Sustainability performance: Progress and forecast

We have been using a range of metrics known as ESG KPIs (ESG stands for Environment, Social and Governance; KPI for Key Performance Indicator) to gauge our CR commitment since 2010. These performance metrics help our stakeholders evaluate our sustainability performance. They also provide a transparent basis on which we systematically and continually improve our ESG performance. The key ESG KPIs have been included as components of our annual report since 2011.

Our 2015 Annual Report forecast trends for the following ESG KPIs in 2016: Energy Consumption, CO2 Emissions and Sustainable Procurement.

The Energy Consumption ESG KPI is calculated by setting electricity consumption in relation to revenue. The trend for this KPI was positive in 2016. It decreased slightly year-on-year as expected. Despite increasing revenue, energy consumption decreased throughout the Group in the reporting period. Given the unabated rapid growth in data traffic and ongoing network build-out, this result was achieved only through further gains in energy efficiency.

We had assumed there would be a slight decline in the CO2 Emissions ESG KPI for 2016, i. e., a slight improvement. In fact, CO2 emissions sank by 5 percent in the reporting period. This positive trend is mainly attributable to falling emissions from electricity consumption and from fuel consumption for our vehicle fleet.

In the case of the Sustainable Procurement ESG KPI, we exceeded the prior-year figure by an even greater margin than forecast. The share of the procurement volume that has been risk-assessed already amounts to 83 percent.

Chart: Energy Consumption ESG KPI
Chart: Sustainable Procurement ESG KPI
Chart: CO2 Emissions ESG KPI

We anticipate a positive development in our Energy Consumption ESG KPI for the years 2017 and 2018, with a declining trend in 2017 and a further slight decrease in 2018. This development is the result of slight savings in electricity consumption coupled with a slight increase in revenue. We expect to achieve further reductions in electricity consumption above all as we migrate our networks in Germany to IP technology and merge T-Systems data centers in various regions. Most of these savings are likely to be counterbalanced by the expansion of T-Mobile US and the accompanying rise in electricity consumption.

Our electricity consumption is the main driver of our CO2 emissions. We therefore also expect a slight downward trend in our CO2 Emissions ESG KPI in the years 2017 and 2018. One of the goals we have set ourselves as part of our integrated climate strategy for the year 2020 is to reduce CO2 emissions throughout the Group (excluding T-Mobile US) to 20 percent below the figure for the base year 2008. The gradual network changeover to IP will make a substantial contribution here. 13

Over the next two years, we expect our Sustainable Procurement ESG KPI to remain stable at a high level.

We measure the impact of our social commitment with a set of three ESG KPIs. The Community Investment ESG KPI maps our social commitment in terms of financial, human, and material resources. The Beneficiaries ESG KPI measures the huge number of active contributors as well as the broad target group they reach. The Media Literacy ESG KPI highlights the high percentage of projects and activities promoting the competent handling of media. It is highly relevant to us as it correlates closely with our core business.

Chart: Community Investment ESG KPI
Chart: Media Literacy

We use the Employee Identification with CR Commitment ESG KPI to determine the degree to which our staff identify with, or how satisfied they are with, our CR commitment. This is based on the Group employee survey (excluding T-Mobile US), which we conduct every two to three years; the next is scheduled for spring 2017. This ESG KPI will therefore not be reported until the next financial year. The figure for both aspects was 78 percent in 2015.

Chart: Employee identification with CR commitment

EXCELLENT RATINGS AND RANKINGS

We use the Socially Responsible Investment ESG KPI to determine how the finance markets rate our sustainability activities. This indicator measures the proportion of T-Shares held by investors whose investment strategy is based not only on economic but also on the ecological and social aspects of corporate governance. In spring and fall 2016 we held a number of Socially Responsible Investment (SRI) roadshows, at which we offered to answer critical questions from our investors. In addition, we attended SRI conferences, organized conference calls and web conferences, and answered numerous direct queries from rating agencies, analysts and investors.

Our efforts to achieve greater sustainability are also paying off with investors. At the end of 2016, around 20 percent of T-Shares were owned by investors who take SRI criteria at least partly into account in their investment decisions. Almost 2 percent of T-Shares were held by investors who give priority to SRI aspects when managing their funds.

Chart: Socially Responsible Investment

Sustainability ratings play a key role in SRI investment decisions. In line with our corporate responsibility strategy, we concentrate on specific rating agencies that we select on the basis of reputation, relevance and independence. They form the basis of the following sustainability indexes (see table below).

Listing of the T-Share in sustainability indexes/ratings
             
Rating agency  Indexes/ratings/ranking Successfully listed in index
    2016 2015 2014 2013 2012
RobecoSAM DJSI World
  DJSI Europe
CDP STOXX Global Climate Change Leaders a
oekom research AG „Prime“ (Sector Leader b)
Sustainalytics STOXX Global ESG Leaders
  iSTOXX 50 SD KPI n. a.
  UN Global Compact 100 n. a.
FTSE Financial Times Stock Exchange FTSE4Good
MSCI MSCI Global Climate
  
 Successfully listed  Not listed

a Deutsche Telekom is sector leader in the DACH (Germany, Austria, Switzerland) region.
b Based on “oekom Industry Report” (2016).

In 2016, the T-Share was again listed on leading sustainability indexes, including RobecoSAM's prominent DJSI World and DJSI Europe. Once more, our share was listed on the FTSE4Good and UN Global Compact 100 indexes. Rating agency “oekom” singled us out as the world's best telecommunications company in terms of ecological and social performance.

CLIMATE PROTECTION LEADER: CDP RANKING AWARD

We qualified for the A List of the most significant international climate protection ranking, CDP (previously Carbon Disclosure Project), which lists the companies globally leading in climate protection, for the first time in 2016. CDP commends companies that report their CO2 emissions extremely transparently and in detail. Within CDP, we have reported not only Scope 1 and Scope 2 emissions but also Scope 3 emissions from our business operations in Germany and virtually all our relevant European subsidiaries since 2014. Scope 3 emissions are all emissions from the upstream and downstream value chains that are generated, for instance, in the supply chain or by customers. In 2016, these Scope 3 emissions in Germany remained stable compared with the prior year and totaled just under 5 million kilotons of CO2-equivalent emissions (CO2e emissions). The CO2e emissions in 2015 were actually about 0.8 million kilotons CO2 higher than reported last year. This necessary adjustment was primarily made as a result of the fact that we have refined our calculation method. The remeasurement resulted in higher emissions, especially from the purchase of investment goods such as mobile antenna masts and network routers. Detailed information on the Scope 3 emissions can be found in our 2016 CR Report, which is due for publication in April 2017.

The following chart visualizes emissions in the different Scopes from our business activities in Germany; shown as CO2-equivalent emissions (CO2e emissions).

Chart: CO2e emissions(Scope 1-3)

The World Wide Fund For Nature (WWF) and the CDP held us up as an example of good practice for the management of our emissions along the value chain. They commended our comprehensive approach to managing and reducing these emissions in the “Leased assets” category.