371 p.

12. Bertalanffy L. von. General systems theory: A critical evaluation. General Systems: Yearbook of the Society for General Systems Research. 1962;7:1-20.

13. Meadows D., Randers J., Meadows D. Limits to growth: The 30-year update. White River Junction, VT: Chelsea Green Publishing Co.; 2004. 338 p.

14. Cordon C.P. System theories: An overview of various system theories and its application in healthcare. American Journal of Systems Science. 2013;2(1):13-22. DOI: 10.5923/j.ajss.20130201.03

15. Hester P.T., Adams K.M. Systems theory. In: Systemic decision making. Cham: Springer-Verlag; 2017:55-99. (Topics in Safety, Risk, Reliability and Quality. Vol. 33). DOI: 10.1007/978-3-319-54672-8_4

16. Ho J.K.K., Sculli D. Road P. System complexity and the design of decision support systems. Systems Practice and Action Research. 1995;8(5):505-516. DOI: 10.1007/BF02281958

17. Stiglitz J. E. The price of inequality: How today’s divided society endangers our future. New York, London: W.W. Norton & Co.; 2013. 560 p.

18. Waldrop M.M. Complexity: The emerging science at the edge of order and chaos. New York: Simon & Schuster; 1992. 384 p.

19. Matutinović I. An institutional approach to sustainability: Historical interplay of worldviews, institutions and technology. Journal of Economic Issues. 2007;41(4):1109-1137. DOI: 10.1080/00213624.2007.11507089

20. Xu L., Marinova D., Guo X. Resilience thinking: A renewed system approach for sustainability science. Sustainability Science. 2015;10(1):123-138. DOI: 10.1007/s11625-014-0274-4

21. Kay J.J., Regier H.A., Boyle M., Francis G. An ecosystem approach for sustainability: Addressing the challenge of complexity. Futures. 1999;31(7):721-742. DOI: 10.1016/S 0016-3287(99)00029-4

22. Mealy P., Teytelboym A. Economic complexity and the green economy. Research Policy. 2020:103948. DOI: 10.1016/j. respol.2020.103948

23. Wu Y., Zhu Q., Zhu B. Comparisons of decoupling trends of global economic growth and energy consumption between developed and developing countries. Energy Policy. 2018;116:30-38. DOI: 10.1016/j.enpol.2018.01.047

24. King C.W., Hall C.A.S. Relating fifinancial and energy return on investment. Sustainability. 2011;3(10):1810-1832. DOI: 10.3390/su3101810

25. Lambert J.G., Hall C.A.S., Balogh S., Gupta A., Arnold M. Energy, EROI and quality of life. Energy Policy. 2014;64:153167. DOI: 10.1016/j.enpol.2013.07.001

26. Daly H.E. Toward some operational principles of sustainable development. Ecological Economics. 1990;2(1):1-6. DOI: 10.1016/0921-8009(90)90010-R

27. Costanza R., de Groot R., Sutton P., van der Ploeg S., Anderson S.J., Kubiszewski I., Farber S., Turner R.K. Changes in the global value of ecosystem services. Global Environmental Change. 2014;26:152-158. DOI: 10.1016/j.gloenvcha.2014.04.002

28. Daly H.E., Farley J. Ecological economics: Principles and applications. 2nd ed. Washington, DC: Island Press; 2011. 544 p.

29. Hall C.A.S., Lindenberger D., Kümmel R., Kroeger T., Eichhorn W. The need to reintegrate the natural science with economics. BioScience. 2001;51(8):663-673. DOI: 10.1641/0006-3568(2001)051[0663:TNTRTN]2.0.CO;2

30. Gowdy J., Hall C., Klitgaard K., Krall L. The end of faith-based economics. The Corporate Examiner. 2010;37(4-5):5-11.

31. Lambert J., Hall C., Balogh S., Poisson A., Gupta A. EROI of global energy resources preliminary status and trends. 2012. URL: https://www.academia.edu/27963830/EROI_of_Global_Energy_Resources_Preliminary_Status_and_Trends

32. Charles A.S. Hall, Kent A. Klitgaard. Energy and the wealth of nations: understanding the biophysical economy. New York, NY: Springer; 2012:20-45. DOI: 10.1007/978-1-4419-9398-4_7.

33. Oda T., Morichi R., Umeki H., Kanda S. Energy saving solutions for sustainable growth of industry. Hitachi Review. 2011;60(6):324-329.

34. Simkins B., Simkins R., eds. Energy fi e and economics: Analysis and valuation, risk management, and the future of energy. Hoboken, NJ: John Wiley & Sons, Inc.; 2013. 624 p.

35. Nogovitsyn R., Sokolov A. Preliminary calculation of the EROI for the production of gas in Russia. Sustainability. 2014;6(10):6751-6765. DOI: 10.3390/su6106751

36. Steblyanskaya A., Wang Z., Razmanova S., Iskritskaya N. Sino-Russian transregional gas cooperation: Key issues. Vestnik Sankt-Peterburgskogo universiteta. Ekonomika = St Petersburg University Journal of Economic Studies (SUJES). 2018;34(3):369-395. DOI: 10.21638/spbu05.2018.302

37. Steblyanskaya A., Wang Z., Ryabova E., Razmanova S. Russian gas companies’ financial strategy considering sustainable growth. Ekonomika regiona = Economy of Region. 2019;15(1):231-241. DOI: 10.17059/2019-1-18.

38. Julong D. Introduction to grey system theory. The Journal of Grey System. 1989;1:1-24. URL: http://www.researchinformation.co.uk/grey/IntroGreySysTheory.pdf

39. Jiqiang L., Yingzhong Y., Xiaofeng N., Jianhui Y., Jing R. Multi-factor grey correlation analysis of horizontal well development effect in Chunguang oilfield. The Open Petroleum Engineering Journal. 2015;8(1);253-256. DOI: 10.2174/1874834101508010253

40. Steblyanskaya A., Wang Z., Denisov A., Bragina Z. Company sustainable growth as the result of interaction between fi e, energy, environmental and social factors (in case of JSC “Gazprom”). Vestnik Sankt-Peterburgskogo universiteta. Ekonomika = St. Petersburg University Journal of Economic Studies (SUJES). 2020;36(1):134-160. DOI: 10.21638/spbu05.2020.107

41. Ivashkovskaya I.V., Zhivotova E.L. Growth sustainability index: Empirical approbation on the data from Russian companies. Vestnik Sankt-Peterburgskogo universiteta. Seriya 8: Menedzhment = Vestnik of Saint Petersburg University. Management Series. 2009;(4):3-29. (In Russ.).

42. Rybachuk M.A. Balance of system structure as a necessary condition for strategic stability of the enterprise. Vestnik Voronezhskogo gosudarstvennogo universiteta. Seriya: Ekonomika i upravlenie = Proceedings of Voronezh State University. Series: Economy and Management. 2015;(1):140-146. (In Russ.).

43. Mitrova T., Boersma T., Galkina A. Some future scenarios of Russian natural gas in Europe. Energy Strategy Reviews. 2016;11-12:19-28. DOI: 10.1016/j.esr.2016.06.001

44. Kleiner G.B., Rybachuk M.A. System balance of the economy. Moscow: Nauchnaya biblioteka; 2017. 320 p. (In Russ.).