Environment

The environment directly affects Škoda Auto’s business, and conversely, the activities of the Company have a significant impact on the surrounding environment. Recognizing this interdependence, Škoda Auto places sustainability and environmental protection at the very centre of its strategy. Topics related to the environment, such as the circular economy and decarbonisation, rank among the top three materiality topics selected by Škoda Auto.

The environmental approach of Škoda Auto is declared by its Environmental Policy. It is based on the efficient management of natural resources and energy, as well as the use of environmentally friendly and energy-saving technologies, and recycled materials. The Company strives to prevent pollution, carbon emissions, and eliminate these throughout the product life cycle, ultimately improving key indicators of its environmental impact. In doing so, Škoda Auto aims to contribute to climate change mitigation and environmental protection, driving positive change in the communities in which it operates.

goTOzero Environmental mission statement

Škoda Auto wants to be a leading provider of sustainable mobility and a role model for the protection of our environment. To achieve this, the Company systematically and verifiably reduces the environmental impacts along the life cycle of the products and services. Compliance with environmental regulations, standards and voluntary commitments is a basic prerequisite for Škoda Auto’s actions.

Škoda Auto is dedicated to contributing to the Group's commitment to the Agreement of a 1.5°C ambition level. The Company consequently focuses on the electrification of the products, the decarbonisation of the entire value chain, and the expansion of renewable energy generation to supply the sites and customers.

By 2050 at the latest, the Company wants to be a net CO₂ neutral company.

By using recycled materials and renewable resources, the Company reduces the need for primary raw materials.

The Company improves its energy and resource efficiency and establishes cycles for materials and water.

Together with business partners, Škoda Auto reduces the use of natural resources along the supply chain.

The Company reduces harmful emissions into air, soil, and water.

Škoda Auto also reduces the impacts of business activities on biodiversity and ecosystem services and promotes projects to preserve them.

Škoda Auto wants to be a role model for a modern, transparent, and successful company in terms of integrity and compliance.

The Company operates effective environmental compliance management systems to identify and manage environmental risks and opportunities along the life cycle of the mobility solutions.

The Company has an open dialogue with its stakeholders and considers their expectations in its decisions.

When updating the targets for key environmental indicators, Škoda Auto has considered all the above-mentioned domains: climate change and decarbonisation (Decarbonisation index DCI – see Climate Change), reduction of the environmental impact of production (UEP indicator– see GreenFuture Strategy/GreenFactory), preservation of the ecosystem (see Pollution and Biodiversity), and the implementation of Environmental Compliance Management System (ECMS).

ECMS involves installing and managing effective certified management systems that cover the environmental impact of the Company’s mobility solutions across all life cycle stages. It is important to not only comply with increasingly strict legal emission requirements but also to significantly increase the share of zero and low-emission vehicles (Battery Electric Vehicles and Plug-in Hybrid Electric Vehicles). See Climate Change.

Škoda Auto holds several important certifications that demonstrate its commitment to environmental protection regarding production as well as the products. This includes certificate ISO 14001 for environmental management and ISO 50001 for energy management.

The GreenFuture corporate strategy covers environmental topics since 2012. It ensures the effective management and control of all activities related to environmental protection, which enables the determination of individual measures at the production, product, and retail levels. GreenFuture aims to minimise the environmental impact of all mobility products and services throughout their entire life cycle. From raw material extraction to the end of life of all mobility products and services.

GreenProduct
The focus lies on developing low- and zero- emission vehicles as well as energy efficient vehicles with combustion engines. Increasing energy-efficiency is the goal over the entire life cycle of the product, starting with its production (internally in Škoda Auto as well as at the suppliers), continuing with the energy consumption of the cars, and ending with ecological scrapping after the end of life. As part of the Company’s corporate strategy Next Level – Škoda Strategy 2030, Škoda Auto is committed to increasing the share of electric car sales in Europe to more than 70% by 2030, depending on market development. To achieve this, the Company plans to expand its portfolio with six new fully electric models in the coming years. Each new generation of Škoda cars is designed with a principle of continuous improvement, aiming for low fuel consumption, CO₂ emissions, weight, and optimal aerodynamics.

In the area of circular economy and resource savings, the new models are developed with an increased share of sustainable, especially recycled materials. The environmental responsibility of the product does not end when the car leaves production. Škoda Auto aims to promote a circular economy and is actively participating in various research projects with the goal of creating and implementing zero-emission parts and maximizing the share of recycled materials in its vehicles towards a closed-loop system. See Circular Economy and Resources.

Explanatory note on data regarding UEP from the year 2010 published in the sustainability report 2019/2020 which covered production in the Czech Republic and India. This report covers only CZ production.

CO₂ emissions per car increased between the years 2021–2022 because of the change in CO₂ coefficients for the production plant in Mladá Boleslav. The reasons are a lower share of co-fired biomass in the MB heating plant and less externally purchased electricity, which comes purely from renewables.

* UEP = Umweltentlastung Produktion = Index for Reducing the Environmental Impact of Production

Škoda CZ = Mladá Boleslav, Kvasiny, Vrchlabí

Climate change is one of the most pressing global challenges of our time, with far-reaching impacts on society and the environment. Škoda Auto recognises its responsibility to mitigate the impacts of climate change and to reduce its carbon footprint. In this report, the Company outlines its efforts to address climate change and transition towards a more sustainable future. The Group has set ambitious targets for reducing GHG emissions; hence, the Company is implementing a range of measures to achieve them. These efforts are part of the Company’s commitment to sustainable development and to meeting the evolving needs of its customers, stakeholders, and society.

Policy and Ambitions

By 2050, the Group aims to become a carbon neutral company. Škoda Auto is aligning its business strategy and innovative development with this goal. Therefore, the Company’s focus is on low- and zero-emission passenger transport to address the needed environmental transformation of the industry accelerated by climate change. However, this transition brings risks that the Company is addressing through the Next Level – Škoda Strategy 2030. See Corporate Strategy.

The Company envisions turning the Czech Republic into a hub for the development of electromobility and low-emission passenger transport, building the related infrastructure, securing existing jobs, and creating new ones while succeeding in foreign markets. Škoda Auto will have invested a total of EUR 5.6 billion in electromobility by 2027.

Transitional risks are perceived as major strategic and business risks for both Škoda Auto and the Group. Škoda Auto is accelerating its transition to battery-powered cars and will introduce 6 electric models in the coming years, which will increase the share of electric car sales in Europe to more than 70% by 2030, depending on market development.

Not only the zero-emission in the use phase of vehicles but also the CO₂ emitted by the entire value chain must be tackled. Škoda Auto recognises the crucial role that their suppliers play in the transition to a zero-emission business. As part of its Next Level – Škoda Strategy 2030, Škoda Auto has reoriented its purchasing processes under the “NEW PROCUREMENT” programme. Sustainability criteria play a decisive role in the procurement of materials and components. Transitional risks are predominantly managed and addressed through established processes within the Business Partners Due Diligence. Škoda Auto’s internal evaluation of all suppliers, known as the S-rating, is based on a set of ESG criteria. The S-rating is more than just an evaluation tool; it is a means of initiating a dialogue with the Company’s suppliers to improve their carbon footprint and energy efficiency. By doing so, the Company can reduce the suppliers’ and Škoda’s environmental impact and mitigate the risks associated with climate change. For more on S-rating see Business Conduct.

Transition plan

Škoda Auto is proud to contribute to the Group’s goal of achieving carbon neutrality by 2050, which aligns with the outcomes of the 2015 United Nations’ Paris Conference. To achieve this, the Group has set a target of limiting the temperature increase compared to pre-industrial times to 1.5°C for Scope 1 = internal operations and Scope 2 = energy supply (for more on GHG Scopes see Climate Change/Data and Specific Disclosures), which has been verified by the Science Based Targets Initiative (SBTi). As part of this effort, the Group has committed to reducing Group-wide greenhouse gas emissions from production by 50.4% by 2030 compared to 2018 levels in Scopes 1 and 2, which translates to a reduction of over 78.9% for Škoda Auto in production in the Czech Republic and India. In addition, Group further commits to reduce Scope 3 GHG emissions from the use of sold products of light duty vehicles by 30% per vehicle km by 2030 from a 2018 base year.

Škoda Auto is actively contributing to this effort by transforming its product portfolio towards electric and low-emission vehicles and pursuing carbon-neutral production.

Strategic decisions are based on their long-term contribution to reducing greenhouse gas emissions. The principle of using the Best Available Techniques (BAT) applies to all types of decarbonisation measures. Škoda Auto is not excluded from the EU Paris-aligned Benchmark in accordance with the exclusion criteria of the EU Climate Transition Benchmarks Regulation.

Product decarbonisation

Decarbonisation at product level decreases CO₂ emissions from vehicles along the entire value chain. It is calculated as the CO₂ footprint per total number of cars produced. To track the value of decarbonisation, the Company uses its internal Group-wide Decarbonisation Index (DCI), which includes direct and indirect emissions from production facilities as well as other CO₂ emissions emitted during the life cycle of a car, from the sourcing of raw materials to the recycling phase at the end of its life. By 2030, the Company aims to reduce the DCI of Škoda products by 40% compared to 2018.

Škoda Auto recognises the importance of tailpipe emissions in the overall carbon footprint of a vehicle, as calculated by the DCI. By increasing the share of electric vehicles, the Company can significantly reduce the DCI and thereby help to achieve its carbon neutrality goals.

DCI phases and achieved values in 2021 and 2022

The diagram shows the principal composition of a car’s carbon footprint over its lifetime, from production to final environmental disposal. The carbon footprint during the use phase is calculated based on an average lifespan of 200,000 km.

The overall carbon footprint of a BEV in the context of the European Energy mix is much lower than that of conventional cars despite a larger share of the supply chain caused by battery production. That is why the increase of BEV share in the product portfolio plays a significant role in the decarbonisation plans.

Other important levers for decarbonisation are the increase of energy efficiency in the production phase and in the use phase as well as the usage of renewable energy in these phases.

In 2022, the average DCI of the Škoda Auto model portfolio was 38.92 tCO₂e/vehicle (without compensation of the entire production phase by offsets). The slight temporary increase compared to the previous year (38.34 tCO₂e/vehicle in 2021) was caused by the introduction of more powerful versions of the Enyaq Coupé and by a decline in the share of Plug-in Hybrid Electric Vehicle (PHEV) due to a shortage of semiconductors.

In future years, the Company expects a positive development with a significant DCI reduction due to the increase in the share of electric car sales.

Electric cars have zero emissions during operation, but the Company needs to consider the higher CO₂e production during electricity generation for charging. In the context of the European energy mix, the total lifetime CO₂e emissions of an electric car are much lower than those of a conventional car.

Škoda Auto is developing long-term measures to reduce the energy consumption of vehicles, both in operation and production, by using appropriate technologies, both in-house and with its suppliers. The Company is increasing the use of renewable energies and the proportion of recycled materials in the products to further reduce the overall product carbon footprint (DCI).

In the production phase, including the supply chain, Škoda Auto offsets the carbon footprint of electric cars, by supporting selected projects and delivering its electric cars to customers in a CO₂-neutral manner (supported by TÜV certification according to the TN-CC 020 norm). That is why all the Enyaq models were handed over to customers with a balanced CO₂ neutral footprint.

Additionally, in the use phase, the Company supports the development of new renewable energy sources to eliminate the carbon footprint during the operational part of all-electric models.

The carbon footprint values of specific Škoda vehicle models are certified by TÜV Nord under DIN EN ISO 14040 and DIN EN ISO14044.

Product offsetting
As mentioned above, the Company has guaranteed the CO₂ neutral handover of their electric vehicles since the start of their production in 2020. The CO₂e emissions generated in the production, incl. purchased components which could not be avoided or reduced yet, are compensated by purchasing the VER (Verified Emission Reductions) offset certificates.

The decarbonisation programme is based on measures to reduce and avoid the existing CO₂e emissions. Therefore, the offsetting will be subsequently replaced by other decarbonisation measures.

Production decarbonisation in the Czech Republic

Škoda Auto aims to achieve carbon neutrality in energy consumption during manufacturing by 2030. To achieve this goal, the Company has developed a decarbonisation plan, which outlines the roadmap and allocated resources for implementing specific measures. Škoda Auto’s focus will be on savings, conversion, and offsetting measures for residual emissions. In the area of savings, Škoda Auto will invest in energy efficiency and in the use of low-emission and highly efficient technologies in the production processes. For conversion, the Company will transform the energy sources consumed during production. The Company plans to shift to renewable energy sources, such as biogas, within five years in Mladá Boleslav and Kvasiny. Additionally, Škoda Auto will modernise its main heat source, the Ško-Energo heating plant, to use 100% biomass instead of coal (by converting boilers and achieving 100% coverage from renewable energy sources within five years).

Production offsetting in the Czech Republic
To attain carbon neutrality by 2050 and align with the SBTi scenario of 1.5 ᵒC, Škoda Auto is committed to minimising emissions produced during vehicle production and usage. Residual emissions that cannot be reduced or avoided can be offset through the purchase of carbon credits from high-quality projects overseen by Volkswagen’s subsidiary, Kraftwerk GmbH. Unavoidable production (Scope1 and Scope2) emissions can be offset under the fulfilment of the following pre-requirements:

Carbon footprint reduction
As mentioned above, in 2021 and 2022 every Enyaq (44,066 in 2021 during Q2–Q4 resp. 52,055 in 2022 in EU27+UK+Norway+Iceland) was handed over to customers with a certified balance sheet neutral CO₂ footprint thanks to using climate protection certificates (VER).

Low-emission vehicles
Škoda Auto’s measures to produce low-and zero-emission cars have a positive impact not only on mitigating climate change but also on the quality of the air we breathe.

All Škoda Auto models fulfil all the legislative criteria regarding exhaust gas purity. In addition, the rising share of electric cars with no local emissions contribute not only to reduce the CO₂ emission within decarbonisation but also contribute significantly to the air quality improvement.

Škoda Auto is accelerating decarbonisation and responding to stricter emission targets for newly manufactured cars from 2021. In doing so, the Company achieved an average CO₂ emissions figure of 114.8 g/km in 2021, around 3 g/km below the EU limit. In 2022 the CO₂ figure was 116.5 g/km (around 1.94 g below the EU limit). The slight reduction of the positive CO₂ deviation from the target value in 2022 compared with 2021 was caused by a decline in the share of PHEVs, due to a shortage of semiconductors.

Electrification of product
During 2021 – 2022 Škoda Auto continuously increased the number of fully electric and plug in hybrid vehicles sold. In 2030, a BEV share of 50 to 70% is planned according to the
market development.

Share of Battery Electric Vehicle (BEV) and Plug In Hybrid Electric Vehicle (PHEV) worldwide / in EU27+UK+Norway+Iceland


	2021	2022	...	2030
BEV	6.0% / 8.1%	7.7% / 9.3%		up to 70%
PHEV	3.9% / 5.5%	2.4% / 3.0%

(excluding China)

Batteries for the MEB platform
In May 2022, the Company launched the production of batteries for the MEB platform vehicles in Mladá Boleslav, and in 2023 it will expand its capacity to produce 1,500 battery systems per day. It is a modular construction-kit system enabling it to construct cars of various sizes and categories on the same chassis, with the same or similar construction of the electric battery.

Powerpass
Škoda Auto wants to make it easier for its customers to charge their electric cars anywhere in Europe. Therefore, since 2021, the Company has been offering the Powerpass service. With the Powerpass card, Škoda customers can use over 500 thousand charging points across Europe. This allows customers to charge their cars with one card at most major charging providers, with one of the strongest charging networks in the EU. For the fleet customers in the Czech Republic, Škoda Auto offers an external charging solution called Chargee.

GreenRetail

Sustainability in retail
Environmental sustainability and efficient energy management within an authorised sales and service network have been fundamental elements of the GreenFuture’s strategy from the very beginning (2012). The portfolio of activities includes web-based training, webinars, consulting services, and voluntary certification. A total of 23 dealers were voluntarily certified in 2021 and 2022. At the same time, a new form of certification was developed and tested within the new Group-wide project called goTOzero Retail (established 2021). The aim of goTOzero Retail is to improve the environmental performance of dealers and define the roadmap, tools, and measures to the retail network carbon footprint reduction.

2ⁿᵈ life of batteries
A large number of test and prototype vehicles are not sold as used cars but scrapped after testing. The batteries from these vehicles would normally be expensive to recycle. Instead, they are used in 2ⁿᵈ life, which means they can still be used for years. See Circular Economy and Resources.

ZEBRA programme

Employee active participation in energy savings campaign within the Škoda Improvement Programme (ZEBRA).
See Own Workforce.

Biomethane
As another step on the way to decarbonisation of the production plant in Vrchlabí the Company has been using certified biomethane instead of natural gas since 2021. This measure reduced the necessity of offsetting of about 2,000 tons of CO₂.

Biomass powerplant
Škoda Auto kicked-off the preparation of a project to replace coal boilers with biomass boilers in Mladá Boleslav to fulfil the CO₂ neutrality target in production by 2030. The preparations for the transition to biomass (30%) from coal (70%) has started. The goal is to use 100% biomass in the heat power plant in Mladá Boleslav.

GreenLogistics

Use of alternative fuels
As part of its GreenFuture Strategy, Škoda Auto constantly monitors the alternative fuels market and the availability of new technologies. Škoda is a member of the Czech Gas Association, which focuses on hydrogen, LNG and CNG technology, including bio variants. It also cooperates with distributors, processors, refineries, and truck manufacturers.

Oversized means of transport
In 2021/2022, the “Gigaliner” pilot was tested for the transport of FBU (Fully Built Unit) vehicles on the route from Mladá Boleslav to Mnichovo Hradiště and back. In the Czech Republic, Gigaliners are allowed to transport vehicles only in an exception, in neighbouring countries they are not. Currently, the potential of oversized transport of FBU vehicles by Gigaliners is being discussed at the level of logistics management of Škoda Auto. A potential future intention is to deploy this technology for intrastate transport, especially motorway transport between Mladá Boleslav and dealerships within 10 km of the motorway network (legislative restrictions), or to target transport to neighbouring countries.

Transport by rail
In 2021 and 2022, the transport of wagons by rail experienced many complications related to the capacity of the railway network and the lack of wagons. For this reason, the current share of FBU transport by rail to the share of FBU transport on trucks has dropped to a ratio of about 45% : 55%. The intention for the coming months and years is to increase the share of FBU transport by rail again. For the so-called “green train,” the Company sees potential in the outbound transportation from Mladá Boleslav to Dąbrowa Górnicza (Poland).

Nature-based climate change mitigation and adaptation

To mitigate climate change and adapt to its impacts, the Company has been maintaining and planting greenery, such as trees, shrubs, and grassland. This greenery offers several essential ecosystem services, such as emissions sequestration (climate change mitigation), soil erosion mitigation, water and organic matter retention, shading, and air cooling (climate change adaptation).

Another environmental activity where the employees help as volunteers is the Škoda Trees project (see Volunteering).

For water related adaptation actions see Water.

Pavel Grmela
Currently in Environmental and Work Protection, with Škoda Auto since 2016

“Day by day, it is becoming clear that climate change is not just an empty phrase. We all have a chance to feel its consequences on our own skin, even if we may not always realise it, whether it be floods, heatwaves, or other extreme weather events. I am very glad that Škoda Auto, along with the entire VW Group, approaches the issue of climate change responsibly and consistently develops a strategy for the future step by step. I am particularly pleased that, in addition to monitoring CO₂ and setting a decarbonisation plan for the entire product life cycle, we also focus on aspects that may seem marginal but are closely related to the issue. This includes the use of renewable energy sources, energy efficiency goals, the use of materials in line with circular economy principles, ensuring sustainable water supply, and last but not least, the protection of the valuable and often neglected biodiversity. Climate change is a very complex issue that connects many areas and requires increased cooperation of all the parties involved in addressing its impacts. Personally, I would like us all to be more open in the future, to learn to better seek common solutions, and to devote at least the same attention to all the aforementioned topics as we do to the issue of decarbonisation.“

Decarbonisation was scored among the top three material topics as part of the stakeholder dialogue. See Stakeholder dialogue. In order to achieve the climate commitment of becoming a carbon-neutral business by 2050, it is imperative that Škoda Auto proactively identifies, anticipates, and effectively manages climate policy risks and opportunities. Being ready for the transition to a low-carbon economy for Škoda Auto means being ready to transform the product towards electrification by taking steps to consume energy from renewable sources and putting emphasis on energy efficiency.

To this end, the Company has been monitoring climate-relevant risks as part of its risk management system, namely risks relating to the fleet CO₂ emissions compliance and the non-vehicle CO₂ emissions compliance. See Risk Management System.

For further information on the operation of Škoda Auto´s risk management system, please refer to the Annual Report 2022 (pages 80–83).

Similarly, physical risks related to climate change is something Škoda Auto must proactively be prepared for. For instance, risks related to water, as it is a crucial resource for the Company’s production. Škoda Auto plans and implements measures to reduce its consumption and closely monitors both water availability and quality, which may be impacted by the effects of climate change. A significant risk the Company faces is the potential lack of water during extended periods of drought. Therefore, Škoda Auto is developing sustainable solutions to reduce water consumption by providing its plants with industrial water.

Another climate-related risk the Company addresses is the flood risk related to heavy precipitation. To mitigate this risk, Škoda Auto has constructed large retention tanks and holds and releases excess water in a controlled manner. See Water.

Energy consumption and mix in Czech production

Reducing the amount of energy consumed and converting energy sources from fossil to renewable is a priority for Škoda Auto.

Škoda Auto has implemented many measures to reduce the consumption of electricity, natural gas, heat, and compressed air. Measures relate to reducing natural gas consumption in production processes, saving thermal energy, accelerating the transition to LED technology, using alternative sources, and targeting energy waste in production and administrative areas.

Additionally, selected departments in Technical Development (Motor Centre) use energy recuperation (heat and electrical) in its processes to achieve further savings in energy and related costs.

In 2022, the share of energy from renewable sources was reduced due to lower biomass supplies. The suppliers were not able to deliver at the contracted prices, which were affected by the expensive energy prices.

Gross Scopes 1, 2, and 3, and total GHG emissions

According to the Greenhouse Gas Protocol – A Corporate Accounting and Reporting Standard (GHG Protocol) greenhousegas (GHG) emissions are reported in three main Scopes as the total carbon footprint per year, or as an average value per vehicle. Additionally, the carbon footprint per average vehicle is reported in five phases of the lifespan. The connection of these two reporting areas is shown in the graphics below.

The carbon footprint is evaluated in tons of CO₂ equivalent (CO₂e). It means that there are other greenhouse gases emissions such as CH₄, NO₂, HFCs, PFCs or SF₆ integrated into the presented values.

The calculation of the Scope 1 and Scope 2 carbon footprint at Škoda Auto is done according to the VW98000 standard which is in line with the GHG Protocol. The carbon footprint data, as well as other environmental certifications, is certified by TÜV NORD.

The starting point for the calculations is the data collected in theGroup’s environmental data management system.

In this sustainability report, the emissions from the Škoda Czech plants (Mladá Boleslav, Kvasiny, and Vrchlabí) are included in Scope 1 and 2, together with the consideration of production of Seat vehicles and components for other group brands. In Scope 2, a zero CO₂ footprint is reported because all purchased energy by Škoda Auto is obtained from sources with a guarantee of origin – 100% carbon neutral energy sources. Škoda Auto ensures that all energy is purchased with a guarantee of origin.

Scope 3 refers to other indirect GHG emissions which are caused by the activities of Škoda Auto. The calculation and the Annual Reports are prepared jointly for all Group companies in line with the Scope 3 standards published by the World Business Council for Sustainable Development (WBCSD) and the World Resources Institute (WRI). The Group and the brands are reporting CO₂ emissions for 14 out of a total of 15 Scope 3 categories whereas two of them are included in other positions as explained below. According to this, around 20% of all Scope 3 emissions are part of the “Purchased goods and services” emissions category, while approx. 73% are part of the “use phase” emissions category (“well to wheel”). To calculate use phase emissions in the DCI and in the Scope 3 GHG inventory, fleet average values are used not including any legal reliefs.

The calculation of CO₂ emissions in the use phase of the Scope 3 GHG inventory is based on the real consumption of the Škoda model portfolio in the relevant regions (EU27, UK, Norway,
and Iceland). The relevant volume mix corresponds to the same car registration figures which are used for CO₂ fleet calculation according to Regulation EU 2019/631. To provide a picture that is as complete as possible, the category use phase is extended by emissions produced during the production and transportation of fuels (“well to tank” emissions).

Remarks:

Scope 1 per annum: all produced vehicles and components in Czech Škoda plants (incl. Seat vehicles and components for other brands; 2021: 680,397 vehicles, 2022: 693,370 vehicles

Scope 1 per Škoda vehicle: value calculated (by Group) as an average of vehicles produced in Škoda plants in the Czech Republic, India, and Russia

Scope 2: neutralised (all purchased energy by Škoda Auto in the Czech Republic is bought with a guarantee of origin – 100 % carbon neutral energy sources)

Scope 3 per vehicle: average values per vehicle according to customer registration in the markets EU27, UK, Norway, and Iceland

Scope 3 per annum: values per vehicle multiplied by volumes of Škoda vehicles registered by customers in the relevant period in the specified markets (EU27, UK, Norway, and Iceland)
(2021: 572,950 vehicles, 2022: 526,708 vehicles)

For detailed overview of CO₂ footprint per vehicle (DCI) 2021 and 2022, see next page.

Rostislav Houba
Currently in Management product sustainability & CO₂, with Škoda Auto since 2016

“As a person who loves nature and sees negative changes around me, I am glad that nowadays a large portion of manufacturers in industries are striving to be more environmentally conscious. It brings me joy to see that Škoda Auto is setting an example in this regard and that I personally can contribute here as well. Within my responsibilities, I focus on reducing the carbon footprint generated throughout the life cycle of our products and on promoting the sustainable use of resources. By that, I mean maximising the use of secondary materials in our new vehicles and ensuring the recycling of materials for further use once the vehicles reach the end of their life. I believe that we will successfully achieve our long-term goals.“

Policy and Ambitions

Škoda Auto places emphasis on the safe handling of substances that, in the event of a leak, may endanger soil or groundwater. If it is technologically possible, the use of less dangerous substances is preferred.

As part of the implemented environmental management system certified according to ISO 14001, effects on the environment are regularly evaluated.

Škoda Auto has committed itself to lowering its Index for Reducing Environmental Impact (UEP). This index includes specific water and energy consumption, specific production of volatile organic compounds (VOC), CO2 emissions (kg/car), and specific production of waste intended for landfilling. The aim is to reduce the UEP Index by 52.5% compared to 2010.
See GreenFuture Strategy.

Risks and Impacts Assessment

The topic of pollution is very important to Škoda Auto. A scoring system is used to evaluate the impact of pollution on the environment, which is updated at least once a year. Based on this system, each organisational unit has an overview of its impact and can thus prioritise possible measures to mitigate this impact.

As part of the risk management system, the Company is working with a cluster of risks related to non-CO₂ emission compliance (such as related to NMOG and NOx emissions; see Risk Management System).

Škoda Auto also has a system for the management of extraordinary events. The Company manages the risk of contamination of surface water, soil, and groundwater by harmful substances used on the Company premises or caused by an accident. In the event of a fire, there is a risk of emergency emissions into the air and the effect on sewage or surface water by fire products.

The measures in place to minimize the impact of these extraordinary events are emergency plans and internal organisational standards. When dealing with harmful substances, the Company consistently applies the principles of multi-barrier protection. The Company considers places with a significant occurrence of harmful substances in their emergency plans, which are regularly verified for relevance. Procedures in the event of an accident are described in Škoda Auto’s internal operating documentation and in approved emergency plans.

The risk of the possible leakage of harmful substances through the sewage system is eliminated by a device for the capture and detection of these substances in the effluents from the manufacturing plant. The Company’s fire brigade is constantly present in all production facilities, equipped to detect potential leaks of harmful substances, contributing to overall safety. The Company also has a system for evaluating and approval of the chemicals used. Regular equipment maintenance and leak checks play an important role in the prevention of emergencies.

Policy and Ambitions

Škoda Auto has a defined goal for water management based on the GreenFuture and the goTOzero environmental mission statement. One of the five indicators that make up the Environmental Impact Reduction Index is the specific water consumption per manufactured car.

The Company has set a target of achieving a 52.5% improvement in the Index for Reducing the Environmental Impact of Production by 2025 compared to 2010.

All 5 environmental indicators that make up the Environmental Impact Reduction Index are monitored with monthly frequency in the Management cockpit, where actual water consumption (for past months) and expected water consumption (for future months) are continuously compared with the annual water consumption plan (target). In the Management cockpit, consumption is also monitored in this way at the level of individual plants.

The Company aims to maximize efficient resource use and promote circular economy approaches for materials, energy, land, and water. As part of the GreenFactory (environmentally friendly production), there is an effort to apply modern technologies in production, thanks to which the effects on the environment will be reduced.

The undertaking has no adopted policies or procedures regarding sustainable oceans and seas. Škoda Auto does not consider the topic relevant at the moment.

Actions

Škoda Auto supports sustainable investments. One of them was the implementation of modern filter systems in the paint shop in Mladá Boleslav. The technology treats the wastewater and returns it into circulation. Water reuse is used in all the Company's paint shops. These include the use of cascade backwash technology and water recycling using membrane technology. The amount of recycled water in the paint shops was 510,749 m³ in 2021 and 467,759 m³ in 2022.

Using a dry capture method, the new paint shop captures paint particles by filtering them through finely ground limestone powder. This process replaces the traditional use of water and significantly reduces the amount of waste sludge generated during overspray capture.

Large retention tanks that hold water and subsequently release this rainwater in a regulated manner help to manage water efficiently. Part of the water captured in the retention tanks is used by the Company for watering greenery in plant I in the city of Mladá Boleslav.

In the years 2021 – 2022, 19 smaller water-saving measures were implemented with a total saving of almost 10,000 m³/year. The largest measure (5.5 thousand m³) was the capture and use of rainwater for watering greenery in the Mladá Boleslav plant area. As part of this project, it was possible to use this water for the maintenance of urban greenery.

Under expert supervision, apprentices from the Škoda Vocational School have added a special detail to the Škoda Afriq with the drinking water generator from Watergen: the racing vehicle designed for the desert rally can provide its occupants with clean and chilled drinking water whenever they need it. By installing a unit in the Afriq, Škoda Auto is raising awareness of this technology that can help combat water shortages in desert regions such as North Africa.

In 2020, there was a stimulating feasibility study where various options (sources) were examined for securing water for the industrial purposes of the Kvasiny plant. In 2021 and 2022, semi-operational tests of water treatment equipment from the biological treatment plants of the Kvasiny plant and the town of Solnice took place.

Risks and Impacts Assessment

For Škoda Auto, water is an important topic that was assessed as material based on the stakeholder dialogue.

The main source for production is the surface water from the Jizera, Bělá, and Labe rivers. To save water, Škoda Auto monitors data on water consumption, wastewater production, and the amount of reused water (recycled water). Based on this data, risks and appropriate measures are determined.

Škoda Auto is aware of the problems with water scarcity during long-term drought. The plant in Kvasiny was assessed as an area with high water stress. For this reason, the Company is working on a sustainable solution for supplying its plants with industrial water. The furthest so far is the project at the Kvasiny plant, where purified water from biological wastewater treatment was evaluated as the most reliable source of industrial water. Recycled water will thus be used for production processes, thereby saving primary water resources.

The amount of recycled water in the paint shops

Data and Specific Disclosures

Water consumption - water taken (%)

* Wastewater – wastewater after physical and chemical pre-treatment discharged to the municipal
wastewater treatment plant (Mladá Boleslav, Vrchlabí) or the wastewater treatment plant in the
factory Kvasiny.

** Recycled water – definition for the purposes of this report – water that has been used more than
once. Multiple use of water in cooling circuits is not included

Share of recycled water (%) in total water consumption

The decrease in recycled water for 2021 and 2022 compared to 2020 was due to production shutdowns.

Wastewater - indirect discharge (nitrogen, phosphorus)

Water consumption per vehicle (m³)

The increase in water consumption between 2020 and 2021 was mainly due to production shutdowns.

The increase in the amount of recycled water per car for the year 2021 was caused by a higher proportion of car bodies produced in the new B paint shop at the Mladá Boleslav plant. The decrease in the amount of recycled water per car for the year 2022 was caused by a lower proportion of car bodies produced in the new B paint shop at the Mladá Boleslav plant.

Materials and waste management are among the key material sustainability topics for Škoda Auto while contributing to the climate commitment. The Company aims to achieve the transition to a circular economy by applying the circular principles in the whole value chain. The mentioned circular economy principles are defined by the EU Circular Economy action plan.

One notable achievement of the Company’s sustainability efforts in this area is the attainment of zero waste to landfill from production in 2020, which has been maintained in both 2021 and 2022.

Policy and Ambitions

As mentioned above, the sustainability approach of Škoda Auto is embodied in the GreenFuture strategy. All three pillars deal with the topics of circular economy and resources.

The goals mentioned below were approved by the board of Škoda Auto as a part of the current Škoda Environmental goals until 2025. For more goals and targets see Climate Change.

At the production level the accepted goal is to maximise effective resource use and to promote a circular economy approach when using materials, energy, water, and soil.

GreenFactory

Škoda Auto endeavours to prevent waste generation and to use raw material resources sparingly. If waste is already generated within a production process, the waste management hierarchy is consistently applied, i.e. material and energy use is preferred over landfilling.

Thanks to the consistent application of these principles, it was possible to reach the state where no waste originating from the production processes in the Czech plants has been landfilled as of October 2019.

Waste management hierarchy

Regarding waste management, the following policies are always applied:
› All produced waste is handed over exclusively to individuals authorised for waste handling.
› All waste produced by the Company is weighed, its legal documentation is recorded, and it is handed over to authorized persons.
› In tenders for waste buyers, preference is given to those who can provide a higher level of treatment according to the waste hierarchy.

The GreenFuture strategy has set goals for circular economy and resources, such as the reduction of waste generated per car manufactured. These are incorporated in the target for UEP reduction by 52.2% by 2025. See GreenFuture Strategy.

One of the objectives of the 2025 Environment goals (see Climate Change) is to reduce the number of used materials and to reduce waste in the production.

GreenProduct

As defined in its Policies and Targets, Škoda Auto systematically maximises effective resource use and innovates with respect to circular economy approaches.

All car models currently produced by Škoda Auto are homologated in compliance with the requirements for recyclability outlined in Directives 2005/64/EC and 2009/1/EC.

The Company uses labelling of the vehicle parts to provide information about the materials used. This helps to determine the composition of each part, simplifying the subsequent sorting and processing of waste according to different material groups.

This reduces the overall environmental impact of the product and increases the share of recycled materials, which can be used as a substitute for primary raw materials.

To fulfil the approved goal to minimise the environmental impact, Škoda Auto uses recycled and environmentally friendly materials, such as bio-based and biodegradable materials which have the same qualities as the virgin materials. When using these materials, the Company prioritises the use of local raw materials with a lower carbon footprint compared to the primary material.

Example of sustainable materials used in current Škoda models

Sustainable materials – Highlights
Selected parts with content of recycled plastics in Scala/ Kamiq

The share of recycled materials will further rise in future models. In the first phase, the content of recycled plastics in new models from 2025 on is planned to be doubled compared to the current products to approx. 40 kg net weight (real weight of recycled material).

This target for the share of recycled plastics will be continuously revised and extended to other materials, such as metals, glass etc. with respect to market research and anticipated legislation.

GreenRetail

The GreenRetail strategy focuses partly on waste management and the GreenRetail certification is awarded based on proven results in resource efficiency. This is how Škoda Auto encourages efficient use of resources by its retail partners.

The accepted goal is to contribute to environmental improvement and sustainable development by actively supporting Škoda Auto’s global sales and service network in:
› resource efficiency,
› take-back and handling of waste from vehicle repairs.

Actions

GreenProduct

Škoda Auto is active in the field of innovative materials and has continued its activities in this area in the reporting period. Below are examples of significant activities in this field:

Implemented
› Crushed sugar beet – developed together with the Technical University of Liberec and the supplier Mocom, potential usage: monochrome design in vehicle interiors to create design elements
› Fabrics made from recycled plastic bottles – developed in cooperation with the Czech supplier Sage Automotive Interiors, usage: design edition of Škoda Enyaq, model Lodge
› Technical fabrics made from recycled PET bottles with a wool blend – developed in cooperation with AUNDE, usage: Škoda Enyaq

In progress
› Material based on Miscanthus reed, potential usage: interior
› Fabrics with special fibres, usage: heating and increasing the comfort of seats, or special reflective yarns
› Materials based on recycled cooking oil, potential usage: exterior components of vehicles

GreenFactory

Another project is a collaboration with a recycling company, in which a process was developed to transform used painted bumpers into granules. These can then be used to produce new bumpers.

GreenRetail

2ⁿᵈ life of batteries

Škoda Auto uses robust and long-lasting batteries for its electric vehicles. For Battery Electric Vehicles – fully electric vehicles, Škoda Auto provides an 8-year or 160,000 km (whichever comes first) warranty guaranteeing the battery will have at least 70% capacity. For Plug-in Hybrid Electric Vehicles, the Company provides the same warranty, but without a guarantee of at least 70% capacity.

Similar to internal combustion vehicles, many test and prototype vehicles are operated, which are not sold as used cars, but scrapped after testing. The batteries from these vehicles would normally be expensive to recycle. Instead, they are used in 2ⁿᵈ life, which means they can still be used for years.

Because batteries used in typical stationary energy storage applications are only subjected to a fraction of the power demand of a vehicle, even older and used batteries have enough power for a 2ⁿᵈ life. Stationary energy storage systems serve as boosters for DC fast-charging stations, backup power supplies (replacing diesel generators), and store green energy from photovoltaics. Therefore, 2ⁿᵈ life batteries can contribute to reducing CO₂ in the energy sector after their sustainable transportation life.

In 2021 and 2022, Škoda Auto obtained the following volumes of batteries and battery modules for 2ⁿᵈ life, 99.9% of which were from internal sources. In total, more than 100 tons of batteries were collected in the years 2021 and 2022.

Overview of the 2ⁿᵈ life of batteries project
The different year-on-year ratios in the number, weight, and capacity of batteries are caused by the presence of various battery types.

Take-back system – tyres, batteries
After a change in legislation, the network of take-back points for tyres and lead-acid batteries was significantly expanded in 2021. They can now be handed in free of charge at more than 800 locations across the Czech Republic. In total, over 500,000 tyres and more than 2,000 tons of lead-acid batteries have been collected and recycled over the past two years. The vast majority of the materials obtained from recycling these used products have been utilised to create new products, including new lead-acid batteries, shock-absorbing and anti-vibration elements, noise barriers, playground equipment, and other rubber granulate-based products.

In 2021 there were 279,662 tyres collected, in 2022 the number reached 305,173.

Jiří Podlipný
Currently in Environmental Protection, with Škoda Auto since 1998

“I consider the most significant achievement in waste management to be the attainment of a state where no production waste from the plants in the Czech Republic is sent to landfills. The Company first achieved this state in 2020 and has since managed to maintain it, even at the cost of increased expenses.

A major event in the field of air protection was the putting into operation of paint shop B at the Mladá Boleslav plant. Thanks to the dry separation system for emissions, it achieves impressive parameters. The amount of volatile organic compounds emitted was 1.27 g/m2 of painted surface, which is less than 4 % of the emission limit. The concentration of the concentration of dust emissions is an order of magnitude lower than in paint shops with wet separation.“

Reflecting global policy developments, such as COP15 and the Post-2020 Global Biodiversity Framework (reflected in the EU Biodiversity Strategy 2030), and related market initiatives, Škoda Auto recognises biodiversity as a key sustainability issue. Biodiversity and ecosystems are considered in the legislatively mandatory environmental impact assessment, as well as in the materiality assessment of sustainability topics through the stakeholder dialogue.

While Škoda Auto is developing its own initiatives to protect and promote biological diversityand ecosystems, it also invests in measures that are recognised by the United Nations Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES) as essential to deal with biodiversity loss, such as climate change mitigation.

Policy and Ambitions

Protection and preservation of biodiversity and ecosystems have been an integral part of the Group Environmental Mission Statement “goTOzero” and has long been one of the key elements of the Company‘s environmental management. It aims to reduce its negative impact on biodiversity and ecosystems, promoting projects to preserve them. The updated environmental mission is currently in the process of integration into Škoda Auto’s GreenFuture strategy, a process expected to be implemented in 2023. The issue of biodiversity and ecosystems is planned to be assessed comprehensively, both on land and in water. Similarly, in its Environmental Policy 2025, Škoda Auto has committed to a maximum effort to mitigate any negative ecological impact, and also to plant and care for greenery. With regards to its value chains, Škoda Auto plans to integrate considerations of resources use into the Code of Conduct required from business partners.

For the purposes of monitoring success, the Company develops dedicated indicators and targets to achieve a near-natural development, reduction of land and resource use, implementation of projects with partners, and involvement of employees. In addition, Škoda Auto commits to concrete targets in other areas that directly influence the state of biodiversity and ecosystems, such as emission reductions, waste and pollution minimisation, and materials recycling.

In line with the Group goals, Škoda Auto is aiming to be more active in the integration of biodiversity and ecosystems into its strategy, identifying and assessing relevant impacts, risks, and opportunities along its value chain.

In this respect, the Company is closely following the development of policies, standards, and tools at both global and European level, such as the requirements of the Post-2020 Global Biodiversity Framework or the framework by the Taskforce on Nature-related Financial Disclosures (TNFD).

Actions

To deliver on its commitment to protect and promoten biodiversity and ecosystems, Škoda Auto develops educational projects, dedicated communication, and provides financing for external projects.

The Company has been maintaining and planting biodiverse greenery, such as trees, shrubs, and grassland (see Nature-based climate change mitigation and adaptation). It manages 206.7 ha of a biodiverse forest on a test track site, using the services of an external expert. As part of this care, the monocultural forest cover has gradually been enriched with a diverse variety of new trees, including species better able to withstand changing climatic conditions and protect the forest land from erosion. Beyond climate change mitigation and adaptation, these initiatives also enable Škoda Auto to protect the individual species of the greenery, supporting the promotion of biodiversity and ecosystems dependent on this greenery, including vulnerable pollinators. No quantitative evidence has been collected with regards to the success of such initiatives.

In 2022, Škoda Auto has also set up a new area dedicated to biodiversity between the administration centre and its headquarters in Mladá Boleslav with the help of employee volunteers.

Relevant projects have been supported by the Škoda Auto Endowment Fund grant programs. Biodiversity and ecosystems are targeted by the Krakonošovy Zahrádky program.

Risks and Impacts Assessment

At the Group level, biodiversity context is assessed using the Biodiversity Site Assessment Tool. Identification and assessment of the potential negative impact on biodiversity follows thenlegal requirement of the application of the EnvironmentalnImpact Assessment (EIA) preceding any major development projects, such as the expansion of buildings and production plants. EIAs have repeatedly confirmed that Škoda Auto‘s major development projects have no or minimal impact on biodiversity. In 2022, two such assessments have been executed, in relation to the “Kvasiny stopping and manipulation area” project and the “Increasing the flexibility of Paint Shop B – Hall M18” project. In the case that any material negative impacts on biodiversity and ecosystems were identified, they would be assessed, and mitigation measures planned.

Beside the legally required environmental impact assessment considerations, this topic was recognised as one of the key topics by the stakeholder dialogue 2021, yet it was not found material. See Stakeholder Involvement.

For the purposes of monitoring risks and impacts, Škoda Auto keeps a list of protected areas and areas of high biodiversity value outside protected areas in up to a 10-km proximity of its plants, together with key details about the status of their protection (see tables below in this chapter).

Soil

Soil use is crucial for manufacturing sites of Škoda Auto, therefore, it tries to handle it responsibly. For example, all Technical Development buildings to date were built on browfields. Regarding new development projects, the Company prefers to locate them on existing sites or use brownfield sites. The potential impact on soil is assessed as part of the EIA. All projects assessed to date have been evaluated as having no or insignificant negative impact on soil.

Škoda Auto has been dealing with a legacy negative impact on soil on the premises of the Mladá Boleslav plant and the Kosmonosy service centre, dating back to the times before the Company was privatised. The situation is regularly monitored, and groundwater and (where possible) soil remediation regularly carried out. The contamination is being gradually eliminated.

No policies or practices were adopted with regards to sustainable agriculture or sustainability of seas and oceans as those areas were identified as irrelevant for Škoda Auto’s operations.