Prague, 22 March 2021 – This year’s Earth Day reminds us that climate change is without a doubt one of the biggest challenges we currently face. Both companies and consumers are beginning to realize this. Customer emphasis on ecology and sustainability has not disappeared despite the crisis caused by the COVID-19 pandemic. The regularly performed EY #FutureConsumerIndex survey shows that 48% of consumers worldwide believe climate change and sustainability will have a strong impact on how they live and what they buy, while 25% would be willing to pay extra for more sustainable goods or services. In the Czech Republic, brand social responsibility is important for more than half (52%) of customers. Companies that want to stay relevant should take note of these trends.
Sustainability is not the primary driver of profit. It also doesn’t just mean ecology. Nor is it the cheapest. But it still pays to invest in it. This is evidenced by data from the EY survey, which says 68% of consumers think companies should positively influence the world. And 50% of customers from 20 countries add that they’d rather buy from companies that disclose the impact of their products on people and the planet. So, even though investments in sustainability do not directly bring profit, they’re a key aspect of customer retention. And it’s a well-known fact that it’s far more difficult to gain customers than to lose them. In addition, if they leave because their favourite brand, one they thought was sustainable, has disappointed them, the likelihood of their returning is very low given the negative experience associated with the feeling the brand was “cheating”.
And what are the biggest environmental trends that Czech companies should monitor? Plastics and sustainable packaging are key. We’re all likely to have seen photographs of beaches flooded with crumpled PET bottles, straws and cotton swabs. However, the issue of disposable plastics is more complex, because not every plastic is a non-recyclable disaster and banning and exchanging everything for wood, glass or paper could contribute significantly to the Earth's environmental burden as a result.
The most effective solution to any problem is its prevention, i.e. trying not to cause it in the first place. Changes are already afoot in this area, and though small, they’re having a great positive impact. “Some dairy packaging, which until recently had a plastic lid over the classic aluminum, has stopped using that. Tissues in a box that used to have a hole lined with plastic now have a paper border there instead,“ are some examples provided by Alice Machová, EY leading partner for CFO agendas and sustainable development.
However, packaging will undergo significant changes in connection with forthcoming legislation restricting disposable plastics. Packaging will remain an important part of the market, but its future is unpredictable due to the development of new technologies or nanotechnologies. Sugar cane packaging and organic plastics, for example, are promising. “In general, however, we can say the most sustainable packaging is no packaging. Even this futuristic view is being addressed by companies, either within the trend of beverage as a service or packaging that can be eaten,” adds Lenka Vaněk, director of EY wavespace Praha, which monitors consumer trends.
The turn to electromobility is extremely important for the Czech economy, which is largely built on the automotive industry. However, it will be slower in our country than in other EU countries. In 2020, in the Czech Republic, according to data from the EV Readiness Index, the share of cars powered wholly or partially by electricity was only 2.4% of the total number of licensed vehicles. Nor is the density of charging stations in our country very high – last year, there were about a thousand public charging stations available in the Czech Republic, i.e. 0.09 stations per thousand inhabitants. Only Greece, Slovakia and Poland achieved worse results. “The low prevalence of electric cars in our country is also influenced by the fact that Czech drivers, unlike other EU countries, cannot count on any subsidies. In Germany, for example, the state can contribute up to € 6,000 to an electric car, and even in Romania, the combination of subsidies could climb to € 10,000,” saysPetr Knap, EY leading partner for the automotive sector in the Central, Eastern and South-eastern Europe and Central Asia region.
Sharing cars and other means of transport also has something to do with ecology. In addition to the effort to maintain a healthy environment (one shared car will replace 8 to 12 ordinary cars in the city), economic motivation also plays a big role here. Why own a car when it will sit in a parking lot for 22 hours a day? An asset used in this way becomes one of the most expensive of assets. A Penn Schoen Berland study found that more than 50% of millennials are open to car sharing, while 32% of all consumers still prefer owning a vehicle over sharing it with others. “However, this will change, at least in part, in the future, as car sharing technologies and companies move forward in development and marketing and become more attractive to users, and may experience a renaissance once COVID-19 is behind us”, predicts Petr Knap EY leading partner for the automotive sector in the Central, Eastern and South-eastern Europe and Central Asia region. Over time, car sharing could also bring benefits to corporate customers.
An interesting trend is the integration of rail transport into the mix in the supply chain. For example, breweries are increasingly using trains instead of trucks to transport malt to their plants. According to the latest research, rail transport produces two to five times less emissions than trucks and removes up to a thousand trucks a year from Czech roads. It is hoped that other companies will follow this trend in the future.
Another challenge for Czech companies will be decarbonisation and the transition to electricity drawn from renewable sources. The Coal Commission recommended ending the use of coal in the Czech Republic by 2038, but some in the government are calling for an earlier end to the use of this raw material. “Decarbonisation will require significant change in almost all parts of the economy and will hit the energy and utilities sectors hardest,” adds EY’s Alice Machová. Due to the end of the coal period, demand for electricity will grow. It is estimated that electricity demand will double by 2050, with its share of final energy consumption in transport multiplying 20 times. And there will also be higher demand for energy from renewable sources such as hydro, wind, solar, biomass or biogas.
Due to the drought that has prevailed in the Czech Republic in recent years, water management is an interesting area especially for small and medium-sized enterprises. Until the end of June, companies can receive a 50% subsidy for performed water audits and obtain the EnvironmentMinistry’s Responsible Water Management label. A water audit can advise companies on how to optimize water management, how to work with rainwater, with polluted water flowing through technological processes, or so-called grey water flowing from sanitary facilities. Following a water audit, companies can apply for additional subsidies to help them implement measures that contribute to water conservation. This can be, for example, the modernization of distribution systems, recycling and water purification, or the installation of green roofs.
EY research shows that customers expect companies to have a positive impact on the world around them. However, in Central Europe and the Czech Republic, companies are only just starting out with sustainability and only true pioneers have and use a comprehensive strategy to meet their goals. However, even here the situation is changing and many Czech companies are well on their way to more sustainable operation. Even relatively small changes can have a significant impact on the environment and can strengthen a company’s image in the eyes of its customers.
An example is EY. Not only does it advise others on how to meet sustainable goals, but it has itself been carbon neutral since December 2020 and wants to reach a net-zero target by 2025. The Czech office of EY helps itself to achieve this in a number of ways: for example, by preferring online meetings over physical ones, restricting flying in favour of more environmentally-friendly modes of transport or using more than 50% rain water (tanks on the roof of its sustainable building gave EY some 5,000m/3 of rainwater by 2020). It also uses recycled paper for its printers or supports its employees who bike to work by providing bike storage and showers. In addition, it also avoided the use of thousands of disposable plastic bottles by connecting EY to a filtered water source. Assuming a standard 1.5-litre PET bottle weight of 38 grams, EY saved a total of 13 tons of plastic from 2014 to 2020. Based on EY’s internal sources and calculating that there is 2.15 kg of CO2 per 1 kg of PET, EY has also saved 28 tonnes of CO2 since 2014. An interesting idea that EY introduced with its move to a new ecological building, which also has a special LEED platinum certificate, was so-called secure printing, which prevents unnecessary or multiple printing, for example due to error. This step saved more than 20% in printed paper. EY prepares personal income tax returns for clients exclusively electronically, saving more than 30,000 sheets of paper a year.
EY employees have also exchanged disposable plastic cups for porcelain mugs in the office and have washable bamboo mugs for travel or can re-sort cans into special containers. And as part of corporate volunteering, they’re participating in the Clean Up the CR event, clearing their surroundings of trash and introducing a number of other steps. “We don't only perceive the sustainability of our business from an environmental point of view; we also invest efforts and resources in supporting our social responsibility and educating the young generation,” concludes Magdalena Souček, managing partner of EY in the CR.