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  • 2016 Corporate Responsibility Report
2016 Corporate Responsibility Report

Sustainable finance

Companies that rely on sustainable business practices are more competitive in the long term. Analysts from Deutsche Asset & Wealth Management and researchers at the University of Hamburg collaborated to analyze more than000 studies on the topic. Their conclusion: The "business case" for sustainability has a sound empirical basis and the vast majority of the studies analyzed pointed to a positive relationship between sustainability and financial performance. This is why investors who are interested in sustainability tend to focus on long-term yields instead of short-term profit. Socially responsible investment (SRI img) can be an important component when it comes to securing capital for Deutsche Telekom AG in the long term.

SRI investment products consist of securities from companies that have passed an audit conducted in accordance with environmental, social, and governance (ESG img) criteria. This is why the development of demand for T-Shares from socially responsible investors serves as an indicator for assessing our sustainability performance. With our Socially Responsible Investment ESG KPI we measure how the financial markets perceive our CR activities. Investors concerned with sustainability often refer to ratings published by specialized SRI analysts. For this reason the rating given to our company by SRI analysts has an impact on our ability to win over and retain socially responsible investors and achieve our goal of keeping our company's medium and long-term cost of capital at a low level.

An increasing number of investors are responding favorably to the concept behind the UN's Sustainable Development Goals (SDGs). The future-oriented SDGs are particularly interesting for investors who are planning for the long term and require greater transparency at companies in terms of their strategic approach and prioritization. We are also seeing a trend toward impact measurement, i.e., assessing and, in some cases, quantifying the impact that a company has on the environment and on society. Taking a look at a company's contribution to the SDGs can be valuable in this assessment. To us, this trend is both a challenge and a chance to make the positive impact of our products and services more transparent both internally at the company and to our customers.

We use different formats – both in our reporting as well as in direct dialog – to inform SRI analysts and investors of our CR activities. More and more investors and rating agencies are interested in receiving information on our CR activities. Investors not classified as SRI investors, like JP Morgan, Société Générale and HSBC are beginning to organize SRI conferences as well. Deutsche Telekom is regularly invited to present our CR strategy and commitment as best practice at these conferences.

Progress

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Socially Responsible Investment (SRI) ESG KPI

At the end of 2016 around 20 percent of T-Shares were owned by investors who consider SRI img 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.

Investor communication expanded
We have been publishing relevant Deutsche Telekom ESG img 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 on our investor relations portal. Interested parties can 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) departments conducted two joint SRI roadshows in 2016, for example, one of which took place in the U.S. for the first time. We also held conference calls to keep interested investors informed and responded to numerous direct requests for information. We covered the entire spectrum of ESG criteria, from governance structure, corporate responsibility controlling and a sustainable supply chain to climate protection and our refugee aid efforts.

Silke Thomas

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Current position in rankings and ratings

Deutsche Telekom's ESG img (environmental, social and governance) performance is assessed within the scope of CR ratings, which provide investors with valuable information for their investment decisions. As in previous years, the T-Share was again listed on leading sustainability indexes such as the DJSI img World and the DJSI Europe Index from RobecoSAM img in 2016. In addition, rating agency oekom singled us out as the world's best telecommunications company in terms of ecological and social performance. We qualified for the A list of internationally leading companies in the CDP img climate protection ranking (previously Carbon Disclosure Project) for the first time in 2016. CDP commends companies that report their CO2 emissions extremely transparently and in detail. In addition to making it onto the A list, we were also included in the STOXX Global Climate Change Leaders Index. The STOXX Global ESG Leaders Index listed Deutsche Telekom for the sixth year in a row. Once again, our share was listed on the FTSE4Good img index and the UN Global Compact img 100 index in the reporting year.

Silke Thomas

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Silke Thomas

Integrated reporting

More and more people are recognizing the significance of CR for a company's success. This can also be seen in the international trend toward tighter integration of financial and non-financial reporting. Sustainability aspects that are very important to corporate added value, such as environmental protection, employee needs and sustainable products, are being included in traditional management reporting.

We have been working on integration in the Deutsche Telekom annual report for several years now. These efforts can be seen in the increasing inclusion of CR topics in central business processes such as procurement, product development and innovation. Integrating these topics into our annual report also promotes a harmonized format for reporting on our company's financial and non-financial performance. This addresses the requirements of our SRI img investors.

In various sections of our annual report, we show how sustainability contributes to value creation in our corporate processes. We have also been reporting on our ESG img KPIs since 2011. For our Energy Consumption, CO2 Emissions and Sustainable Procurement ESG KPIs we have been including additional qualitative trend forecasts for the following two financial years since 2013. In the 2016 Annual Report and this CR report, we once again compared our forecasts with the actual KPI img trends. Find out more in the ESG KPI section.

To facilitate the integration process, we outlined Deutsche Telekom's contribution to the Sustainable Development Goals (SDGs) for the first time in our 2016 Annual Report. Many of our products, services and activities contribute to the SDGs. In order to make this more transparent for our readers, we have marked the relevant sections with the appropriate SDG symbol.

 

Tax policy guidelines

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 utilizing the scope available for optimizing taxes on the one hand, and living up to the social 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 on salaries 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 Group, 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.

Socially responsible investment strategy for Deutsche Telekom pension funds

We take a holistic approach to the topic of socially responsible investments. This includes investments in the capital market for company pension schemes and similar obligations in Germany, which are also based on our sustainability principles. These principles were incorporated into our socially responsible investment strategy for pension funds in 2013 in the form of exclusion criteria. These criteria prohibit investment in companies that produce or trade in ABC weapons, anti-personnel mines or cluster bombs. Also prohibited are investments in companies that have repeatedly violated the principles of the UN Global Compact img. Deutsche Telekom pension funds are also prohibited from purchasing government securities from governments that are subject to sanctions in accordance with public international law. The pension funds agreed to comply with our socially responsible investment strategy in 2013.

We are convinced that putting this investment strategy into practice will help improve our financial risk indicators. It will help us avoid high-risk, controversial investments and, instead, invest in long-term, stable values that are in line with our principles of sustainability. This approach meets the requirements of business customers and support our responsibility as a trustee when it comes to investing our employees' capital. Last but not least, it also supports our reputation as a leading DAX company among NGOs and in the media.