ESG trends in czech business. Higher representation of women in top leadership or GHG measurement as a standard, revealed VSE research

Sustainability, social responsibility, and their integration into corporate management are principles that local companies and consumers are increasingly focusing on. Additionally, legislation is requiring a growing number of companies to disclose these activities in so-called non-financial or ESG reports. The largest companies are already obligated, but ESG concerns are also being addressed by some medium and small enterprises. What specific areas are Czech companies focusing on, how accurate are they in their reporting, and what are their challenges? These were the questions explored by researchers in the CEMS program at the Faculty of Business Administration in the ESG Rating, which they organized for the second time in collaboration with Association of Social Responsibility.

The study leverages a unique methodology developed by experts from the Faculty of Business Administration at the University of Economics, Prague. The result is a robust framework for evaluating how companies respond to environmental challenges (E), manage social matters (S), and effectively implement ESG and transparency principles into their management practices (G). A total of 135 companies registered for the ESG Rating, marking a 55% increase from the previous year. Their combined turnover in 2022 reached 1.2 trillion CZK, accounting for 17.2% of the Czech GDP. Among these, there were 52 large enterprises and 83 small and medium-sized businesses.

Domestic companies are still learning about ESG, but we already have a few frontrunners.

This year’s ESG Rating also confirms that the size of a company directly impacts the quality and depth of ESG reporting. “Small and medium-sized enterprises generally achieve lower scores across all ESG areas, which is an expected outcome reflecting limited resources, the ability to hire specialists, and knowledge of issues related to sustainability. On the other hand, large companies often have dozens of employees dedicated to ESG. This trend is particularly noticeable among banking institutions,” says Ladislav Tyll, an expert on international corporate strategy and ESG from the Faculty of Business Administration at the University of Economics, Prague (VŠE), and academic director of the CEMS program, who was responsible for the methodology and evaluation of the study.

“Among the largest enterprises, quite a few cover most of the assessed ESG topics and engage in truly commendable activities far beyond the requirements or standards. For example, ČEZ scored the best among all participating companies due to its detailed work with almost all ESG factors in its non-financial reports and its transparent communication to the public,” says Tyll. The company’s specific commitments include transforming its production portfolio to low-emission by 2030 and achieving climate neutrality by 2040. By 2030, it also aims to have 30% women in management.

Similarly, Moneta, which took second place in the rankings, scored very high in several areas of all three ESG pillars. Not only does it have a detailed understanding of its carbon footprint, but it also strives to obtain the most accurate data on greenhouse gas emissions from its suppliers. It has also been successful in reducing differences in compensation and in general differences among employee groups. For example, all employees are entitled to a day off for wedding preparations, regardless of gender or type of union.

Third in the ranking, Coca-Cola HBC covers a very detailed range of criteria, especially in the G and E pillars. The company has been successful in reducing the amount of waste per product, and as of 2022, despite the production and logistical nature of a significant part of its activities, over 33% of the management in the Czech and Slovak divisions were women, with 27% in top management.

Out of all participating large enterprises, the companies receiving the highest ratings for their ESG reports are:
1. Skupina ČEZ, 2. MONETA Money Bank, 3. Coca-Cola HBC Česko a Slovensko, 4. Vodafone Czech Republic, 5. Československá obchodní banka, 6. Komerční banka, 7. Albert Česká republika, 8. Letiště Praha, 9. Veolia Česká republika, 10. Hyundai Motor Manufacturing Czech.

Data from the ESG Rating show that about one-third of large companies address the ESG agenda directly under the CEO’s supervision. However, according to Tyll, this is unusual compared to abroad. “Internationally, this agenda is often delegated to Chief Sustainability Officers (CSOs) who are part of the company’s top management, distributed among various management members, or under the purview of financial directors,” Tyll explains, noting that companies in our country are just beginning to create CSO positions. The University of Economics, Prague (VŠE) aims to focus on the education of these experts as part of a newly established ESG specialization.

Small and medium-sized enterprises sometimes underestimate themselves in ESG.

The assessment results also indicate that large companies, which achieved high ratings in the ESG Rating, typically attribute a high self-assessment to themselves. However, this trend could not be identified among small and medium-sized enterprises. “This leads us to assume that small companies either lack sufficient knowledge and skills for self-assessment in ESG, or they are not fully acquainted with what it means to ‘be good’. We want to provide these companies with valuable feedback and guidance on how to work effectively with ESG topics,” says Tyll.

From the small and medium-sized enterprises, the following made it into the top five companies with the best-handled ESG: 1. MEGA, 2. Sonnentor, 3. Nobilis Tilia, 4. KONSIT, 5. Portu.

Small and medium-sized companies achieve the best results in the Social (S) area. “It’s evident that smaller companies often pay increased attention to their employees and local communities, with whom they maintain personal contact. On the other hand, large companies have surprisingly lagged in the area of social responsibility in this year’s ESG evaluation, although our surveys from 2022 show that the Czech public considers social aspects to be the most significant,” explains Natálie Badie, a member of Tyll’s research team.

“It was also confirmed again that a one-size-fits-all approach is not suitable for ESG. Some topics are not relevant for all sizes of enterprises. Moreover, smaller businesses often do not have the capacity to address all areas comprehensively,” adds Ivan Balogh, a member of the research team, who focuses on corporate strategy with a specialization in finance and sustainability at the Faculty of Business Administration, University of Economics, Prague (VŠE).