Corporate responsibility and non-financial statement

2019 was dominated by the climate crisis and worldwide protests about climate policy. We know how urgent the situation is: That is why we initiated further decisive steps in the reporting year to strengthen our contribution to fighting climate change. At the beginning of 2019, CEO Timotheus Höttges set a new ambitious science-based target: We aim to turn the Deutsche Telekom network into a “green network” by 2021 – 100 percent electricity from renewable sources and 90 percent lower direct and indirect emissions by 2030. SDG 13 Furthermore, the CEO called for a holistic approach to developing a “greener Deutsche Telekom.” We have affirmed this approach by extending our Group strategy. Initial measures have already been put in place as part of our new Group program “We care for our planet,” like the introduction of our “we care” label and the first sustainable smartphone recycling scheme in Germany. SDG 15 We were also faced in 2019 with rising populism, fake news, and the manipulation of public opinion on the Net. In order to take a stand against these phenomena, we made “digital democracy” the focus of our activities to promote media skills in 2019. SDG 16 We also launched a campaign for participation in 2019 under #TAKEPART. The idea behind the campaign is that everyone should have access to the many opportunities afforded by digitalization. We want to bring everyone into the digital society. Participation for all is the key target for Deutsche Telekom. SDG 10

Creating transparency

We have been transparently reporting on our corporate responsibility (CR) activities for more than 20 years: on our website, in the “We Care” magazine, in our CR report, and in our Annual Report. 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.

For further information, please refer to the section “Sustainable Development Goals.”

We meet our reporting obligation under the CSR Directive Implementation Act. For this reason, we publish this associated combined non-financial statement (NFS) in the management report. When selecting the subjects for the present 2019 NFS, we again not only considered legal requirements, but also the results of our materiality analysis. SDG 17 The concepts in this NFS are described on the basis of our long-standing CR reporting and in line with the GRI standards. We will publish our 2019 CR report in March 2020. This will also satisfy the additional transparency expectations of our stakeholders.

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 (revised). 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.

In 2019, we once again received accolades for our sustainability performance and associated reporting: Timotheus Höttges was given the Appeal of Conscience award by the foundation of the same name for his outstanding contributions to education, culture, and sustainability through Deutsche Telekom AG, and for his commitment to strengthening digital literacy, and his high respect for human rights. SDG 17 In 2018, our CR report reached third place in the 10th ranking of sustainability reports by the Institute for Ecological Economy Research (IÖW) and Future e.V. The Ethisphere Institute also named us one of the World’s Most Ethical Companies in 2019 for the second time in a row.

Explanation of the business model

We are one of the leading telecommunications 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. We underlined this once again in 2019 by extending our Group strategy. 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 the 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, 12 Responsible consumption and production, and 13 Climate action.

Our CR strategy includes three fields of action: “Connected life and work – enabling a sustainable lifestyle in the digital world,” “Connecting the unconnected,” 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. Its aim is to further develop our corporate culture, particularly in terms of sustainable innovation and social responsibility. The CR managers from the different business units and national companies are responsible for implementing our CR strategy and work together in the international CR Manager Network. GCR is also advised by the CR Board, which is composed of the heads of the Group’s key areas. 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 activities, 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. 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, 2019, 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 the reporting year, our share was included in four additional sustainability indexes: the Euronext Vigeo Europe 120 and the Euronext Vigeo Eurozone 120 by Vigeo Eiris, the S&P Europe 350 ESG by RobecoSAM, and the EURO STOXX 50 ESG by Sustainalytics. SDG 8

We are making our contributions towards solving social challenges measurable and have defined a uniform process for evaluating selected products, solutions, and programs. This process helps us to keep our key sustainability activities results-oriented and to make our contribution to achieving the SDGs visible. SDG 8 Detailed information will be published in our 2019 CR report.

Process for determining significant topics

We conduct a comprehensive materiality process to determine the topics that are relevant for our reporting. For example, we carry out a document analysis which includes evaluating existing legislation and determining the topics’ influence on our value chain. The results of the materiality analysis give us important indications of how to direct our sustainability strategy. Detailed information on our approach will be published in our 2019 CR report.

In 2019, we again considered the main topics key to understanding business operations, the operating result, the Company’s situation, and the effects on non-financial aspects. The results of the materiality analysis from the previous year were confirmed. Consequently, there is no need to include further matters in the NFS for 2019.

As part of our comprehensive risk and opportunity management system, we 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.”