Finance

Investors interested in sustainability often prefer to focus on long-term yields instead of short-term profits because companies who rely on sustainable business practices tend to be more competitive in the long term. That makes their investment (socially responsible investment, SRI ) an important component when it comes to securing capital for Deutsche Telekom AG in the long term.

SRI  investment products generally consist of securities from companies that have been declared compliant with ESG  (environmental, social and governance) criteria. The trend in demand for T-shares in this category therefore serves as an indicator helping us assess our sustainability performance. We use our Socially Responsible Investment ESG  KPI  to analyze how the financial markets perceive our CR activities.

Investors concerned with sustainability often refer to ratings published by specialized SRI  analysts. That gives these ratings influence on our company's reputation in the finance industry. This is why the rating given to our company by SRI  analysts plays a role in determining whether or not we will be able to win over and retain long-term investors and achieve our goal of keeping our company's medium and long-term cost of capital at a low level.

We use different formats – both in our reporting as well as in direct dialog – to inform SRI  analysts and investors of our CR activities.

Following last year's KPI review we decided to keep our Socially Responsible Investment ESG  KPI  in its current form. At the end of 2014, around 21 percent of T-Shares were owned by investors who consider SRI  criteria in their investment decisions at least to some extent. Two percent of T-Shares were held by investors who give priority to SRI  aspects when managing their funds. Increasingly, our efforts toward more sustainability and social commitment therefore pay off in terms of reputation.

Investor communication expanded
We have been publishing relevant Deutsche Telekom ESG  KPIs in our Annual Report for several years now, also providing forecasts regarding their future development. Financial market players interested in sustainability can also review ESG  information in the Socially Responsible Investment (SRI) section of our investor relations portal. Interested parties can also find additional information on these topics in the SRI  facts info box provided as a supplement to this CR report.

In addition to our reporting activities, we also engage in targeted dialog with investors. Our CR and Investor Relations (IR) units, for example, conduct joint SRI  roadshows on the topic. The first SRI  webinar was also hosted during the reporting period with the participation of several major financial institutions. We also responded to numerous direct requests for information made by analysts and investors, covering the entire spectrum of ESG  criteria, from climate protection and human rights to data privacy and diversity.

More and more investors are looking at our company's sustainability performance when deciding whether or not to invest. Deutsche Telekom's ESG  (environmental, social, and governance) performance is assessed in CR ratings, which offer investors a reliable basis for their investment decisions. As in previous years, the T-Share was once again listed in important sustainability ratings in 2014. Rating agency oekom singled us out as the world's best telecommunications company in terms of ecological and social performance. Deutsche Telekom was again rated among the top ten in the SAM  rating and, as a result, was awarded the Bronze Award in the SAM  Yearbook. We have also been listed in the STOXX Global ESG  Leaders Index for four years and in the UN Global Compact  100 Index and the Climate Disclosure Leadership Index for two years. The FTSE4Good Index again listed our share in the reporting period. You will find an overview of these ratings in the section on KPIs.

CR is becoming increasingly important to our core business. This can be seen in the internationally emerging trend toward intensified integration of financial and non-financial reporting. More and more companies are including sustainability aspects that are highly significant to the company's value creation, such as environmental protection, employee interests, and sustainable products, in their traditional management reports. Deutsche Telekom welcomes this development. Integrating this information encourages people from various Group functions to discuss CR topics and paints a more consistent picture of our company's financial and non-financial performance.

Responsibility is an integral component of our business activities, which is why we report on the responsibility we assume in different sections of our Annual Report and make reference to how sustainability contributes to value creation in our corporate processes. We have been reporting on our ESG  KPIs in our Annual Report since 2011. Since 2013, we have also included a qualitative trend forecast for the two upcoming financial years for our Energy Consumption, CO2 Emissions, and Sustainable Procurement ESG KPIs. As a result, we were in a position to compare trend forecast and actual developments in our KPIs for the first time in our 2014 Annual Report and in this year's CR Report. You can find more information in the section on ESG KPIs.

By integrating financial and non-financial content, we intend to meet the requirements of SRI  investors on the one hand and more effectively incorporate cross-functional issues, such as ESG  aspects, in different areas of the Group on the other. We held a cross-department workshop on integrated reporting in November 2014 to intensify the link between CR and annual reporting activities.

The Group Tax department is responsible for ensuring that the Deutsche Telekom AG Group pays taxes and duties at national and international level in accordance with the applicable statutory provisions. This involves maximizing the scope available for optimizing taxes on the one hand, and fulfilling the social and community responsibility of a multinational company on the other.

Group Tax makes sure that the Deutsche Telekom Group complies with all its tax obligations in Germany and abroad, in particular that it pays the taxes in accordance with the local laws and regulations applicable to the individual Group entities. This includes the Group's income taxes, which must also be regularly reported in our IFRS financial statements, as well as VAT and income tax payable within the context of customer transactions and for Group employees. Group Tax also ensures that the corporation has an efficient tax structure within the framework of German and foreign tax law as applicable in each country, i.e., that the Group does not carry any unnecessary tax burden. The goal is to achieve sustainable tax efficiency for the corporation, something in which transparent, reliable cooperation with local tax authorities is deemed to be indispensable.

In addition, Group Tax also has the ambition to contribute as much as possible to the success of Deutsche Telekom's operations, e.g., by providing detailed tax advice regarding new business models or innovative technological developments. In such matters, the department is particularly focused on immediately clarifying any unresolved tax law-related issues as well as providing practical solutions to meeting all applicable tax requirements.