Interview: Active preparation for ESG pays off. You won't be surprised by demanding mandatory reports anymore

České Budějovice Heating Plant (Teplárna České Budějovice –⁠⁠⁠⁠⁠⁠ TČB) has completed its first non-mandatory ESG report based on ESRS standards, thus becoming one of the first companies in the Czech Republic to complete this homework. Marie Machálková, ESG Consultant & Team Leader from Frank Bold Advisory, guided them through the several-month process. The interview with Marie, which was published in “Teplárenský zpravodaj”, is reprinted here. You can read the TČB sustainability statement with a summary of the ESG report here.

In the interview, Marie explains what the new European Sustainability Reporting Standards (ESRS) mean for companies in practice, what the most common challenges are, and why it is a good idea to start working with ESG topics as soon as possible - even if companies are not yet legally obliged to report.

Why do some companies approach sustainability reporting now when it is not yet mandatory for them?

The most common reason is, of course, the desire to be prepared for this demanding process. It is also a way for many companies to demonstrate to investors, customers, partners and the public their proactive approach to responsible business issues and to show that they are conscientious about preparing for the “hard reports”.

Do you have any idea how many there are, in what sectors?

We don't know the exact numbers, but within the Czech Republic we are only talking about the units of companies that have already issued a sustainability report in accordance with ESRS principles. These are the standards according to which the CSRD reports. The first wave of reports from the largest companies, i.e. those with more than 500 employees and public interest entities, covered the year 2024, and these companies are only now processing their reports.

What will it bring them?

If a company does a really thorough report and maps out the sustainability impacts, risks and opportunities of its business in a so-called double materiality analysis, it can follow up with specifically targeted strategies.

And reporting in advance?

This contributes to a good preparation for sharp reporting, as data collection processes can be set up on the first report and data that may not have been available can be added on the basis of this. At the same time, other internal processes and responsibilities related to the sustainability agenda can be set up, thus avoiding the risk of not being able to produce the sharp report on time and with sufficient quality. But there are also communication benefits, where the company presents its transparency and position on ESG issues.

Does this also apply to the Teplárna České Budějovice?

Sure. Reporting under ESRS standards is extensive and deals with a wide range of topics and data. It is not advisable to rush the preparation of good data and processes, if only because sharp reports will be subject to audit.

How difficult is it to prepare a sustainability report?

The obligations under the ESRS are extensive and many topics are completely new to companies, such as double materiality analysis. Particularly if a company wants to do more in the area of sustainability than just meet the legal obligations, it is advisable to really start preparing well in advance.

So what does the process consist of?

I'll try to simplify the description. It starts with an analysis of double materiality, which looks at the impacts that a firm's activities cause externally towards the environment and society. It also addresses the risks and opportunities that may in turn impact the firm externally. The result of the analysis is a list of so-called material impacts, risks and opportunities, from which the scope of the reported information is determined. It is then possible to start defining the necessary data, start collecting it and compiling it into the final report. At the same time, the company's carbon footprint needs to be calculated, as this value is also part of the report. Of course, the development of related strategies can also be addressed, but these are not directly required by the ESRS standards.

What is the role of your consultancy in this?

Our consultants worked together with the heating plant team on all the steps necessary to produce the report. Our role is mainly to provide expert advice on the interpretation of ESRS standards and other related legislation. Because we have been involved in sustainability for a long time at Frank Bold, we have professionals with a high level of expertise and benefit from experience. It is very important for us to pass them on gradually and for clients like the heating plant to be able to create follow-up reports mainly internally.

Some banks have announced that their involvement or non-involvement in ESG will eventually have an impact on their access to financial resources. Have you had this experience?

Currently, banks already collect ESG information from their clients, for example in the form of various questionnaires. Their evaluation can influence the obtaining of financing or interest rates.

Can companies that go through the ESG process require the same approach from their suppliers or customers?

They can request sustainability information from their suppliers and often already do. For example, if a company wants to reduce the carbon footprint of the goods it buys, it has a reason to ask its suppliers about the carbon footprint of their products. If a supplier is able to produce products with a lower carbon footprint than others, this is a market advantage. It is also worth mentioning that large companies will, as part of their reporting, collect more data in their supply chains over time, which will also affect smaller companies.