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ESG reporting should not be a one-off necessity – data can move companies forward, and artificial intelligence can help.
As businesses and governments place more and more emphasis on ecology and sustainability, companies are increasingly obliged to report not only their financial results but also the outcomes of their efforts with regard to protecting the environment and reducing emissions.
The date is approaching when so-called ESG reporting will newly apply to companies with over 250 employees and a turnover of more than one billion Czech crowns per year. In the Czech Republic, this concerns approximately 1,200 companies but, according to research conducted by Adastra, more than half do not measure their suppliers’ or clients’ carbon footprint, and a fifth do not monitor emissions at all.
Adastra, which focuses on digital transformation, is thus currently preparing Czech companies for ESG reporting, and even fundamentally modernizing the process.
“We have long been used to financial reporting that summarizes profits, losses, expenses, and other parameters. This gives us a picture of how the company is doing and how it will perform in the short term. But the question of whether it is on track for long-term success is better answered by non-financial reporting. Alongside the financial records, therefore, the investor gains additional information from non-financial reporting, so they can see whether the company is going in the right direction – that is, according to today’s ideas of what the right path should look like,” explains Radim Petratur, who connects sustainability with digitalization at Adastra.
According to Petratur, many consulting firms have emerged in the Czech Republic that can perfectly process their clients’ data for ESG reporting and set strategies for what they should do to move forward in the individual areas of sustainability. However, they lack know-how surrounding how to digitalize the data related to sustainability, render them accessible and visualize them for their clients in real time.
“At Adastra, we are also working on artificial intelligence and the Internet of Things. So the moment we have data digitalized and in one place, we don’t leave them unused – you can continue to work with them. For example, if a company finds that it is missing some data, that is exactly where IoT can be deployed. For logistics, we can utilize AI, which helps optimize the whole process. It can use an algorithm to calculate how to travel more optimally, so it saves money as well as emissions,” adds Petratur.
We can take ŠKODA AUTO as an example. They reached the limits of the human brain when they could not figure out how to further increase the loading capacity of the containers for transporting car components. The situation was a little bit like a game of Tetris. In cooperation with Adastra and after using artificial intelligence for optimization, the capacity of each container was successfully increased by three cubic meters. While this may not sound spectacular, the solution in fact saves 160 tons of carbon dioxide emissions and approximately 840,000 euros per year.
“Consulting firms do a fantastic job in terms of tracking data. They know where they are, what form they’re in, they collect them and use them to calculate, for example, the carbon footprint. But they do that once a year and, unfortunately, don’t then work with the data any further. There is no one there who would convert them into electronic form and consolidate them in one place. This is where we can step in. We can digitalize the data and put them into a single dashboard to make them as transparent as possible,” says Petratur.
This kind of solution is needed especially by large companies with many branches and a complex network of subcontractors. According to Petratur, best of all is when a company does some ESG reporting and feels that it would need to work continuously with the data collected and use them to drive important business decisions, or perhaps to communicate with banks or investors.
Modernization and digitalization are now more urgent than ever. Since 2017, big banks, insurance firms, and publicly listed companies with more than 500 employees have been required to publish an ESG report. In 2025, this obligation will be extended to companies with more than 250 employees and a turnover of more than CZK 1 billion. Small and medium-sized enterprises listed on the stock exchange will have to participate in the same reporting from 2027.
The resulting non-financial report will not only give the company in question an overview of how sustainable its operations are, but also become an important tool for banks and investors, among others. It may even be one of the criteria for tenders. Data from non-financial reporting will be shared across the supply chain, where digitalization will be key.
According to Petratur, the ideal future could see ESG data collection largely automated, making it easier to create a kind of business ecosystem in which all companies are connected – through data. One firm will automatically share data with the next. However, there is still a long way to go to achieve such interconnection. As more companies become involved in the system, it will be easier to show them what aspects they can improve and which processes they should focus on, but this path must first be trodden gradually.
“We held a meeting with the ESG managers of large Czech companies, and one of the most pressing issues we identified was the lack of rules and instructions for how to do it all. Companies do not know which data to collect, and the state has not provided enough instruction, so consulting firms are now filling the gap. However, it is now really high time companies began looking for someone for ESG reporting, to start automating it and digitalizing it so that they have everything clearly displayed in computer graphics, and are able to manage it and get the most out of the data – whether in savings or in terms of reducing their carbon footprint. Our mission is to help companies digitalize and automate ESG,” concludes Petratur.
He himself has a lot of experience in sustainability and digitalization. Petratur has worked in IT at Microsoft and Avast, at the Office of the Government in the Department of Economic Analysis, and at the Ministry of Defense, where he headed up the Internet Department. He is currently doing a PhD at the University of Chemistry and Technology (VŠCHT), where he is focusing on corporations’ carbon footprint and sustainability. Internet historians may also associate him with the Buy Local (Nakupujte lokálně) project, which he launched in 2008 together with David Pavlík, now Chief Technology Officer of logistics startup ShipMonk.
Survey on ESG literacy among Czech companies
- More than 50% of large Czech companies, who will be required to submit ESG reports, do not collect emissions data from suppliers or clients.
- One fifth of Czech companies do not measure emissions at all, whether direct or indirect.
- Up to 46% of companies admit they do not know what to do with regard to ESG reporting and are in the strategy planning phase.
- 91% of companies do not use any specialized software tools to measure ESG targets.
Source: Czech Crunch (21. 6. 2023)