Serge Damian for e15: A company that does its ESG homework gains a competitive advantage

Where should a company start if it wants to adhere to ESG principles?

The term ESG can be confusing for some companies, especially if they have no prior experience with it. People typically associate it only with environmental issues. However, there is much more behind the term ESG. As the name suggests, it encompasses not only environmental issues but also social issues and corporate governance principles. I believe that if a company wants to approach this topic comprehensively, it must start with the basics. Every company is built on certain pillars, on some form of "governance," it must meet legal requirements, and create a safe environment for its employees. Only after establishing these solid foundations can it think in the broadest context, about how it impacts not just its immediate surroundings, but the entire planet.

So, is it like a pyramid, with well-established corporate governance processes and legal compliance at the base, and environmental issues coming into play only afterward?

Yes, my standard recommendation is to first look at how the company is managed. Understand decision-making and approval processes, and, of course, compliance with legal requirements is absolutely critical. Once the company has set up these related processes, it can then start promoting the idea of sustainability in all its forms.

Do universities prepare young professionals who are useful to companies in implementing ESG principles?

I agree that people should be educated in this area, but comprehensively, so they understand not only the environmental impacts but especially the economic ones. The second aspect is educating not just the younger generation but also older individuals. However, it is important to acknowledge that we benefit from the work of our parents, and we are not here just to criticize, but to contribute to further progress in our society. It is easy to point out that previous generations made mistakes, but I believe that, given the circumstances they operated in, they chose the most reasonable solutions.

What does the sustainability department in CSG handle?

Within our holding company, as the highest governing body, we have established a dedicated sustainability team at the highest management level. It is still relatively small, consisting of only three people. I must emphasize that our role is not about "hugging trees," but about systematically building the process foundations that will allow us to achieve our ultimate goal of greater competitiveness for our holding company and ideally a state in which we positively contribute to reducing environmental impacts on the environment.

At present, we are primarily focusing on the "governance" pillar – finding the optimal management system – and on "compliance" – adhering to regulations. As a European company, we operate in a complex legislative environment and must meet a wide range of requirements and expectations.

ESG is full of mysterious acronyms and terms like CSRD, ESRS, taxonomy, TCFD, SBTi…

Yes. Our task is to bring order to this chaos and present the topic to the company's leadership in a coherent form with a specific plan and concrete goals. Therefore, we communicate with our stakeholders, whether they are banks, investors, auditors, local communities, or employees, and present them with a plan and a prioritization of the issues we want to address. When we identify, for example, that water consumption is a material issue for us, we will be able to allocate resources in this area, determine the appropriate capital investments, and estimate operational costs. Then, suddenly, the whole story starts to make sense.

Why should companies comply with ESG requirements?

There are two dimensions to this. The first dimension is more of a negative motivation, which is legislation, because all companies will eventually have to report their non-financial data, which will ultimately be audited. It will no longer be possible to hide behind a veil of CSR (corporate social responsibility) or charitable projects. Then there is a positive motivation, which is not immediately obvious, and that is a competitive advantage. When a company truly does its homework, it understands how it operates from the inside out and from the outside in, meaning what goes into production and what its production affects. This will enable management to identify imperfections, inefficient processes, and ultimately, with the help of the data collected, bring the company to a better state.

Can ESG therefore lead to better company operations?

To put it purely pragmatically, despite all the associated administrative burden, I see ESG as a very effective tool for streamlining the entire operation of a company. The rather erroneous assumption is that an external regulator dictates how we should do things. Here, it is more about the internal motivation of the company to show the world how it wants to achieve a specific state.

How to approach companies that do not feel their business aligns with ESG principles?

I do not think such a stance is legitimate. We must realize that the concept of sustainability can be applied to any aspect of our lives and to any company. All companies have management, employ people, and all companies inevitably produce a carbon footprint. I'll speak about us. The defense industry today is not perceived as the greenest in the true sense of the word. However, we face this head-on, recognizing the environmental impacts of our production. But alongside these environmental impacts, there are other aspects. We are a significant employer, we bring substantial resources into state budgets, we influence many people – our employees, their families, and ultimately specific communities. It is also necessary to consider the perspective of ethical principles, such as corporate governance, or broader social impacts, such as safety. It is harder to quantify, but I believe that a company in the defense industry can be very successful in terms of sustainability.

If I understand correctly, it is about an overall view of the company and its impacts?

Yes. I am convinced that it is always necessary to understand the entire context and apply a certain degree of critical thinking. I personally worked in the aviation industry for some time, where the question of whether air transport should be significantly restricted due to the significant carbon footprint produced by the use of fossil aviation fuels is much debated. But these are two sides of the same coin. Available air transport, on the other hand, increases workforce mobility and has a positive impact on socioeconomic development, the global interconnectedness of society, and the economy. So should we limit it?

CSG already operates in eight countries, outside of the Czech Republic and Slovakia, it includes the UK, Italy, the USA, Spain, Serbia, and India. Each region is at a different stage in terms of ESG – can this be unified?

We set the same rules for all the companies in our holding, in a way that is applicable worldwide. In short, we do not make distinctions.

So you are implementing ESG principles across the entire holding...

Yes. We are indeed implementing these processes within our company's operations. At CSG, there is a kind of silent evolution taking place, which is not widely noticed but happens every day. We are truly addressing these issues, communicating with our stakeholders and employees, understanding their needs, and setting our company strategy to meet future requirements. We aim to be a leader in ESG and inspire people both in the Czech Republic and beyond, as we are already a global player. If we succeed, it will make a huge difference for us.