Management & facts

SRI  investment products consist of securities from companies that have passed an audit  based on environmental, social, and governance (ESG ) criteria. The development of demand from socially responsible investors for T-Shares serves as an indicator we can use to assess our sustainability performance.

With our Socially Responsible Investment (SRI) ESG KPI, we measure how the financial markets perceive our CR activities.

The concept behind the United Nations’ Sustainable Development Goals (SDGs) continues to attract attention on the part of investors. With a view, in part, to evaluating our operations in light of the SDGs , we have introduced a process for assessing the impacts of projects, products, and measures.

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Claudia Kurpiers

As part of our CR strategy, we have taken part successfully for many years in ESG  ratings, which we select based on reputation, relevance, and independence. When rating agencies give high marks to our social and ecological commitment, the T-Share  is included in the financial market’s sustainability indexes.

In 2022, the T-Share was again listed on leading sustainability indexes, including S&P Global’s prominent, and CSA-based, DJSI  World and DJSI Europe. Our shares were also listed yet again on the FTSE4Good Index  Series (for the eleventh year running) and the UN Global Compact 100 Index. We are also still listed on the Euronext Indexes.

The table below presents a selection of other T-Share listings.

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Claudia Kurpiers

The EU Taxonomy  Regulation is the outcome of a European regulatory initiative. The goal of the Regulation is to promote investment in companies that are managed responsibly and that are involved in sustainable economic activities. The EU taxonomy aims to create a uniform understanding of which activities and investments are sustainable. For this, the European Commission has defined clear criteria with exact metrics. This is intended to help investors to assess whether a company in which they want to invest operates sustainably. Since 2021, the businesses affected have had an obligation to report on how much of their turnover comes from the economic activities covered by the EU taxonomy. In addition, companies must disclose the extent to which they invest in these economic activities, and what level of operating expenditure is associated with these activities.

Six environmental objectives 
The first criteria regarding which economic activities are to be classed as environmentally sustainable in accordance with the EU taxonomy were agreed in 2021. They apply to the taxonomy environmental objectives “climate change mitigation” and “climate change adaptation.” The taxonomy includes further environmental objectives in the areas of “the sustainable use and protection of water and marine resources,” “the transition to a circular economy,” “pollution prevention and control,” and “the protection and restoration of biodiversity and ecosystems.” The European Commission has not yet published any criteria for these objectives, however.

The EU taxonomy distinguishes between economic activities that are “taxonomy-eligible” and “taxonomy-aligned”:

• “Taxonomy-eligible” economic activities are those activities for which concrete sustainability criteria are listed in the taxonomy (Annexes I and II of the Delegated Regulation (EU) 2021/2139). 
• “Taxonomy-aligned” economic activities meet these criteria in full. To be taxonomy-aligned, an economic activity must make a substantial contribution to one of these six environmental objectives while at the same time avoiding any negative impact on other objectives (the principle of “do no significant harm” or DNSH). In addition, the company must meet the minimum social standards defined in the Taxonomy Regulation. The diagram below provides a summary of the taxonomy requirements:

Implementation at Deutsche Telekom 
The following economic activities carried out by Deutsche Telekom are currently taxonomy-eligible (the activity numbers refer to Annex I of the Delegated Regulation (EU) 2021/2139, which lists the criteria for the taxonomy environmental objective “climate change mitigation”):

• Data processing, hosting and related activities (8.1)
• Data-driven solutions for GHG emissions reductions (8.2)
• Infrastructure enabling low-carbon road transport and public transport (6.15): charging infrastructure for the electric vehicles of our subsidiary Comfort Charge
• Transport by motorbikes, passenger cars, and light commercial vehicles (6.5): Deutsche Telekom vehicle fleet (cross-cutting activity)

A complete overview of the economic activities that are currently part of the EU taxonomy is available using the EU Taxonomy Compass.

All activities identified as taxonomy-eligible were checked for their taxonomy alignment. A taxonomy criterion that applies to all activities is the climate risk analysis. This was carried out at Group level and no significant climate risks were identified in association with the taxonomy-eligible activities. However, the management of climate risks is still under development in the United States operating segment and in the national companies in Greece and Hungary and does not yet meet the taxonomy requirements in full. Therefore taxonomy-eligible activities that are allocable to the United States operating segment and our national companies in Greece and Hungary are reported as non-taxonomy-aligned for the reporting year. We ensure compliance with minimum social standards for all taxonomy-eligible activities through a Group-wide management system. The standards refer to the OECD  Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights, including the ILO  Core Conventions and the International Bill of Human Rights. We perform our human-rights-related due diligence obligations using a risk-based management system encompassing both the Group and our supply chain. We also maintain a process of trust-based dialog with employees’ representatives and trade unions.

You will find comprehensive information on checking for taxonomy alignment in the relevant sections of the CR Report and the non-financial statement in our Annual Report. 

The following table provides an overview of our taxonomy-aligned economic activities for the reporting year. It breaks the figures down into both absolute values and the applicable percentage of Group turnover, capital expenditure, and operating expenditure. 

EU taxonomy KPIs – taxonomy-eligibility and -alignment of the economic activities of the Deutsche Telekom Group  

The total Group figures used as the basis for calculation in accordance with the EU taxonomy in the reporting year amounted to EUR 114.2 billion (turnover), EUR 38.5 billion (capital expenditure), and EUR 0.4 billion (operating expenditure). The turnover and capital expenditure were determined on the basis of the consolidated financial statements. In line with the EU taxonomy regulations, the disclosures on capital expenditure do not form part of a capital expenditure (capex ) plan that is part of a plan to expand taxonomy-eligible economic activities. Operating expenditure relevant to the EU taxonomy represents only a small proportion of total operating expenditure. This includes costs that relate to research and development; building remediation measures; short-term leases; maintenance and repair; and any other direct expenditures relating to the day-to-day maintenance of property, plant and equipment. You will find more information on the reporting principles and KPIs for the EU taxonomy in the non-financial statement in our Annual Report.

As Deutsche Telekom’s core business is not yet adequately covered by the criteria in the EU taxonomy, an aggregate view of the taxonomy eligibility of all economic activities results again in 2022 in very low proportions of taxonomy-eligible turnover (1.8 percent), capital expenditure (0.8 percent), and operating expenditure (33 percent) for the Deutsche Telekom Group.

In the 2022 financial year, the taxonomy-aligned proportion of all economic activities of the Deutsche Telekom Group was 0.5 percent of turnover, 0.0 percent of capital expenditure, and 0.4 percent of operating expenditure. The taxonomy-aligned proportion is attributable to economic activity 8.2 Data-driven solutions for GHG emissions reductions.

For the Systems Solutions operating segment (T-Systems) the taxonomy-aligned proportion of turnover was 12.3 percent, 0.1 percent of capital expenditure, and 0.8 percent of operating expenditure. We plan to increase the taxonomy alignment of our economic activities on a continual basis. You will find further information in the sections on taxonomy activity 8.1 and taxonomy activity 8.2. 
 

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Further development
The bulk of our business model is not yet included in the EU taxonomy , because the taxonomy does not include criteria for the economic activity “Provision and operation of a network infrastructure for telecommunications.” We can therefore only reflect the added value of our activities for digitalization and the associated environmental benefits within the EU taxonomy to a very limited extent. We firmly believe that the IT solutions and products running on our network can help both businesses and private individuals to reduce their carbon emissions. For this reason, as the taxonomy is revised and updated, it should take into account the importance of telecommunications networks. We are therefore active in a range of business and industry associations assessing whether our core activities could be reflected by suitable criteria in the EU taxonomy. These associations include the Sustainable Finance working group in the European Telecommunications Network Operators’ Association (ETNO), and, until 2022, the EU Platform on Sustainable Finance. We are also active within the European Round Table (ERT), and at national level we are part of the econsense network and several other organizations and stakeholder  dialogs. We have set out our position in a range of position papers, for example, here with ETNO.

The European Commission is currently drawing up criteria for the four environmental objectives that do not yet have any. These objectives are “the sustainable use and protection of water and marine resources,” “the transition to a circular economy,” “pollution prevention and control,” and “the protection and restoration of biodiversity and ecosystems.” The criteria will be based on the recommendations submitted to the European Commission by the Platform on Sustainable Finance in March and October 2022. For Deutsche Telekom, the proposal by experts to include IT solutions in the EU taxonomy that contribute to the circular economy or to the protection of water resources is key. As soon as the European Commission publishes the draft criteria, we will check how these can be applied in the information and communications sector, and will contribute our assessment to the planned consultation phase.

In its current form, the EU taxonomy concentrates on environmental objectives. It is to be expanded in the future with the inclusion of a “social taxonomy.” The aim of this is to give businesses the opportunity to reflect their social contributions, too. Given the demanding regulatory environment currently facing businesses, these plans have been temporarily suspended. However, in October 2022, the Platform on Sustainable Finance expert committee took the initial step of compiling a proposal for fleshing out the minimum social standards that are already part of the EU taxonomy. The experts suggest focusing on the following areas: respect for human rights and labor law; anti-corruption; tax; and fair competition. It is not yet clear to what extent the European Commission will make these expert recommendations legally binding.

The application of the Corporate Sustainability Reporting Directive, which entered into force on January 5, 2023, will progressively increase the number of businesses that are obligated to publish taxonomy-related information. Going forward, this will help us to check the taxonomy alignment of goods and services we purchase, as required by the EU taxonomy.

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We cover the taxonomy-eligible economic activity Data processing, hosting and related activities (8.1) with our Systems Solutions operating segment (T-Systems). As well as data centers operated by T‑Systems, we also included data centers operated on co-locations in the evaluation of taxonomy eligibility. 

Economic activity 8.1 represents the largest proportion of taxonomy-eligible turnover, capital expenditure, and operating expenditure: in 2022, taxonomy-eligible business activities for data processing and hosting represented 1.0 percent of turnover, 0.4 percent of capital expenditure, and 19.0 percent of direct expenses, based on the relevant total figures for the Group. To illustrate taxonomy eligibility at segment level, too, we also report supplementary KPIs for the Systems Solutions operating segment (T-Systems). The taxonomy-eligible portion is 36.0 percent in relation to net revenue of the segment, and 62.6 percent in relation to capital expenditure.

Data centers must comply with the European Code of Conduct for Energy Efficiency in Data Centres to be considered as making a substantial contribution to climate change mitigation in accordance with the EU taxonomy . Five of the eight sites operated directly by T‑Systems currently comply with this Code of Conduct. Compliance with the Code of Conduct has not yet undergone external auditing, which is a requirement of the EU taxonomy. We are therefore classifying the data centers used for economic activity 8.1 as non-taxonomy-aligned in the reporting year. 

In addition, the EU taxonomy stipulates that the refrigerants used in data center cooling systems may not exceed a global warming potential value of 675. This criterion is currently met by one data center that was fully refurbished in 2022. At present, the other sites still use industry-typical refrigerants that meet the criteria of the EU directive on fluorinated greenhouse gases. The taxonomy-aligned turnover, capital expenditure, and operating expenditure for economic activity 8.1 are therefore all 0.0 percent.

We will make the change to taxonomy-aligned refrigerants as part of the regular refurbishment program for our data centers. We will carefully review the individual data centers’ compliance with the criteria for preventing significant harm to the remaining environmental objectives in each case as soon as they fulfill the aforementioned climate change mitigation requirements in full. This will enable us to continually increase the taxonomy alignment of our data centers.  
 

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We associate those solutions and products that are predominantly aimed at the provision of data and analytics enabling GHG emission reductions with the economic activity Data-driven solutions for GHG emissions reductions (8.2). These are, in particular, solutions and products that we have incorporated into our Enablement Factor and Sustainable Revenue Share ESG  KPIs, and/or that have been awarded our #GreenMagenta label. We have identified the following taxonomy-eligible services within our Group-wide business activities:

• Business-related video conferences (saves travel-induced CO₂ emissions)
• Workplace and cloud solutions (increases energy efficiency by improving server utilization)
• IoT solutions (saves CO₂ emissions through, for example, efficient light switching)

We provide these services to a significant financial extent in the Germany operating segment , in our major subsidiaries in the Europe operating segment, and in the Systems Solutions operating segment (T-Systems).

Taxonomy-eligible solutions under economic activity 8.2 represent 0.8 percent of turnover. Business-related video conferences make a particularly substantial contribution in this regard.

A life-cycle analysis is required as evidence of taxonomy alignment. This must show that a solution results in substantial greenhouse gas emission reductions both over and beyond its entire life cycle in comparison with the relevant reference solution available on the market. We understand reference solutions to be alternative solutions that would typically be used in a company in our footprint markets. This assumes that the companies are aligned with best practices. The technical screening criteria do not stipulate a specific threshold for “substantial” reductions in greenhouse gases in comparison with the reference solution. As there are differences in the technologies of the various taxonomy-eligible solutions, we have reviewed each solution separately to determine the point from which greenhouse gas savings can be considered “substantial” in accordance with scientific findings. The requisite life-cycle analyses have been prepared for business-related video conference solutions and for the cloud solutions Future Cloud Infrastructure, Open Telekom Cloud, and SAP Cloud Services. To date, we have not prepared a life-cycle analysis for the IoT solutions and therefore we do not report them as taxonomy-aligned for the reporting year.

A comparison of in-person meetings with the taxonomy-eligible business-related video conference solutions included in the analysis provided evidence of significant reductions in greenhouse gases. For instance, hybrid meetings reduce greenhouse gas emissions by around 28 percent (small meetings) or 37 percent (large meetings).

Of the workplace and cloud solutions covered by the life-cycle analysis, Future Cloud Infrastructure reduced greenhouse gas emissions by around 16 percent (in comparison with decentralized data centers operated by our customers themselves). Future Cloud Infrastructure is based on an infrastructure as a service model: the customer’s IT systems are brought together on a platform hosted by T-Systems. Centralizing the service in this way not only reduces the consumption of materials for hardware but, thanks to the highly energy-efficient operation of our data centers, also cuts greenhouse gas emissions. The Open Telekom Cloud is also offered as an infrastructure as a service model. Via a platform operated by T-Systems, businesses can flexibly purchase computing capacity, memory resources, and network resources, among other things. Improved server utilization and the highly energy-efficient operation of our data centers mean that, according to the life-cycle analysis, using the Open Telekom Cloud or SAP Cloud Services leads to savings in greenhouse gas emissions of 50 percent in comparison with the reference scenario. This scenario is based on the assumption that our customers use their own, decentralized server infrastructure for storing and processing data, rather than the cloud solution. Our SAP Cloud Services, which run on a cloud platform operated by T-Systems, achieve a similar level of savings in greenhouse gas emissions. In view of the demonstrated reduction in greenhouse gases, we classify all web conferencing, workplace, and cloud solutions included in the life-cycle analysis as taxonomy-aligned.

For the aforementioned solutions, we exclusively use infrastructure located in Germany. The requirements for the “Transition to a circular economy” conform to current EU legislation, which we enforce as part of our environment management activities at our EU sites.

The taxonomy-aligned solutions for GHG emissions reductions represented 0.5 percent of turnover, 0.0 percent of capital expenditure, and 0.4 percent of operating expenditure. For the Systems Solutions operating segment (T-Systems), the taxonomy-aligned proportion of turnover was 12.3 percent, while 0.1 percent of capital expenditure and 0.8 percent of operating expenditure were taxonomy-aligned.
 

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Silke Thomas

We have observed that investors are increasingly incorporating SRI  approaches in their investment strategies. In addition, investors, analysts, and rating agencies are increasingly inquiring about our CR activities. To meet these requests, we use different formats – both in our reporting and for direct dialog.

We publish this CR report annually. The Management and Facts section provides readers with detailed information that helps them assess our CR performance. In addition, we have also prepared under Experience sustainability relevant sustainability issues in a straightforward, clear manner for a broad readership. Our Annual Report also includes a non-financial declaration that allows us to meet the current EU requirements for sustainability reporting. We also offer ESG  information for financial market players on our company website, under “Corporate Responsibility”, and on our investor relations portal, under “Socially responsible investment”. In addition, we provide social indicators in our HR Factbook.

We strive to engage in personal dialog with investors and regularly hold national and international information events as SRI roadshows. We also regularly take part in SRI conferences or meetings, and, upon request, present our CR strategy as best practice. In addition, we provide information to interested investors in conference calls, and answer numerous direct inquiries. This reporting year, we again ran our investor dialogs, including our SRI roadshows, online.

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Claudia Kurpiers