Corporate responsibility and non-financial statement

• Act responsibly. Enable sustainability.

We are more than a company providing society with telecommunications infrastructure. In an ever more complex and digital world, we are a trusted adviser through every stage of life. As such, we take our responsibility for society and the environment very seriously. We work systematically to minimize the potentially negative impact of our business activities while creating effective, positive impetus for sustainable change. We have been transparently reporting on our corporate responsibility (CR) activities for over 20 years. In our CR report and annual report, and on our website, we provide comprehensive information every year on the challenges we are facing and the progress we have made as a responsible company focused on sustainable action. Since the 2016 financial year, we have also explained how our core business contributes to achieving the UN Sustainable Development Goals (SDGs), which have been set as part of the 2030 Agenda. In addition, this year’s management report is the first in which we are also highlighting how our activities are having a positive impact on our business development (i.e., adding value). For further information, please refer to the section “Sustainable development goals”.

Since the 2017 reporting year, we have published a combined non-financial statement (NFS) as part of our management report, thereby fulfilling our reporting obligation as per the CSR Directive Implementation Act. When selecting the subjects for the present 2018 NFS, we again not only considered legal requirements, but also incorporated the results of our materiality process. Regularly analyzing materiality in this way helps us align our sustainability activities with our stakeholders’ expectations and structure our reporting accordingly. SDG 17

The Supervisory Board of Deutsche Telekom AG is responsible for the review of the content of the NFS. In the reporting year, it did this with the support of PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft (independent auditor) in the form of a limited assurance engagement. This audit was based on the International Standard on Assurance Engagements ISAE 3000 (as amended). Unless otherwise stated, all disclosures in this NFS apply in equal measure to the Group and the parent company. To avoid repetitions within the management report, we refer to further information provided in other sections wherever relevant. References to disclosures not contained in the combined management report are provided as background information; these disclosures are not part of the NFS and thus are not covered by the review. By publishing our 2018 CR report in March 2019, we are using a tried-and-tested format to fulfill our stakeholders’ expectations of transparency, basing our work as usual on the guidelines of the Global Reporting Initiative (GRI). The concepts described in this NFS are consistent with this long-standing reporting tradition and make reference to the GRI standards, while also taking statutory requirements into consideration.

In 2018, we received a further accolade for our sustainability performance and our associated reporting, taking the top spot in the Good Company Ranking, which rates the sustainability performance of all DAX 30 companies based on audited publications. In addition, our 2017 Annual Report secured us a double victory in the Investors’ Darling 2018 capital market competition, in the categories of “Corporate social responsibility” and “Strategy reporting.”

Explanation of the business model

We are one of the leading telecommunication companies worldwide. We offer our consumers fixed-network/broadband, mobile, internet, and internet-based TV products and services, as well as ICT solutions for our business and corporate customers. For further information on our business model, please refer to the sections “Group organization” and “Group strategy”.

Strategic and organizational approach to sustainability

We see ourselves as a responsible company on the basis of our Leading European Telco strategy: We want to be the leading telecommunications provider in Europe. For us, social and ecological responsibility is inextricably linked with such a leadership role. Our mission statement is “Act responsibly. Enable sustainability.” We are committed to implementing sustainability along our entire value chain – and to playing an important role in meeting today’s environmental, economic, and social challenges. We are expressly committed to the principles of the United Nations Global Compact, the German Sustainability Code, and Germany’s Code of Responsible Conduct for Business. Furthermore, we support the SDGs of the United Nations (UN), in particular contributing to the following goals: (3) Good health and well-being, (4) Quality education, (5) Gender equality, (8) Decent work and economic growth, (9) Industry, innovation and infrastructure, (11) Sustainable cities and communities, and (13) Climate action.

Our CR strategy, which is oriented to our core business, includes three fields of action: “Connected life and work – enabling a sustainable lifestyle,” “Connect the unconnected – access to and participation in the information and knowledge society,” and “Low-carbon society.” In addition, the following topics are of particular importance within our sustainability management system: data security and data privacy, digitalization, sustainable supply chains, human rights, circular economy and resource decoupling, as well as being a responsible employer.

Our Board of Management bears overall responsibility for our CR goals, discussing and making decisions on key CR-related issues. The Group Corporate Responsibility (GCR) unit develops Group-wide policies and guidelines. It is also responsible for positioning and aligning CR strategically, and monitors all of the corresponding processes. The CR managers from the different business units and national companies are responsible for implementing our CR strategy, and work closely together in the international CR Manager Network. GCR is also advised by the CR Board, composed of the heads of key Group areas, in order to ensure direct feedback is always shared between CR and our core business. Our values and basic principles are anchored in our Guiding Principles, the Code of Conduct, the Code of Human Rights & Social Principles, and other subject-specific policies. The cornerstones of our sustainability management activities are formally set out in our CR Policy, which is binding for all Group units. As part of our CR controlling system, we record environmental, social, and governance (ESG) data and performance indicators. We use this data primarily to calculate our Group-wide ESG KPIs (key performance indicators), which we use to measure and control our CR performance. We regularly review these KPIs to ensure they provide reliable information, revising them as needed. In some cases, the KPIs and other metrics can also be linked to the SDGs to show the progress we are making in the SDG focus areas.

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, at least in part, on environmental and social aspects of corporate governance. As of September 30, 2018, around 18 percent of all T-Shares were held by SRI (socially responsible investment) investors, and 3 percent were held by investors who manage their funds primarily in accordance with SRI aspects. In addition, during the reporting year, our shares were again listed on leading sustainability indexes, such as RobecoSAM’s prominent DJSI World and DJSI Europe. Our share also continued to be listed on the FTSE4Good and UN Global Compact 100 indexes. SDG 8

Our aim is to continuously improve the effects our products, solutions, and programs have on society. To this end, we need to quantify the extent to which our business activities help solve social challenges. In 2018, we initiated a pilot project for measuring this impact and are defining a uniform process for evaluating our products, solutions, and programs. This pilot project is intended to lay the foundations for managing our sustainability activities with a focus on their effects. You can find in-depth information about the project in our 2018 CR report, which is due to be published in March 2019. SDG 12

Process for determining significant topics

By following a comprehensive materiality process that we evolve and adapt every year, we aim to determine what topics are relevant for our reporting and to develop our sustainability strategy along these lines. In 2018, we incorporated a document analysis into the process, which we have used to evaluate aspects such as current legislation and determine the impact of the topics covered on the ICT sector and our value chain. For more detailed information on our approach, please refer to our CR report for 2018.

We have reviewed whether and to what extent the result of our materiality analysis requires us to amend the concepts covered in the previous year’s NFS. This was done to ensure the present NFS for 2018 adheres to the requirements set out in the CSR Directive Implementation Act. This involved considering the main topics key to understanding business operations, the operating result, the Company’s situation, and the effects on non-financial aspects. It was confirmed there was no need to extend the range of topics covered in the previous year. Nonetheless, conserving resources is becoming an increasingly debated topic both in the public arena and among our own workforce. This reporting year, we therefore decided to address this issue under Aspect 1: “Environmental concerns” – despite the fact that the operations of Deutsche Telekom as a service provider have a relatively minor impact in this regard.

As part of our comprehensive risk and opportunity management system, we also determine existing and potential risks and opportunities arising from environmental, economic, or social aspects, and from how our Company is managed. Topics such as climate protection, suppliers, data privacy and data security, health and the environment involve potential risks, which we have outlined in the section “Risk and opportunity management.” We maintain this practice to provide the transparency our stakeholders expect, even if the risk assessment has found that these topics have a “low” risk significance and therefore do not need to be rated as “very likely severe” in the meaning of the CSR Directive Implementation Act. The present NFS focuses on these risks and opportunities in relation to the relevant aspects. For further information, please refer to the section “Risk and opportunity management”.