Sustainability at Skoda: Enthusiasm Beats Excel

After Škoda took a brief break in model development, resolved supply bottlenecks, and reinvented itself behind the scenes, it invited people to an evening discussion for the first time. In the past, this would have been called a fireside chat, but the cool functional building next to the workshop, where the RS130 Rallye stands next to the Fabia WRC2 Rallye, doesn't quite give that vibe. The speaker was Karsten Schnake, Board Member for Procurement at Škoda, also known as Member of Board Procurement - and was thus responsible for sustainability as well.

The last three years were also a rally of a special kind, although the business development in Weiterstadt is quite satisfactory. But this time, the focus was on the topic of sustainability, which was discussed more passionately as the evening progressed. An emotional Schnake certainly contributed to this. The East Westphalian from Minden has been living in Prague for quite some time and will have much to tell about the special Skoda spirit and why the brand is essentially the "start-up" within the large VW Group.

To introduce the topic, Schnake also starts with numbers: Škoda aims to grow continuously, earn money sustainably, and not participate in a displacement competition of any kind. In 2022, a record sales return of 4.1% was achieved in the trade, the CO2 pooling value in Germany remained below the EU value, and in 2023 it will be even better. Especially since three electric models are planned by 2026. It starts with a compact SUV below the Enyaq, followed by a new small car in the Kamiq format for about 25,000 euros, and a large seven-seater SUV above the Enyaq. 

Sustainability starts on your doorstep

However, sustainability already begins on their doorstep, where they control their own CO2 footprint, organize Clean-Up days in Weiterstadt to clean bike and footpaths, and participate in the Biodiversity program by planting additional trees and bushes around the buildings to further promote diversity. And of course, over 100 charging points for electric vehicles have been installed, and various programs for social sustainability are being run.

Typical Škoda: Family atmosphere, flat hierarchies, quick decisions

Schnake then begins to tell between the lines: That Škoda remains very “hands on.” This means quick and short decision-making paths, and thus it has more of a start-up than a corporate culture. This is combined with a family-driven inventive spirit that the Bohemians have been proud of for 128 years. And since the older ones among them still experienced socialism, they always look for simpler yet intelligent solutions, leading to the motto "simply clever." And the wrangling with parent company VW over vehicle valuation? Settled, as VW will tend to introduce the latest developments first and become the "tech brand" among the large series providers in the group, Seat/Cupra will take on the sporty-southern part, and Škoda will focus on clever “space cars,” thus embedding the Bohemian “family idea” directly into the car.

Europe is seen as a sustainability driver worldwide

All well and good, but haven't Asian manufacturers caught up by now? Not quite, says Schnake. Because CO2 reduction in all its consequences has become a European topic, and the world sees Europe more and more as the sustainability driver, a driver for sustainable business, big ideas, and great technologies. According to Schnake, this is a chance that must be taken advantage of!

With this, he connects the bridge to the automotive industry, where sustainability is a "key value driver" for future products:

"Sustainability is no longer an add-on; it has arrived in daily business and is thus a fundamental element for technical development."

This requires creativity, which they want to generate among partners and customers. This is significantly more satisfying and value-adding than simply working on more sustainable products. He also calls for this additional driver, to celebrate innovative ideas not just for the sake of statistics or Excel tables. Instead, sustainability is listed for all models, but in a way that requires new ideas, even from suppliers. Ultimately, a circular economy should emerge, "whatever it will look like" - Schnake is that open and honest, because what he does not want is greenwashing, which in his opinion always ends in a belly flop after a short bounce. And that is something they want to avoid!

Essential for Schnake: The sparkle in customers' eyes

Of course, the question quickly arises: Can this be financed? And Schnake answers clearly: "Yes, it can!" Because if somewhere a part gets a little more expensive, they usually find another that gets cheaper, and then cool financiers calculate this to the benefit of the better solution and the product. In this positive development stream, Schnake sees Europe as an innovation driver. They have now gone through three years of crisis with the pandemic, semiconductor, and wiring harness shortages. This creates a great moment of inspiration and motivation that could put the EU industry ahead of others - but not in statistics or on Excel paper. Instead, Schnake is about the sparkle in the eyes, which customers usually still have when they take delivery of their new car:

"We need this shaking moment again in the industry, as a driver to make the world better."

Then he addresses the first bottlenecks in recycling materials, which are expected to become their own procurement area and their own area in technical development. It sounds simple but is difficult to implement. They discuss this every day, but as a friction point, the closed material loop has fully arrived in daily work. Schnake gets going and concludes:

"I am confident that we will eventually clear the mountains of plastic."

At Škoda, there is a sustainability advisory board – which likes to ask critical questions

After all, Škoda was the third brand in the group to introduce a sustainability advisory board. And they always ask whether they are still on the right track. In this context, they also put their collaboration with suppliers on a new basis. They work with 7000 partners and thus have responsibility for around one million people and a social responsibility for a society! Yes, profits must be made, otherwise, the business model becomes obsolete, but the sustainability advisory board always asks the critical questions:

"They are asked, and that's a good thing, and that's a cool number."

Schnake finds this. They can then also take the suppliers along, let them invent new things, which are then also implemented. Cool things come out: With a tire manufacturer, they are working on pigmentations for dark paints derived from old tires, with a mattress manufacturer, they are developing insulation materials from old mattresses, and with another supplier, they are advancing "green aluminum." They currently have over forty projects running with partners as Sustainable Innovations. One of them will be deployed from KW 48/2023: The first sustainable umbrella in a new model.

The brand maintains decades-long partnerships

In the Enyaq, a wool fabric is mixed with PET bottles. According to Schnake, it's always important to source products locally: The company has been working with a fabric supplier in Mönchengladbach since the 1940s and one in Strakonice, south of Prague, since the 1950s. "When you see how the worker in Mönchengladbach strokes the fabric with his hand and can feel the smallest irregularities, it has something special," says Schnake, who therefore also likes to visit the suppliers' productions, which he refers to as "partners next to us." Yes, something has changed - sustainably!

Škoda doesn't want to produce cheap cars, but always affordable ones

A question-and-answer session followed, naturally beginning with the critical question about the ever-increasing prices – a particularly sensitive topic for Škoda. Schnake is adamant that affordable cars must be produced: “The customer has the right to an affordable product. I hope we never produce cheap cars, but affordable ones.” That's a difference. Because affordability results from sustainability. Moreover, the price range within which they operate is also planned for the electric and sustainable world: “We won’t achieve this immediately, but the customer is entitled to it,” explains Schnake.

To achieve this sustainably, a lot of new and specifically sustainable features are written into the specifications for the cars and suppliers. The most energy-intensive component is the battery, which ideally is produced with renewable energies. Large and heavy components require a rail connection. Not everything is immediately and easily achievable, but the goal must be to enable the partners, define the path with them, and follow it.

New luxury: Laurin & Klement and RS could be redefined in terms of content

Another interesting approach was to redefine higher-end lines like RS or Laurin and Klement in terms of sustainability: RS could be the lightest, Laurin and Klement the most sustainable instead of the highest quality. All of this would also redefine luxury in a new and more sustainable way.

Next, we brought up the topic of refurbishing: This is also being analyzed, which is why Schnake is absolutely no fan of cell-to-pack or even cell-to-body. Because if battery cells are simply glued into the car for the cheapest possible production, it would lead to a huge problem if a cell ever needed to be replaced. Because repairability also extends the vehicle's life and maintains value stability.

Affordable repairs, affordable comprehensive insurance classes: This is global corporate philosophy

This also includes the corporate philosophy of being able to offer customers affordable comprehensive insurance classes – a claim that exists in all regions of the world. And even if this sometimes requires several smaller parts or a slightly more complex construction, they stick to it, as it is historically rooted in the corporation:

“We are deeply convinced of making parts easier and cheaper to replace. This serves the preservation of the car and, ultimately, sustainability.”

Schnake can affirm that this also applies to markets like India: it is the same historically grown claim worldwide:

“I have been with the company for 27 years now, and this is a value we have carried with us for a long time. We are proud of that – it is good that way and that is why we do it.”

Change in the industry: Innovation trumps economies of scale

And how much leeway does Škoda have within the group? Plenty. First, they develop together, but they have many freedoms in the product design. Even if economies of scale are lost? According to Schnake, they are by far not as significant as they were 20 years ago; instead, flexibility, innovations, and technical advancements are becoming more important. This is a major but not a bad change.

The question about e-fuels is quite general. Schnake also has a clear opinion on this:

"As an industry and society, we have embarked on the path of e-mobility - rightly so. The chain of consideration extends back to energy production."

But for existing stock in a few years, e-fuels could at least make it as environmentally friendly as possible. Because it is about completely emission-free driving.

"That is the decision we have agreed upon. And the direction we have taken is the one we need to follow."

The last question at the end returns to sustainability - this time regarding the batteries.

In the future, batteries could be made only from recycled material

The first step is to use the battery for as long as possible. After its "job in the car" it can still serve at the dealer in an HPC power station, to enable faster charging without an extra connection or transformer house. The good thing about a battery: it can be recycled 100%, except for the separator. After 15 to 20 years, we might be at a point where we can reuse all the raw materials. We must first achieve full penetration with the batteries, and this cycle only happens once! Then the recycling mode starts, and even the issue of battery production will become much more sustainable!

What does that mean?

If you listen to Schnake for a while, you get an idea of how complex surfing in a large corporation is, where only a narrow wave crest exists between various interests - but which is to be used as effectively and sustainably as possible.