EXECUTIVE TALKS

JUN 17th, 2025

Transition at Risk: Are Regulation, Energy Policy, and Oversight Falling Out of Balance?

Martin Herrmann, Chairman of the Supervisory Board of Česká pošta, s.p.

A timely dialogue between Ulrike Gravert-Jenny and Martin Herrmann — manager, investor, and supervisory board member — on how ESG, EU regulation, and energy policy are redefining the role of corporate boards in Europe.

Mr. Herrmann, you held numerous leadership positions at RWE and innogy, oversaw a carve-out, brought a new brand to the stock market, and are now active on several supervisory boards. How has the role of the supervisory board changed in recent years?

Mr Herrmann: The level of responsibility has increased significantly — in terms of content, time commitment, and legal liability. The work has become more demanding and, in some respects, more formalized. It requires a high degree of expertise. At the same time, board culture is changing: diversity and content depth are becoming increasingly important.

“Both elements in the word “supervisory board” — supervision and advice — are in higher demand.”

What does that mean for the composition of boards?

Mr Herrmann: We’re seeing increasingly diverse boards with broader and deeper expertise. Most companies are in the midst of profound transformation, which places specific demands on leadership bodies, including supervisory boards. In the energy sector, for example, technical and regulatory expertise (including ESG) are required, along with financial literacy, IT expertise (including AI and cybersecurity), HR experience, and commercial know-how. Not every board member needs to master every area, but as a group, the board should collectively cover all the necessary skills to fulfill its supervisory and advisory functions.

At the same time, supervisory boards are being tasked with more control duties. How does this change the work in practice?

Mr Herrmann: The scope of tasks has expanded significantly. With the multitude of new requirements in ESG and taxonomy, annual reports are becoming more comprehensive. This demands a deep, time-consuming examination, especially for members of the audit committee. Risk management is also gaining in importance.

You mentioned diversity – why is that so critical?

Mr Herrmann: Different perspectives make discussions more productive. Experience from other industries can be extremely enriching — it helps you escape your own mental loop. However, even more important than diversity is the attitude of each individual. Everyone on the board must fully commit to the role, actively participate, and take responsibility.

“I’m a strong advocate of diverse boards. Diverse views prevent tunnel vision, yet a board thrives only when all members fully engage.”

Before joining supervisory boards, you held senior positions in the German and Czech energy sectors for many years. How do you assess the EU’s ESG regulatory initiatives — especially in light of the increasing global competitive pressure on European industry?

Mr Herrmann: In the energy sector, ESG topics have long been part of corporate strategy and are playing an increasingly important role in corporate culture. Naturally, the focus is on the “E”, but the “S” and “G” are also comprehensively addressed. From my point of view, two aspects are problematic: first, the pressure to address all three dimensions simultaneously. Second, the enormous administrative burden coupled with political volatility. You can best see this from an international perspective. While ESG is increasingly questioned in some European countries, the overall direction remains clear. But across the Atlantic, that’s no longer the case — in the U.S., the trend is heading in a completely different direction. Even within Europe, change is the only constant, even if it goes in the right direction— see Omnibus I. Fundamentally, a multitude of rules and measures that are not globally applied do not help European competitiveness.

“The real problem is political volatility: when directives are passed, then weakened or delayed again — like Omnibus I — it undermines planning certainty.”

So the direction is right, but the implementation is lacking?

Mr Herrmann: Exactly. Many companies know what needs to be done on ESG. But national implementation is uneven. Some countries are more advanced; others have a long way to go. This time lag creates uncertainty — and leads to competitive disadvantages for affected companies. And in my view, the number of blockers in Europe is growing.

Is the European regulatory approach more of an opportunity or a burden?

Mr Herrmann: Both. The idea behind CSRD and CSDDD is fundamentally sound: more transparency, better governance, genuine sustainability. But the bureaucratic burden is enormous. Entire departments are now dedicated to ESG reporting. Overregulation paralyzes us — especially in international competition.

Is Europe overwhelming itself with its own bureaucracy?

Mr Herrmann: Yes. We have a tendency to overregulate. Many frameworks are well-intentioned but not practical. While we document sustainability down to the last detail, other world regions are acting more pragmatically. If we prioritize form over substance, we risk self-paralysis.

“Europe is regulating itself out of competition. The ESG goals are valid but excessive bureaucracy  and fragmented national implementation are undermining Europe`s industrial competitiveness.”

Does this also apply to energy policy?

Mr Herrmann: Absolutely. We’re transforming our energy system — often without adequate grid expansion, secure capacity, or a safety net. Old systems are being shut down, while new ones are not yet stable. We lack storage, backup capacity, and a coordinated European master plan. National solo efforts block synergies — with consequences for security of supply and economic viability.

What exactly is going wrong?

Mr Herrmann: Too much is happening too quickly — without proper economic analysis. The goals are right, but many measures are inefficient. In Europe, we invest vast amounts of money to achieve minimal CO₂ reductions — while other regions achieve more with less. Instead of global impact, we see national symbolic politics.

But couldn’t Europe also serve as a role model — especially through new technologies?

Mr Herrmann: Certainly. Europe can demonstrate that decarbonization is possible — and develop technologies that are applied globally. But what’s missing is reliability. Funding commitments take too long, are only partially granted, or even revoked. Projects get canceled because they’re “commercially not viable.”

What’s needed instead?

Mr Herrmann: Market models that ensure long-term economic viability. Take green hydrogen: without offtake agreements, stable frameworks, and realistic price structures, we won’t scale. Funding programs alone are not enough.

Let’s look at Germany: How do you assess the current state of energy supply?

Mr Herrmann: We had a functioning system — but started dismantling it without adequate replacement. Now we have two systems operating in parallel: an old one that’s shrinking, and a new one based on renewables that’s growing but not yet self-sufficient. Storage and firm capacity are lacking. The shutdown of the last nuclear plants and coal phase-out have significantly reduced secure capacity.

“We’re dismantling old energy systems before the new ones are ready. The energy transition is politically driven — but lacks storage, grids, and viable business models. Symbolic politics is replacing systemic logic.”

What would be necessary?

Mr Herrmann: We urgently need flexible gas-fired power plants that run only a few hours a year — but step in when needed. Politicians are talking about 20 GW of reserve capacity by 2030. That’s more than ambitious. Beyond the technical challenge of building and delivering these plants in time, what’s missing are investment incentives or regulatory mechanisms to make them economically viable. Without a capacity market or equivalent market mechanisms, it won’t work.

Back to board work: How intense is the regulatory pressure today?

Mr Herrmann: It’s considerable — and often underestimated. CSRD and CSDDD also increase personal liability risk. But those who work professionally and thoroughly can significantly reduce their risk. This includes well-documented decisions, meaningful minutes, and of course, effective D&O insurance.

How do you experience political influence — particularly in state-related enterprises?

Mr Herrmann: It’s a reality — through government changes or politically motivated appointments. What matters is how professionally it’s handled. Clear roles and transparency are more important than ever.

What defines good supervisory board work today?

Mr Herrmann: Motivation, competence — and attitude. It’s not enough to “hold” a mandate. You have to live it.

“Holding a board seat isn’t enough — you need to take a stand.”

About Martin Herrmann

Chairman of the Supervisory Board of Česká pošta, s.p.
Member of the Supervisory Board of MVV Energie AG

After completing high school and a banking apprenticeship, Mr. Herrmann studied economics at the University of Münster. He then worked as an investment banker in Prague and Frankfurt am Main. From 2002 to 2019, he held various management positions within the RWE Group and innogy, most recently serving as CEO of innogy ČR in Prague and COO Retail of innogy SE in Essen. Mr. Herrmann is currently Chairman of the Supervisory Board of Česká pošta, s.p., and a member of the Supervisory Board of MVV Energie AG, where he also serves on the Audit Committee at both companies. In addition, he is an investor in and mentor to several start-ups.