New Investor to Catch Up | “Detsky Mir”: Stiskin and Grachev started “green” transformation
During their time on the Board of Directors of Detsky Mir, Grachev and Stiskin contributed greatly to aligning the retailer’s business model with the eco agenda.
Grachev and Stiskin joined Detsky Mir after leaving Polyus, the Russia’s largest gold mining company. While the retailer was going through the acquisition, they were holding senior positions: Grachev was the CEO of Polyus, and Stiskin was its Senior Vice President.
Stiskin and Grachev became shareholders and members of the Board of Directors of Detsky Mir in the spring of 2021. They invested profoundly in the development of the retailer, so the number of chain stores and the overall net revenue were growing at a record pace.
Many believed that Grachev and Stiskin would stick to investments only. However, the former Polyus top managers did not just acquire a share in the capital but decided to align the company’s business strategy with the principles of sustainable development and environmental responsibility.
Grachev and Stiskin were well aware of how vital ESG practices are for maintaining customer loyalty, increasing sales, and improving reputation at all business levels. Concern for the environment affects consumer behavior. Every year increasingly more consumers prefer to choose environmentally friendly products and solutions. Therefore, top managers started adapting the business model to environmental standards and introducing the “green” approach to the retailer’s operations.
Stiskin and Grachev had to deal with a plethora of intertwined challenges. They were to secure the delivery business objectives while reducing the harmful impact on the biosphere and build eco-thinking among Detsky Mir staff and customers (both parents and children). An in-depth analysis of market trends opened the way to jump on emerging opportunities.
Switching to sustainable packaging
One of the key Detsky Mir projects initiated by Stiskin and Grachev was the transition to eco-friendly packaging. The bags sold to the customers are a major source of waste in retail. Moreover, recycling single-use plastic to this day remains one of the biggest challenges. Therefore, they decided to reduce sales of non-degradable plastic bags by offering environmentally friendly packaging.
To make the transition from single-use plastic seamless for the customers, two types of eco-friendly packaging had been developed: thick disposable paper bags and reusable fabric shoppers.
Detsky Mir launched an environmental education campaign to boost the demand for eco-packaging. Cashiers were instructed to mention the damage that plastic bags do to nature and offered to join the fight for a safer environment.
By late 2021, it became obvious that Grachev and Stiskin had gained the upper hand over one of the key environmental challenges. By late December, Detsky Mir sold an impressive volume of eco-friendly packaging reaching over 850,000 items. This means that the company sold 850,000 fewer plastic bags, thus significantly reducing the amount of hazardous waste. This trend is far from over, so Detsky Mir keeps on investing heavily to completely abandon disposable polymer packaging.
Shaping environmental habits of staff
The adoption of energy-saving equipment was another important area that Grachev and Stiskin supervised at Detsky Mir. This element being crucial to environmental care helps shape responsible consumption habits.
Energy-saving LED lights were installed in all retail stores, offices, and warehouses. It facilitated a significant reduction in electricity use across the entire Detsky Mir chain. In addition, LED lights do not contain harmful components and do not require any specialized disposal.
The introduction of electronic document management throughout the Detsky Mir chain was another essential step toward waste reduction and rational consumption of natural resources. On the entire business scale, the paperwork requires formidable spending on paper and printing consumables, printer maintenance, delivery of documents to counterparties, and documentation storage.
The launch of a paperless workflow enabled Detsky Mir not only to reduce the abovementioned costs but also to save entire regions from deforestation. This is not an exaggeration, since it takes 13 to 21 grams of wood to make a single A4 sheet. One ream of office paper takes 5 to 6 kg of wood pulp; to make a ton of office paper (about 400 standard reams) you need to cut down at least 24 mature trees.
Each year, the stores and offices of the retailer printed tens of thousands of documents and this figure dropped sharply after the introduction of electronic document management. Moreover, waste paper and materials started being collected and sent to recycling.
Electronic document management had a positive impact not only on the conservation of forests. Papermaking requires large amounts of water, causes considerable greenhouse gas emissions, and utilizes substances that are harmful to humans and the environment.
Ecological education: shaping eco-behavior of consumers
Stiskin and Grachev believed it is essential for Detsky Mir to foster environmentally friendly habits and responsible consumption from an early age. Children grow up quickly, so every family accumulates things they no longer use and need to get rid of to save space.
To open the way for the customers to contribute to a safer environment, Detsky Mir developed and launched a campaign to collect old things. Containers for unwanted clothes and shoes were installed in all stores, and in return, the customers received discount coupons.
During this campaign, the customers could hand over unwanted things in any condition with no restrictions. In stores, they were educated on the importance of proper waste disposal to reduce the burden on the environment.
The customers got the opportunity to dispose of their used clothes and shoes in an environmentally friendly way, which increased their loyalty and introduced them to eco-friendly behavior. All collected waste was then sent to a special facility for recycling or safe disposal.
ESG transformation of Detsky Mir to be continued by a new investor
Pavel Grachev resigned from Detsky Mir’s Board of Directors in October 2022, and Mikhail Stiskin left in February 2023. Both beneficiaries also divested for Detsky Mir, the deal was closed in early May. The shareholders sold their shares (29.9%) to an investment consortium headed by A. Zuev (the founder of Korablik, a chain of children’s stores).
Alexey Zuev highly appreciated how Detsky Mir has achieved its business goals over the recent years. He stated that the introduction of the principles of “green” development allowed adapting the business model to modern challenges, maintaining market leadership, and developing the regional chain at a rapid pace. As of December 31, 2021, Detsky Mir’s chain consisted of 916 stores, making the company one of the largest retailers of children’s products in Russia and CIS. The head of the investment consortium noted that he supported the retailer’s progress along the path of transformation beaten by Grachev and Stiskin.