Introductory Information

Company Profile

Škoda Auto a.s. (hereinafter the “Company” or “Škoda Auto”) is one of the oldest car manufacturers in the world. The history of the Company stretches back to 1895 when Václav Laurin and Václav Klement laid the foundations for today’s global company.

After initially manufacturing bicycles and motorcycles, the first passenger cars were manufactured in Mladá Boleslav in 1905. Throughout its history, the Company has held an unmistakable position in the automotive industry that will continue long into the future due to its broad and attractive portfolio, not least because it has been part of the Volkswagen Group (hereinafter the “Group”) for 30 years. It has become a strong, internationally successful company that is active worldwide, offering its customers a total of eleven model lines. Škoda Auto has long been a pillar of the Czech economy, currently employing more than 35,000 people in the Czech Republic, while making sure to be a good neighbour at all its sites in terms of environmental and social responsibility.

The Company is based in Mladá Boleslav, where one of its production plants is also located; another two can be found in Kvasiny and Vrchlabí. However, vehicles bearing the winged arrow are also manufactured in China, Slovakia, and India, mostly via Group partnerships, and in Ukraine in collaboration with a local partner. In the reporting period the production of Škoda cars in Russia was suspended in connection with the Russian war in Ukraine, as were exports to the Russian market.

The Company launched its first all-electric SUV, the Enyaq, on international markets and brought out a new generation of the Fabia in 2021. The highlight of 2022 was undoubtedly the world premiere of the Enyaq Coupé. This attractive SUV coupé, characterised by elegant, sporty lines and a generous interior complements the standard Enyaq SUV. The complete product portfolio is described in detail in the Annual report 2022.

Complete information about the deliveries can be found in the Annual report 2022.
The financial results at Škoda Auto are reported in accordance with IFRS, as adopted by the European Union. The reporting period was significantly affected by the Russian-Ukrainian conflict, the impact of the Covid-19 pandemic, and ongoing problems in the supply chain, particularly in the availability of semiconductors. Despite the tough conditions, the Company achieved a positive operating result and maintained a stable financial performance.

For revenues and investments see the Annual report 2022.

In June 2021, the new corporate strategy: Next Level – Škoda Strategy 2030 was introduced by the Company. The strategy will steer the evolution of the Company up to 2030. Sustainability became one of the 10 core topics in this strategy, confirming that sustainability is a company-wide priority.

The Next Level – Škoda Strategy 2030 lays out ambitious goals in the areas of internationalisation, electrification, and digitalisation. Škoda Auto aims to become one of the top five bestselling brands in Europe by 2030 while expanding to become the leading European brand in the Indian market.

As part of its Next Level – Škoda Strategy 2030, Škoda Auto has defined clear and ambitious targets for climate protection and sustainability.

The Company will strive to comply with the European Union’s emissions and CO₂ standards and the related portfolio adjustments, which will be further expanded to digital business models and mobility services. The Company will expand its portfolio with six all-electric models in the coming years. The share of electric vehicles in Škoda Auto’s European sales will exceed 70% by 2030.

The Company aims to achieve a CO₂ neutral energy balance at its Czech and Indian production sites by 2030. Furthermore, the Company aims to reduce its fleet emissions by more than 50% compared to 2020. The specific actions taken by the Czech car manufacturer to consistently reduce the ecological footprint of its business activities cover the entire value chain. The overall Decarbonisation Index (DCI) will be reduced by 40% compared to 2018 (see Climate Change).

One of the tools for implementing the Next Level – Škoda Strategy 2030, the transition to electromobility and digitalisation is the new “Modern Solid” design language that was presented to the public in August 2022. It is in line with the Company’s new purpose “We will help the world live smarter” and its core values: Human, Simplifying, and Surprising. This is characterised by a robust appearance, functionality, and authenticity. The Škoda cars of the future will emphasize superior aerodynamics, with sustainable materials coming to the fore in a spacious interior, as presented in the study Škoda Vision 7S.

Škoda Auto’s comprehensive sustainability strategy, established in 2019, continued into the years 2021 and 2022. It remained focused on three pillars: Environmental, Social and Governance.

New developments and updates were achieved across all three pillars in the reporting period 2021 and 2022.

In the environmental area, the Company continued with its decarbonisation journey. It also systematically implemented more sustainability elements into its products, such as natural, recycled, and recyclable materials in its cars. This is, for instance the case of the seat covers made from new wool and recycled PET bottles in the all-electric Enyaq SUV.

In the social area, the sustainability strategy was updated in 2022. The Company is attempting to transition to a new approach based on Creating Shared Value (CSV) principles. CSV enables Škoda Auto to create a shared value between the Company and its stakeholders. The strategy defines the following five focus areas: Education, Mobility, Volunteering & Employee engagement, Well-being and Diversity. In each of these focus area, important points of interest regarding the external and internal dimensions were defined to create a positive impact on society. Additionally, a new diversity strategy was established in 2022 to make sure that inclusion, equity, and diversity become part of the company culture creating an environment equal for all.

In the governance area, Škoda Auto strives to act responsibly and transparently not only internally but also externally. Škoda Auto has developed further relations with business partners by integrating the environmental and social standards into a Code of Conduct for Business Partners.

The Company dealt with multiple challenges in both reporting years, such as the Russo-Ukrainian War, instability of the supply chain due to global fluctuations, volatile energy prices, and the aftermath of the Covid-19 pandemic that still lingered into 2021 and 2022, restricting the production lines at times.

New legislative requirements and regulations were also a contributing factor in the acceleration of sustainability efforts across the whole company. With its strategy, the Company is taking steps to ensure that sustainability is truly present in all areas of business. This was shown in an unique Czech ESG Rating, developed by the Prague University of Economics and Business and the CEMS programme, where Škoda Auto was rated among the top 10 companies in its ability to report transparently on sustainability.

The table below displays the Sustainable Development Goals (SDGs).
For detailed list of Škoda’s specific contributions to selected SDGs in the reporting period see Annex 2.

In autumn 2015, The General Assembly of the United Nations adopted the 2030 Agenda for Sustainable Development, which lays out 17 Sustainable Development Goals (SDGs) as a universal call to action to end poverty, protect the planet and ensure that all people enjoy peace and prosperity by 2030. While the SDGs are primarily aimed at states and governments, Škoda Auto, as part of the Group, supports the VW Group in its commitment to the Paris Agreement.

The Škoda sustainability strategy and its related activities are aligned with the SDGs adopted by the United Nations in 2015. This alignment helps to guide the Company’s focus on areas where it can create a greater impact and make its own business activities more sustainable. Škoda Auto contributes to the majority of the SDGs addressed by the Volkswagen Group.

Not only does Škoda Auto follow the same goals as the Group, but the Company also aligns with the national SDGs. The Czech Republic places emphasis on six topics (People and Society, Economic Model, Resilient Ecosystems, Regions and Municipalities, Global Development and Good Governance) covered in “Czech Republic 2030” document, which is a strategic framework for the sustainable development of the Czech Republic. The Company aligns with four out of the six topics chosen as national priorities – People and Society, Economic Model, Resilient Ecosystems, and Regions and Municipalities.

The goals of good governance and global development are mainly related to the public sector, so they are not at the forefront of Škoda Auto’s activities.

In the reporting period, Škoda Auto has been monitoring sustainability-related impacts through stakeholder involvement. The assessment of risks and opportunities is done through an established risk management system. This way, the Company steers the strategy and management of its own business model and value chain.

Škoda Auto understands that its operations and business partnerships are dependent on and have both positive and negative impacts on the environmental, social, and governance areas. Considering this while following the relevant legislation and the Group’s approach, Škoda Auto is monitoring developments in materiality assessment requirements and will take into account any future legislative requirements.

Regular communication with stakeholders throughout the year is a key activity for Škoda Auto. Every second year the Company conducts a stakeholder dialogue which serves as a tool in the selection of material topics for future strategic plans.

Škoda Auto places great emphasis on employee cooperation and communication, utilising various channels to facilitate this process. These include, for example:

› the Company intranet, weekly newsletters, and monthly magazines
› annual Group-wide employee satisfaction survey called the “Stimmungsbarometer” (StiBa) tool
› regular communication and feedback-sharing opportunities with supervisors
› employee representation on the Supervisory Board
› collective bargaining with the KOVO Unions
› Whistleblowing system

At the same time, the Company actively communicates with external stakeholders, such as municipalities, shareholders, governments, suppliers, customers, universities, and NGOs, via various means of communication with varying regularity.

Stakeholder dialogue 2021

In 2021, the stakeholder dialogue was performed to assess Škoda Auto’s impact materiality of sustainability topics and to make sure the Company considers the feedback of its stakeholders in its sustainability activities and strategic priorities.

Škoda Auto has mapped sector-specific impact areas. As part of the mapping exercise, it assessed 25 topics as important for the company. The significant topics were selected based on the scores of 483 stakeholders (internal and external).

Among the sustainability related topics, stakeholders assessed as material: profitability and sustainable growth, circular economy, customer, quality and safety, technology and innovation, employee relations and satisfaction, health and safety, decarbonisation, data privacy and cybersecurity and resource management and innovations.

Priority topics that were not assessed as material but are close to the materiality threshold are being continuously monitored and considered.

External stakeholders did not mention any new material topics to be included in the materiality analysis.

Škoda Auto operates with an internal control system and a comprehensive risk management system, following the methodology of COSO II.

To assess and monitor the operating risk, Škoda Auto put in place a regular quarterly assessment focusing on the financial effect of a predefined list of focus risk clusters identified at a group level. Among the ESG-relevant risk clusters, Škoda Auto works with sustainability compliance and legal risks (e.g. fleet CO₂ emissions), pollutant emission risks, other environmental risks, and risks related to the health and safety of employees.

Evaluation of risks by respective responsible staff has a form of scoring based on the severity and the likelihood of respective risks. For a risk to be considered material for the Company it must exceed the threshold of EUR 5 million. Once the resulting draft list of material risks is collected (typically around 80–100 risks), the top 10 risks are provided to the Board of Directors. The collection is supported by an annual consultation and training for all employees, where employees can discuss any newly identified risk to the Company’s financial position with the head of their departments.

Škoda Auto also works with an immediate risk reporting system based on a direct communication line with the Board of Directors about major risks without undue delay. Immediate risk reporting is required if, despite the risk management measures adopted, a risk of EUR 50 million is expected within the next 24 months and with a likelihood of over 50%.

The Škoda sustainability governance model has been implemented across the whole company with defined roles and responsibilities to manage sustainability topics effectively and consistently in line with the internal and Group sustainability guideline, setting standards for sustainability management key processes.

The Škoda Sustainability Board, consisting of the Board of Management, meets at least once a year to set the overall strategy, defines concrete sustainability targets, and controls its overall implementation, including the impacts and risks. It also makes decisions regarding the implementation of far- reaching sustainability measures and flagship projects. To aid the Board of Management, the environmental and social pillar- specific committees such as the Strategic Committee on the Environment and Sustainable Development and the Social Sustainability Board submit proposals and brief the Board of Management. Both committees hold three meetings every year, while governance-related issues are discussed with the Board of Management directly at the divisional level.

The GreenOffice is responsible for the implementation of the overall environmental GreenFuture strategy and manages the Strategic Committee on the Environment and Sustainable Development.

Social sustainability-related topics and the Social Sustainability Board are managed by the External Affairs department in cooperation with other HR functions.

The Sustainability Circle, a cross-departmental body comprising representatives from all three pillars and all relevant departments, under the leadership of the Corporate Strategy and Innovation department, is responsible for the sustainability strategy’s continued development. This working team acts as an interface for all sustainability topics and is responsible for the implementation of the company-wide sustainability programme and the management of the Škoda Sustainability Board. The head of the Sustainability Circle, the Brand Sustainability Manager, acts as an interface to the Group and represents the Company’s sustainability.

In November 2021, Škoda Auto extended its current governance model by creating the External Sustainability Council, consisting of five external sustainability experts with international experience from the fields of business, the environment, and social sustainability. The Council advises the Škoda Board of Management regarding the strategic focus areas of sustainability and projects. It also brings a unique outside-in perspective and challenges the Company’s sustainability initiatives. The External Sustainability Council is an independent body, and its members are Mr. Hans Reitz, Ms. Sandra Feltham, Mr. Jan Bureš, Ms. Soňa Klepek Jonášová and Mr. Ladislav Miko. The Sustainability Council holds two meetings every year with the Board. Škoda Auto became one of the first companies in the Czech Republic to call on the expertise of an External Sustainability Council.

Hans Reitz
Director and co- founder of The Grameen Creative Lab, creative entrepreneur, visionary, implementer and “story maker”

Sandra Feltham
Founder and CEO of Flagship Impact, and President at Business Leaders Forum

Jan Bureš
Chief Economist of Patria Finance

Soňa Klepek Jonášová
Founder of the Institute of Circular Economy

Ladislav Miko
General Environmental Advisor to the President of the Czech Republic, Advisor to the Minister of the Environment, and Government Plenipotentiary

Business Model and Value Chain

Market Position

Corporate Strategy

Sustainability Strategy

Sustainable Development Goals – Targets

Impacts, Risks, and Opportunities

Stakeholder Involvement

Risk Management System

Corporate Governance of Sustainability

Climate-related incentive scheme

Risks to the reporting process