In the Czech Republic, the vast majority of ESG (environmental, social, governance) regulation comes from the European Union. There is no active effort at the Czech state level to take an active step and to make the topic of sustainability a legislative priority. So what defines the Czech approach to ESG and where do we really stand on sustainability? More to be discussed in the following article.
International commitments
The Czech approach to ESG and CSR is based on the concept of sustainable development. At the moment, the most important framework is the joint global development programme, the so-called Agenda 2030, which was adopted in 2015 for the next 15 years. Its key component consists of 17 Sustainable Development Goals (SDGs). These focus, for instance, on eradicating poverty and hunger, promoting equality, ensuring prosperity, as well as protecting the climate and the environment.
Following this initiative, in 2017 the Czech Republic adopted a document called the Strategic Framework for the Czech Republic 2030 ("CR 2030"), which translates the 17 SDGs to the domestic environment. This material outlines the targets that the Czech Republic should achieve in the following six key areas:
- People and society
- Economic model
- Resilient ecosystems
- Communities and regions
- Global development
- Good Governance
This document also includes an implementation plan for the "CR 2023", which contains a set of recommendations and measures to ensure the fulfillment of each specific objective. The first implementation plan was passed in 2018, and the second implementation plan for 2022-2025 was approved by the Government in 2022.
In terms of the European legislation, in recent years the EU has put forward a number of directives and regulations that relate to sustainable finance in a larger context and also concern CSR. These include in particular:
Both have been described and explained in our previous articles Everything You Need to Know About CSRD and EFRAG’s New EU Sustainability Standards (ESRS) and Everything about the EU legislative framework on sustainable action.
National context
It should be stressed that so far CSR and sustainability matters have been approached by companies on a voluntary basis. However, in 2017, when the Non-Financial Reporting Directive (NFRD) started to apply to certain large financial entities, awareness of ESG has increased significantly and the interest in this topic has grown.The Ministry of Industry and Trade is the department responsible for overseeing this area. It is also responsible for drafting a strategic document called the National Action Plan for Corporate Social Responsibility in the Czech Republic (NAP CSR). The aim of this document is to set the basic groundwork for the dissemination and promotion of CSR principles. The original version of the CSR NAP was developed for the years 2011-2014. In 2015, the CSR NAP was updated for the period 2016-2018 and later, in 2018, it was approved by the Government for the years 2019-2023.
People and society
The Czech Republic has not yet addressed the relationship between business and human rights in any way. That is why the National Action Plan for the Implementation of the UN Guiding Principles on Business and Human Rights was created (2017), aiming to improve the protection of human rights in the context of business activities. The plan thus summarizes the current state and makes recommendations, particularly in the areas of business transparency, labor relations and violations, and moral and ethical standards of business conduct.
In addition to this strategy, the Czech Republic has several laws and regulations that require companies to behave in a responsible manner. For example, the Labour Code requires companies to provide a safe working environment and to protect the health and safety of their employees.
Environment
The Environmental Protection Act requires companies to comply with environmental standards and regulations. The adoption of the amendment to the Public Procurement Act then introduced an obligation for contracting authorities to take social, environmental and innovative principles into account when purchasing goods, services and construction works.
What does this all mean for Czech companies?
As can be observed, the Czech Republic does not yet have a comprehensive ESG policy. However, this does not mean that there is no interest in sustainable development practices. There are Czech companies that are already implementing their own initiatives. Worth mentioning is e.g. the association Change for the Better, which brings together companies that perceive sustainability as an opportunity and not as a threat.
Nonetheless, the Czech Republic does not take its own initiatives at the state level. Most of the obligations imposed on Czech companies at the moment stem from the EU-level regulation. In contrast, there are countries such as France, which go one step further and are driving ESG legislation development. Therefore, there is plenty of room for improvement in our country and it is desirable that Czech companies embrace ESG as an opportunity for innovation and efficiency rather than just a regulatory obligation announced in Brussels. As the vast majority of regulation comes from the EU, there is no effort at the state level to make the topic of sustainability a priority. But if we do not want to miss the train, we should increase our ambition and begin to perceive sustainability as a window of opportunity.
Sustainability has benefits not only for the economy but also for the society as a whole.
If you are interested in anything related to sustainability, or if you are looking for help with strategy and ESG reporting, please do not hesitate to contact us.
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