Aspect 4: Respecting human rights

Compliance with human rights is highly important to our Group. This applies both internally within our Company and equally so to our business partners and our approx. 20,000 suppliers in more than 80 countries – whom we explicitly place under the same obligations.

Labor standards in the supply chain and in the Group SDG 10

There are still places in the world where human rights are not a given. As part of our global procurement activities, we can be exposed to country- and supplier-specific risks. These include, for example, the use of child labor and inadequate local working and safety conditions. Violations cause severe damage to those affected, and can also result in reputational damage and negative financial consequences for companies. For further information, please refer to the section “Risk and opportunity management”.

As a responsible company, we have made an express commitment to upholding the UN Guiding Principles on Business and Human Rights adopted by the United Nations Human Rights Council in 2011 (Ruggie Principles). The obligation to respect human rights is anchored in our core regulations – i.e., our Guiding Principles and our Code of Human Rights & Social Principles. The latter underscores our commitment to protecting human rights and to the goals of the German National Action Plan on Business and Human Rights adopted by the Federal Government in 2016. At the same time, the code embodies our commitment to complying with the principles laid down by the International Labour Organization (ILO), the Organisation for Economic Co-operation and Development (OECD), the Universal Declaration of Human Rights, and the UN Global Compact. We also require our suppliers to comply with all our guidelines related to human rights. Within the Group, our primary focus is on safeguarding the right to conclude collective agreements and on guaranteeing diversity and equal opportunity. For further information, please refer to the passages entitled “Collaboration with employees’ representatives and trade unions” and “Diversity and equal opportunity” in this section under Aspect 2: “Employee concerns”.

The UN Guiding Principles on Business and Human Rights require businesses to systematically identify the impact their operations have on human rights, and to prevent, mitigate, or compensate these where necessary. In order to meet these requirements, we have developed an extensive program to implement the UN Guiding Principles throughout our Group and introduced an ongoing process comprising several interconnected measures and tools. The program includes promoting awareness, a mechanism for lodging complaints, a risk and impact analysis, and reporting.

We primarily use two instruments to review our Code of Human Rights & Social Principles. Firstly, we prepare an annual Human Rights & Social Performance Report. In 2018, all 120 companies surveyed for the report declared that they are in compliance with the requirements of the Code of Human Rights & Social Principles, with the report showing no violations for that year. Secondly, we provide a central point of contact for human rights issues, available at the email address humanrights@telekom.de or through an anonymous whistleblower system. We have summarized all relevant contact information on our whistleblower portal Tell me!. We look into all tip-offs received and introduce countermeasures, provided the information is identified as plausible. In 2018, nine tip-offs relating to human rights issues were received either directly via the central point of contact or through the (anonymous) whistleblower system. Not all of these tip-offs were deemed plausible. Whenever necessary, we carry out review processes at our national companies to assess employer-employee relationships. To do so, we compile five human rights- related key performance indicators, such as employee satisfaction, then assess these using a traffic light system. For further information about employee satisfaction, please refer to the “Employees” section. In addition, we conduct an annual formal review of compliance with the Employee Relations Policy. The results are discussed with the regional managers in our national companies. If necessary, we agree upon measures such as the Human Rights Impact Assessment, which provides a means of evaluating the effects business operations have or could potentially have on human rights, and the organization’s ability to prevent, mitigate, or remedy such effects. In 2018, we carried out such an assessment at T-Systems Malaysia and T-Systems Singapore, and conducted an Employee Relations Policy review at Magyar Telekom. We also launched a special human rights training course for employees throughout the entire Group in 2018.

The public increasingly expects companies to take responsibility for their entire value chain and fully utilize the opportunities open to them to influence specific issues. We have been working to improve sustainability throughout our supply chain for many years. We derive our sustainability strategy in procurement from our CR strategy; it is anchored in the purchasing processes used throughout our Group. The heads of the CR and Procurement units are jointly responsible for implementing sustainable procurement practices. They report to the CHRO and CFO, respectively. An escalation process calls for decisions to be made at Board of Management level in severe cases. The Sustainable Procurement working group supports international procurement units in meeting sustainability requirements. Our sustainability principles for procurement are laid down in the Global Procurement Policy; the associated Procurement Practices provide specific instructions for procurement in Germany and serve as recommendations for our national companies. We train our employees throughout the Group using an e-learning tool. In addition, a buyer handbook has been available since 2016 to provide an overview of which CR criteria must be considered at which point of the procurement process. SDG 8

Basic ethical, social, and environmental principles as well as fundamental human rights are set out in our Supplier Code of Conduct, which is part of our General Terms and Conditions for Purchasing and must therefore be recognized by all of our suppliers. When selecting a supplier after issuing an invitation to tender, sustainability factors are given a weighting of 10 percent.

We cannot guarantee that all our suppliers will conform to the principles of our Supplier Code of Conduct. We review compliance regularly to minimize risks and further develop suppliers, working closely with them on these issues. We do so using a four-phase approach. The Supplier Code of Conduct is an integral part of all supplier agreements, and as such binding on all of our suppliers (phase 1). As the business relationship proceeds, we ask strategically relevant or high-risk suppliers to enter more detailed information about their practices into the EcoVadis information system. We go one step further with certain suppliers that exhibit a higher CR risk, and conduct on-site social audits (phase 2). Our focus here is not only on our direct suppliers but also, wherever possible, on downstream suppliers. We also boost the effectiveness of our audits by collaborating with sixteen other companies in the Joint Audit Cooperation (JAC). In 2018, we completed a total of 117 social audits – 29 at our direct and 88 at our indirect suppliers. As in previous years, we concentrated our auditing activities on suppliers in Asia, in particular in China and their neighboring countries such as India, Malaysia, South Korea, and Thailand, as well as in Brazil, Mexico, and Eastern Europe. Audited suppliers included manufacturers in the areas of IT hardware, software and services, as well as networks and devices. SDG 10

We use the information provided by the companies themselves and audit findings to classify and rate suppliers, primarily those that offer several material groups, according to CR criteria (phase 3). As part of our multi-award-winning Supplier Development Program (phase 4), we have developed solutions in cooperation with our suppliers for areas such as environmental protection, working hours regulations, and health protection over the past few years. In 2018, we placed our supplier program as an industrial approach under the umbrella of the ICT sector’s Global e-Sustainability Initiative (GeSI), where it is being continued as the Sustainable Development Program (SDP). In this way, we hope to help make the global supply chains for ICT products more sustainable, even beyond our own value chain. In the second half of 2018, we initiated the GeSI SDP as a pilot project with four suppliers. Other ICT companies, their suppliers, and sub-suppliers will join the program as of 2019. We expect to see these companies obtain similar results to those achieved by the participants of our previous supplier program, whom we were able to help derive social, environmental, and even quantifiable economic benefits – with better working conditions reducing the number of employee absences, boosting their motivation, and increasing productivity. All this also improves product quality, which in turn reduces the number of complaints about our products. The environmental improvements include reduced consumption of resources such as water. SDG 17

We use the Sustainable Procurement ESG KPI to measure and manage our sustainability performance in procurement. This KPI represents the procurement volume attributable to suppliers who have accepted our Supplier Code of Conduct and have been checked on the basis of the information they have disclosed, for example, via EcoVadis or during a social audit, with regard to social and environmental criteria. This calculation relates to our procurement volume throughout the entire Group (from 2018 without T-Mobile US). At around 81 percent, the share of the procurement volume subjected to a risk assessment in 2018 was on a par with the prior year and in line with the level forecast. Our goal continues to be attaining at least 80-percent coverage by 2020.