Introductory Information

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, and largely because it has been part of the Volkswagen Group (hereinafter the “Group”) for more than 30 years. It has become a strong, internationally successful company that is active worldwide and offers its customers a total of thirteen model lines.

Škoda Auto has long been a pillar of the Czech economy, currently employing almost 35,000 people in the Czech Republic. 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.

The business activity in which the Company is engaged primarily focuses on the development, manufacture and sale of cars, and components. The latter also included battery systems for MEB platforms, original parts, Škoda brand accessories and the provision of servicing.

Škoda Auto is currently offering the broadest portfolio ever and provides the best of both worlds – electric and conventional powertrain options. Nevertheless, the future of Škoda is electric. The Company is implementing its clearly defined e-mobility roadmap, including six completely new e-models in the coming years.

The Company is further expanding its global footprint as a key element of its Next Level Škoda Strategy 2030. Škoda Auto intends to become one of the top five best-selling brands in Europe by 2030. As an integral part of Brand Group Core, the car manufacturer is leveraging its expertise in price-sensitive growth markets and contributes its know-how to unlock new growth potential for the Group in India and ASEAN.

For several years now, sustainability has been one of the Company’s top priorities. The Next Level Škoda Strategy 2030, which defines a total of nine key areas and priorities for Company development leading up to 2030, was updated in 2023. Sustainability helps the Company achieve the Next Level Škoda Strategy 2030 and has been firmly anchored in it as an integral part of it. The name of the sustainability strategy also reflects the Company’s ambition – “Best in Class in ESG”.

The implementation of this strategic topic is overseen by two members of the board of directors responsible for the area of Procurement and the area of Production and Logistics.

As a vehicle manufacturer of long-standing tradition, Škoda Auto is well aware of the global challenges ahead and its responsibility toward the environment and society. The strategy aims to help the Company achieve significant success in the defined areas, to become an inspiration for other companies on the market, and to link the Škoda brand with the issue of sustainability even more in the minds of its customers.

The updated Sustainability Strategy is based on three main ESG pillars and defines a total of eight strategic areas.

In the environmental pillar, the Company intends to become an innovator in re-using resources with sustainable Simply Clever solutions. Strategic areas include decarbonisation, the circular economy, and protecting local ecosystems.

The social sustainability pillar at Škoda Auto encompasses strategic areas such as people and communities, including support for education, mobility, well-being, volunteering, and diversity. It proactively engages local communities, supports employees, and provides humanitarian aid.

As far as corporate governance is concerned, Škoda Auto wants to become an example of ethical conduct and resilience to crises. Strategic areas were defined as being integrity and compliance, risk management, and building sustainable business relationships.

In order to monitor the achievement of the Company’s objectives, a set of eight “TOP KPIs“ are used in relation to strategic areas, defining specific targets for the year 2025 or 2030 for each particular area. At the operative level, there are several other monitored indicators.

When updating its strategy at the end of 2022, the Company initiated an internal analysis of sustainability issues emerging from dialogue with stakeholders from 2021 and the strategies and commitments of the parent Volkswagen Group.

Among the significant issues identified were: profitability and sustainable growth, the circular economy, customers, quality and safety, technology and innovation, employee relations and satisfaction, health and safety, decarbonisation, data protection and cybersecurity, and resource management and innovations.

At the same time, the Company mapped out its current activities and objectives in the sphere of sustainability based on interviews with key internal departments. The outcomes were considered and discussed with the External Sustainability Council at the beginning of 2023. The updated sustainability strategy was then approved based on the input specified above.

In the future, the Company plans to work with the Volkswagen Group to evaluate material issues in line with the principles of double materiality which corresponds to the requirements of the new Corporate Sustainability Reporting Directive (CSRD). The outcomes will be projected in an updated overview of material issues in non-financial reporting, showing the areas having the greatest impact on Company activities.

Regular communication with stakeholders is a key activity at Škoda Auto, giving it a better idea of the needs and expectations of its partners and enabling it to better set the sustainability strategy and its priorities.

At the same time, the Company communicates with external stakeholders, such as municipalities, public authorities, suppliers, customers, universities, and NGOs, with differing degrees of regularity using different means of communication.

Communication methods are adapted to the individual parties and include active communication at individual meetings and representation in different bodies, as well as passive communication, including publishing reports on sustainable development, press releases, or publishing information about sustainability on the Company website.

Sustainable Development Goals

The UN General Assembly adopted the 2030 Agenda for Sustainable Development in the autumn of 2015, setting out 17 sustainable development goals as a global challenge. The aim is to end poverty, protect the planet, and make sure that all people live in peace and prosperity by the year 2030. Whereas the sustainable development goals are intended primarily for countries and their governments, Škoda Auto, as part of the Group, endeavours to contribute at least in part to achieving certain goals through its sustainability strategy.

In light of its updated sustainability strategy, the Company chose 14 of the most significant SDGs, which it reflects in its current activities. The selection of individual goals was done at the level of sub-goals based on the 17 main SDGs. Remaining three SDGs (1. No poverty, 2. Zero hunger and 14. Life below water) were not selected because of the limited Company impact. These goals are shown in the individual chapters of the Report.

In the reporting period, Škoda Auto has been monitoring sustainability-related impacts through stakeholder involvement. The assessment of risks and opportunities is carried out using an established risk management system. This enables meaningful strategy and management of the business model and value chain.

The Company’s activities and partnerships rely on the environment, social areas, and corporate governance, influencing them both positively and negatively. Škoda Auto monitors the development of requirements on evaluating the impacts of its activities, doing so in line with the Group’s approach. The Company plans to fully consider any future legislative requirements.

The risk management system

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

Regular quarterly assessment is conducted to evaluate and monitor operating risks. This focuses on the financial impact of a predefined list of risk activities identified at the Groupwide level.

Risk assessment proceeds in the form of a points score based on the severity and likelihood of the risks. Risks whose value exceeds EUR 5 million are deemed to be significant. After gathering the resulting proposed list of significant risks (generally around 80–100 items), the Board of Management assesses the 10 most significant risks. Such risks include sustainability related compliance and legislative risks, for example, fleet emissions of CO₂, risks associated with emissions of pollutants, other environmental hazards, and the health and safety of employees. Assessing these risks in line with the ESRS method takes place at the Group level. The collection of data is further supported by annual consultation and the training of all employees. They have the opportunity to discuss all newly identified risks with their managers.

Škoda Auto also works with a system of immediate risk reporting based on direct communication with the Board of Management without undue delay. Immediate risk reporting is required in situations in which, despite all measures taken, a financial impact of EUR 50 million is expected within the next 24 months with a likelihood of more than 50%.

The Board of Management Škoda Auto meets at least once a year to discuss the status of the sustainability strategy, define specific goals, control its implementation, including impacts and risks, and evaluate its fulfillment. Furthermore, it decides on the implementation of related projects and measures in relation to sustainability.

The Strategic Committee for the Environment and Sustainability and the Social Sustainability Board, chaired by a member of the Board of Management for Production and Logistics and People and Culture, is in charge of the environment and social areas. Both committees meet up to three times per year to discuss issues related to the environment and social matters. Corporate governance does not have a separate committee, in that issues are discussed with the Board of Management at the level of individual divisions.

The specialised GreenOffice Department is responsible for carrying out the general GreenFuture environmental strategy, and it coordinates the aforementioned Strategic Committee for the Environment and Sustainability.

The External Affairs Department coordinates the action of the Social Sustainability Board and issues associated with social sustainability in cooperation with other HR coordinators.

The Sustainability Circle is a cross-departmental team comprising representatives from all three pillars and other relevant departments, under the leadership of the Corporate Strategy and Innovation department. The team acts as a hub for all issues of sustainability and is responsible for carrying out the enterprise-wide sustainability programme board meetings regarding sustainability. The chair of the team, the Brand Sustainability Manager, acts as the contact for the Group and represents the Company in the area of sustainability.

The External Sustainability Council

The External Sustainability Council, founded in 2021, consists of independent external sustainability experts with international experience in business, environment, strategy and communications. The External Sustainability Council advises the Company’s Board of Management on the strategic direction of sustainability projects and related
activities. The Council provides feedback and offers a unique view from the outside, as well as new perspectives on sustainability.

The External Sustainability Council met with the Board of Management twice in 2023. Discussions centred on the circular economy, biodiversity, diversity, communities, and communication. In addition to these regular meetings, members of the Council attended meetings with individual departments about the issues mentioned. As of 31 December 2023, the members of the External Sustainability Council were Sandra Feltham, Jan Bureš, Soňa Klepek Jonášová and Ladislav Miko. Hans Reitz stepped down from the External Sustainability Council in June 2023.

Integration of sustainability-related performance in incentive schemes

The fulfilment of strategic issues and key performance indicators (KPIs) at the Company is projected into the evaluation of members of management. As far as sustainability is concerned, KPIs reflect the issues of decarbonisation, diversity, and customer perception of sustainability. A uniform ESG factor was also introduced throughout the Group in 2023 to take into account the fulfilment of set objectives in the sphere of decarbonisation, diversity, and compliance and integrity, both at the Group wide level and at that of individual brands.

Risks to the Reporting Process

Škoda Auto monitors risks to the reporting process and defines the internal controls of the reporting of data. The lack of double materiality analysis increases the risk that issues which could be material for the Company are not covered.

Examples of the risks identified in 2023:

› The relevant basic data are incomplete, incorrect, or unverified.
› The relevant data are delivered late or not at all, and therefore are not available in time.
› Data processing is incorrect and/or incomplete.
› Calculations or analyses are incorrect.

Value Chain

Sustainability Strategy

Stakeholder Dialogue and Material Topics

Stakeholder Engagement

Impacts, Risks, and Opportunities

Corporate Governance of Sustainability