Aspect 1: Environmental concerns

We are committed not only to minimizing the impact our business activities may have on the climate and the environment, but also to tapping into the opportunities for sustainable development offered by digitalization. If harnessed properly, these opportunities can contribute, among other factors, to protecting resources and saving energy.

In order to establish uniform processes in the Company and to continually improve our environmental protection efforts, we use a comprehensive environmental management system that is part of the Group-wide integrated QHSE (quality, health, safety, and environment) management, and that is based on international standard ISO 14001. We amended our Group-wide Environmental Guidance in the reporting year. It collates the relevant aspects of our self-commitments. The amendments reflect the increasing importance of issues such as the circular economy, biodiversity, and water scarcity. The Environmental Guidance also contains an updated version of the EMF Policy (EMF being short for “electro-magnetic fields”). The Environmental Guidance was adopted by the Global CR Board in the reporting year.

In order to handle the rising tide of regulatory requirements, especially from the EU (e.g., the Green Deal), we established an internal, cross-divisional Green Deal task force in 2020. The purpose of the task force is to ensure that necessary measures and processes can be implemented without delay and to create the necessary transparency. Correspondingly, evaluations and indications resulting from the task force’s activities are taken into account in the Group’s various sustainability initiatives.

Climate protection

Our investments in the network build-out make us one of the biggest investors in the industry. In 2023, we invested more than EUR 16 billion Group-wide, primarily in building and operating networks to meet the growing demand for faster, full-coverage data services. However, the network build-out is not to lead to an increase in CO₂ emissions and thus accelerate climate change. For this reason, we use energy from renewable sources to decouple CO₂ emissions from energy consumption. In Europe, we have set ourselves the goal of doubling the energy efficiency of our networks by the end of 2024. Above and beyond this, we want to further increase energy efficiency – for instance at our data centers – and thus reduce energy consumption in the medium term despite the expected rise in data consumption (2024 against 2020, goal excludes T‑Mobile US). The two non-financial performance indicators “energy consumption” and “CO₂ emissions” (Scope 1 and 2) were incorporated into the variable component of our Board of Management’s remuneration in 2021, and in 2022 were also made relevant for our international executives (excluding T‑Mobile US), as well as all employees in Germany not covered by collective agreements. In the United States, we are forging ahead with the highly intensive build-out of our 5G network, in particular in rural areas. This initially drives up power consumption. T‑Mobile US, like the Group as a whole, has covered 100 % of its electricity requirements from renewable energy sources since 2021. There are fluctuations in T‑Mobile US’ Scope 1 carbon footprint owing to unforeseeable natural disasters and the associated temporary use of equipment such as diesel generators to restore and back up damaged network infrastructure. Consideration must be given to the special national situation in this key market, which is why the decision was taken not to include T‑Mobile US in these two non-financial performance indicators in respect of short-term variable remuneration. This step ensures that the right incentives are set for the Board of Management, executives, and all employees in Germany not covered by collective agreements toward the sustainable development of the business, while at the same time safeguarding the stability of network operations.

The annual ambition for the performance indicators “energy consumption” and “CO₂ emissions” (Scope 1 and 2) will continue to be set, managed, and reported for the entire Group as before, including a target value for T‑Mobile US. Energy consumption for the Group as a whole in the reporting year was down slightly year-on-year at 12,241 GWh (prior year: 13,253 GWh). Due in particular to the Group-wide use of electricity from renewable energy sources, CO₂ emissions (Scope 1 and 2) are at a low level and dropped further as a result of our measures to 217 kt CO₂e (prior year: 233 kt CO₂e). The values given for total energy consumption and Scope 1 and Scope 2 emissions are based in part on estimates, assumptions, and extrapolations, and, in part, on data provided by our external energy service providers.

For about the last two decades, climate protection has been steadily increasing in importance at Deutsche Telekom. Our Group-wide climate protection strategy covers the following aspects: Emissions from the value chain, Renewable energy sources, Energy efficiency, and Enablement: positive climate-protection effects on our customers. In 2019, the Board of Management adopted climate goals, which it stepped up again in 2021: In March 2023, we replaced our previous science-based target on our journey towards climate neutrality with more ambitious interim and final goals, which have now been confirmed by the SBTi.

Our climate goals are:

1. We achieved 100 % electricity from renewable energy sources across the Group (Scope 2, market-based method) at the end of 2021.
2. We are aiming to reach climate neutrality across the Company by the end of 2025 (Scope 1 and 2). As we cannot avoid all emissions, we intend to offset around 5 % of the remaining emissions through compensatory measures.
3. As a new interim goal on our journey towards climate neutrality along the entire value chain, we have committed to reducing CO₂ emissions across Scopes 1–3 by 55 % in absolute terms by 2030 compared with 2020. This interim goal is considerably more ambitious than our previous goal, which was to reduce Scope 3 emissions by 25 % per customer (compared with 2017) by 2030. As a result of our systematic efforts to reduce our Scope 1 and Scope 2 emissions, the majority (over 98 %) of our carbon footprint now occurs through the production and use of our products. We maintain a close dialog with our suppliers in order to reduce the emissions generated during production and to ensure the products manufactured consume less energy during the utilization phase.
4. We want to reach net zero by 2040 across all three scopes along the entire value chain. We want to cut emissions by at least 90 %, so that we only need to offset up to 10 %. This goal is also in line with the targets set out by the European Green Digital Coalition, of which Deutsche Telekom is a founding member.

As a general principle, where there are CO₂ emissions that we cannot avoid by using renewable energy, improving energy efficiency, or agreeing climate goals with suppliers, for example, we will offset these using compensatory measures that mean they are permanently removed from the atmosphere, such as through natural sinks in which natural ecosystems absorb greenhouse gases from the atmosphere. We have set ourselves the quality requirement for offsetting that we only use high-quality removal projects in accordance with Oxford category IV and V, i.e., the removal of carbon through short- and long-term storage.

We developed our Group-wide climate goals in line with the current scientific and political conditions. For the current targets, the SBTi once again confirmed in the reporting year that our climate protection goals contribute to compliance with the Paris Agreement even under its stricter new guidelines. We developed a Climate Target Transition Plan in 2023 that we will detail further in 2024 in accordance with the future requirements of the European Sustainability Reporting Standards (ESRS). The plan enables us to manage and monitor the success of our reduction measures internally. It also helps us to inform our stakeholders about our journey towards net zero emissions. The SBTi also gave a positive assessment of the targets set by our subsidiaries in the United States and Hungary. The national companies are taking different steps to achieve these targets. These include power purchase agreements (PPAs) for procuring electricity from specific sustainable sources, such as wind and solar power. At the end of 2023, we were obtaining 32.5 % of our electricity through these PPAs (prior year: 27.7 %). By 2025, we intend to increase this percentage in Europe to 50 % of our power consumption. Our aim is to actively support the sustainable production of electricity from renewal energies.

As approximately three-quarters of Scope 3 emissions are attributable to the supply chain, we established the Supply Chain Emission Reduction task force in the reporting year. It prioritizes suppliers by their relevance to our CO₂ emissions. The task force agrees targets and measures with the intention to define binding emission reduction agreements together with our suppliers. Suppliers also play an important role when it comes to reducing emissions from the utilization phase of the devices we lease or sell. Improving energy efficiency is one of the key levers here.

We calculate our CO₂ emissions across the Group in line with the Greenhouse Gas (GHG) protocol. The market-based method is used for Scope 2 emissions. The standard distinguishes between three CO₂ emissions categories (Scope 1, 2, and 3). The calculations for Scope 3 were partly based on assumptions, and the value for Scope 3 amounted to 10,476 kt CO₂e (prior year: 12,287 kt CO₂e) in the reporting year. This reduction partly resulted from methodology adjustments for upstream activities in particular. The following graphic visualizes the emissions of the different scopes resulting from our business activities, shown as CO₂-equivalent emissions (CO₂e emissions).

CO₂e emissions (Scope 1–3)

Deutsche Telekom Group in 2023 in % and kilotons (kt) of CO₂e

We will publish detailed information on the year-on-year development of data and the impact of the adjusted Scope 3 methodology on previous years in our 2023 CR Report.

We determine the effectiveness of our climate protection measures using key performance indicators (KPIs). The Renewable Energy KPI is an important metric for us. It shows how much of our Company’s overall electricity consumption is obtained from renewable energy sources, and has been 100 % across the Group since 2021. Direct procurement, guarantees of origin, own energy production, and PPAs are included in this calculation.

The Power Usage Effectiveness (PUE) metric serves as one indicator for the efficiency enhancement in our data centers. We determine this metric using the method recommended by the standard DIN EN 50600 for data centers, which takes the total energy consumed by data centers into account, not just that used to operate the servers. In 2023, the global PUE metric for our T‑Systems data centers was 1.53 (prior year: 1.59). Our most efficient highly available data center has a PUE of 1.24. In the reporting year, the European Commission honored the T‑Systems data center in Biere with the European Code of Conduct Award for significantly reducing its energy consumption.

The KPI for Energy Intensity for Deutsche Telekom (fixed-network and mobile entities) is shown in the following graphic. The KPI reflects our energy consumption in relation to the volume of data transmitted, thus demonstrating how our network’s energy efficiency has recorded positive growth. The result stands at 70 (prior year: 91).

Energy Intensity ESG KPI

Deutsche Telekom Group (fixed-network and mobile entities) in 2023

We are also applying our climate protection efforts to our mobility: Our goal within the Group is to progressively increase the proportion of electric vehicles in our fleet in order to have fully electric mobility in place as soon as possible. We committed to buying only electric company vehicles in Germany from 2023 onward, for example, and a policy to this effect came into force in January 2023. On the basis of this, almost 100 % of the company vehicles we ordered in the reporting year had an electric drive in Germany, apart from just two exceptions that were covered by the policy. We have also extended the retention period for company vehicles from three to four years. In addition, our subsidiary Comfort Charge provides e-mobility charging infrastructure in Germany. One target designed to support a nationwide charging infrastructure was to operate more than 250 rapid charging stations by the end of 2023. We only narrowly missed this target due to various factors, with approximately 230 rapid charging stations. The main reasons for this were local construction delays, late approvals, or missing power connections, which prevented us from setting up the remaining stations in 2023. They will be successively installed in 2024 so that we will quickly reach the threshold of 250 rapid charging stations. Both our own fleet and third-party vehicles can use the vehicle charging stations.

In order to effectively curb climate change, many relevant players must work together, which is why we participate in national and international associations and organizations, such as the Global Enabling Sustainability Initiative (GeSI) and Econsense. We are also working systematically on improving climate protection throughout our supply chain. Since 2016, the CDP supplier engagement rating has assessed how well companies have integrated the topic of climate protection into their supply chains. In 2022, we were awarded an A rating by CDP and included on its Supplier Engagement Rating Leader Board. The supplier engagement rating had not yet been announced for the reporting year at the time of the publication of this report. Our CDP Supply Chain Coverage ESG KPI indicates the degree to which our procurement volume was covered by our suppliers’ participation in the CDP Supply Chain Program in 2023. A total of around 51 % (prior year: over 52 %) of the procurement volume was covered in 2023 (excluding T‑Mobile US). In the reporting year, 294 suppliers took part in the program (prior year: 247).

Resource conservation

Our goal is to make our product portfolio increasingly sustainable. To achieve this, we take a holistic approach to resource conservation and are committed to the responsible use of resources along our entire value chain. We aim to make products and materials as durable as possible and to ensure they are always recycled at the end of their lifetimes. Also, by providing innovative, network-based solutions, we support our customers in reducing their own CO₂ emissions and contributing to climate protection.

Sustainable products are a key factor in competition for us. Using the Sustainable Revenue Share ESG KPI, we determine how much revenue we (excluding T‑Mobile US) generate from products that make a contribution to sustainability. Revenues for individual product clusters are partially determined using a percentage allocation based on assumptions. In 2023, this share amounted to almost 43 % (prior year: 42 %). We have recorded this indicator since 2014 using our own methodology, which we adapted in 2022. As previously, a product can only be assigned to the sustainable product portfolio provided it is highly likely that the product does not entail any of the seven risks defined in our methodology. The risk analysis covered the following issues: pollution involved in the manufacturing of ICT products, avoidable non-recyclable electronic waste, unethical working conditions, the use of conflict minerals during production, social exclusion, radiation and its impacts on health, and information security. Additionally, a product must offer at least one of five sustainability benefits. Reduced energy consumption, a reduction in CO₂ emissions, efforts to achieve a circular economy, a reduction in time required, and enabling social participation are taken into consideration for this. Cost savings are still considered as additional information. However, a cost benefit does not constitute a sustainability benefit in and of itself. Revenues from the rental of devices in the fixed network were included for the first time this year, making up around 1 percentage point of the total value. It is difficult to differentiate between data and voice revenues when taking mobile broadband revenues into account, which is why this is based on assumptions. Owing to the fact that the EU Taxonomy does not cover the major part of our business model at present, we are also reporting this KPI in parallel for the reporting year.

We will publish detailed information on the Sustainable Revenue Share ESG KPI in our 2023 CR Report.

The return, repair, and recycling of old devices should be a matter of course. By 2030, we want all of the fixed-network and mobile products we bring into circulation to be recycled at the end of their lifetimes. We are implementing measures to increase the return of used devices to achieve the goals we have set ourselves. We measure the progress we are making by recording the return ratios for the aforementioned product categories and the number of reconditioned devices. The return ratio for mobile devices was 25 % for the Group in 2023. More than 4.4 million fixed-network devices (customer premises equipment, CPE) were taken back across the Group in the reporting year. In the Germany and Europe operating segments, 38 % of the devices collected there were reconditioned for reuse. T‑Mobile US has a different calculation basis. There, the returned devices are sent to third parties who responsibly manage reuse, resale, and recycling. T‑Mobile US reports the percentage of recovered materials that were reused and recycled in its annual Corporate Responsibility Report. We also want our suppliers to make their devices and network technology circular by 2030. We ask suppliers to provide relevant information, including about the environmental impact of the production and operation of individual products (life-cycle analyses). We also evaluate information on energy efficiency, spare parts supply, including software updates, the use of recycled materials, and the relevant packaging solution – in particular with regard to eliminating single-use plastics.

In general, we work closely with manufacturers in many areas to make our product offering ever more sustainable. For example, we stepped up our strategic collaboration with Fairphone – a vendor specializing in sustainable smartphones – in the reporting year. In 2021, we introduced the Eco Rating methodology, in cooperation with four other European mobile communications operators. Eleven network operators are now using this rating methodology in 36 countries. More than 450 cell phone models from 23 vendors were evaluated by the end of 2023 in terms of their environmental impact throughout their entire life cycle. The score calculation methodology is regularly reviewed on the basis of technical advances and changes in the regulatory regime and adapted, if necessary. We use the Eco Rating to help our customers make more sustainable purchase decisions and motivate vendors to reduce the environmental footprint of their devices. We are also pursuing our goals in our packaging. Since mid-2022, all new branded products launched across Europe must meet the sustainability criteria laid down in our new packaging guideline. Packaging for smartphones that we source from our suppliers must also meet these criteria. We did not become aware of any violations of the packaging guideline by suppliers in the reporting year. We verify compliance with the criteria by means of regular factory audits.

We want to make the sustainability benefits of our products transparent for our customers. That is why we undertake testing procedures to obtain recognized environmental labels. For example, several routers and mesh devices are certified with the Green Product environmental label of the TÜV Rheinland testing service provider. The Blue Angel government environmental label was also awarded to the system for taking back cell phones operated jointly by Telekom Deutschland and Foxway Germany. We use our #GreenMagenta and #GoodMagenta labels for those of our products and initiatives that bring sustainability benefits. #GreenMagenta encompasses Deutsche Telekom products, services, projects, actions, and initiatives that make a particularly positive contribution to climate protection and the more responsible use of resources. #GoodMagenta describes projects, actions, and initiatives that make a positive contribution to overcoming social challenges in the digital world. We have set out strict rules for awarding these two labels. There must be proven sustainability benefits. The two labels are only awarded after completing a defined process, which also includes a comprehensive impact assessment. This process was validated by an audit performed by TÜV Rheinland in the reporting year. If there are clear disadvantages for society or the environment, #GreenMagenta or #GoodMagenta will not be awarded, despite any potential advantages. More than 45 products from Germany and some European national companies, such as T‑Mobile Austria in Austria, Hrvatski Telekom in Croatia, and Makedonski Telekom in North Macedonia, have already been awarded the labels. For example, we have labeled our green network in Germany, which has been operated with electricity from 100 % renewable energy sources since 2021, with #GreenMagenta, while our new MagentaTV Box G7, with a case made from biobased plastic and plastic-free packaging, also bears the label.

We will publish detailed information on this in our 2023 CR Report.

Conserving valuable resources is also a goal of the Green Pioneers initiative launched by our employees. Our Green Pioneers raise awareness among the workforce of resource efficiency in the workplace and also provide inspiration for our core business. In 2023, some Green Pioneers held courses on environmental issues for their colleagues, with more than 2,100 employees in total taking part. As part of the WeGrow employee development program, we planted around 1,000 trees and shrubs in collaboration with the Green Pioneers in the reporting year. We also used the Green Pioneers Day in the reporting year, marking the fifth anniversary of the initiative, to develop new ideas and goals for the future work of the community with the participants.

Environmental opportunities arising from the digital transformation

We can use our products, services, and activities to contribute to tackling many environmental and social challenges, as was made clear in a comparison with the 17 sustainability goals (SDGs) adopted by the United Nations. For instance, ICT solutions can help reduce resource consumption in agriculture and increase harvests, shape cities and mobility up for the future in terms of sustainability, stabilize power supply grids, or improve access to education and medical care – areas of application that offer market opportunities for our Company. In order to evaluate the concepts described in this NFS, it is important to also look to the opportunities digitalization opens up for sustainable development.

We use the Enablement Factor to measure our overall performance with regard to climate protection. For this ESG KPI, we calculate the positive CO₂ effects facilitated for our customers through using selected products. Relevant emissions generated by customers are generally taken into account. Rebound effects are taken into account based on studies and estimates by experts, where it is possible to do so with reasonable effort. We put this figure in relation to our own CO₂ emissions. According to this figure, the positive CO₂ effects facilitated for our customers in Germany were 378 % higher in 2023 than our own CO₂ emissions (enablement factor of 4.78 to 1). The year-on-year increase (enablement factor of 3.76 to 1) was mainly due to the substantial reduction in Scope 3 emissions. The usefulness of the KPI depends very much on the underlying assumptions, and the solution-based approach means double counting cannot be ruled out.

Enablement Factor ESG KPI

Deutsche Telekom Group in Germany in 2023

In addition, we are currently supporting the work of the European Green Digital Coalition (EGDC) to develop an industry standard for calculating emissions savings from ICT products. This standard is designed to increase transparency and credibility and lead to improved comparability when calculating savings. As soon as this calculation guideline has been finalized, we will adapt our own calculations and reporting to the new requirements.

Compliance with the EU Taxonomy transparency requirements

The EU Taxonomy is designed to promote investment flows from the finance sector to businesses that are involved in environmentally sustainable activities. The EU Taxonomy is therefore aimed at helping implement the European Green Deal. As a basis for this, the EU Taxonomy provides a binding definition of the environmental sustainability of activities and investments. The EU Taxonomy Regulation requires companies to report on these economic activities. In 2021 and 2022, criteria for the taxonomy environmental objectives “Climate change mitigation” (CCM) and “Climate change adaptation” (CCA) were initially defined in the EU legislation. In June 2023, criteria were adopted for the remaining four environmental objectives: “Water and marine resources” (WTR), “Circular economy” (CE), “Pollution prevention and control” (PPC), and “Biodiversity and ecosystems” (BIO). These new criteria were applied for the first time in 2023 financial year.

Under the EU Taxonomy Regulation, the first step is to ascertain the taxonomy-eligible economic activities of a company. These are activities that are covered by the EU Taxonomy and that therefore potentially contribute significantly to achieving the environmental objectives. The second step is to check whether these activities are taxonomy-aligned. An activity is defined as taxonomy-aligned if it meets the technical screening criteria for a significant contribution to at least one environmental objective listed in the Annexes to Delegated Regulations (EU) 2021/2139, (EU) 2022/1214, (EU) 2023/2485, and (EU) 2023/2486. At the same time, it must not do any significant harm to any of the other environmental objectives and must meet the minimum social standards (“minimum safeguards”) set out in Taxonomy Regulation (EU) 2020/852, which in particular require compliance with human and labor rights.

Deutsche Telekom is a company in the information and telecommunications industry. The following two economic activities are therefore relevant to our core business (taxonomy-eligible) in connection with the “Climate change mitigation” (CCM) environmental objective under the EU Taxonomy:

• Data processing, hosting and related activities (CCM 8.1)
• Data-driven solutions for GHG emissions reductions (CCM 8.2)

Since we also lease devices to our customers as part of our core business, the following economic activity, which is assigned to the “Circular economy” (CE) environmental objective, is also relevant for Deutsche Telekom:

• Product-as-a-service and other circular use and result-oriented service models (CE 5.5)

No economic activities relevant to the environmental objective “Climate change adaptation” (CCA) were identified in the 2023 financial year.

The EU Taxonomy does not currently include criteria for the economic activity “Provision and operation of electronic communication networks and services.” This means that most of our business model is not yet covered by the EU Taxonomy. As a result, the EU Taxonomy does not give us an opportunity to indicate our contribution to climate change mitigation in the area of fixed and mobile network build-out and operation. We are active in various business and industry associations to ensure that relevant and appropriate criteria are added to the EU Taxonomy to reflect our core activities in the area of fixed and mobile networks. Among other activities, we took part in the joint feedback process of the European Commission and the Platform on Sustainable Finance in 2023.

On the other hand, the EU Taxonomy does provide a list of cross-cutting activities outside of our core business that are relevant for our general corporate infrastructure, such as for fleet and facilities management and energy generation. In the 2023 financial year, Deutsche Telekom only carried out the following taxonomy-eligible cross-cutting activity for the environmental objective “Climate change mitigation” (CCM) to a financially material extent:

• Transport by motorbikes, passenger cars, and light commercial vehicles (CCM 6.5)

The three tables below provide an overview of our taxonomy-eligible and taxonomy-aligned economic activities for the reporting year. They break the figures down into both absolute values and the applicable percentage of Deutsche Telekom’s turnover, capital expenditure, and operating expenditure. As required by law, we will begin publishing disclosures on the taxonomy alignment of the economic activity “Product-as-a-service and other circular use- and result-oriented service models” (CE 5.5) for the 2024 reporting year.

Method for ascertaining taxonomy eligibility and alignment

When ascertaining the taxonomy-eligibility of economic activities, we focused on our core business activities taking cost-benefit aspects into account. There was a slight change to the application of the materiality assessment in the reporting year. In contrast to the prior year, we are therefore no longer reporting turnover and capital expenditure for 2023 for our Comfort Charge subsidiary, which offers charging solutions for electric vehicles, in connection with the taxonomy-eligible economic activity “Infrastructure enabling low-carbon road and public transport” (CCM 6.15).

Those activities identified as taxonomy-eligible were checked individually for their taxonomy alignment. However, proof of conformity for avoiding significant harm to the environmental objective “Climate change adaptation” (CCA) was provided comprehensively for all taxonomy-eligible activities, as we manage climate risks centrally at Group level. The only exception to this is the United States operating segment, where management of climate risks is still in the process of being established and therefore does not yet fully meet the requirements of the EU Taxonomy. No taxonomy-eligible activities were carried out to any significant extent in the United States operating segment in the reporting year. We monitor compliance with minimum social safeguards using a Group-wide management system.

To avoid significant harm to the environmental objective “Climate change adaptation” (CCA), checking for taxonomy alignment of all of the economic activities listed above requires an analysis of potential physical climate risks. We carried out a comprehensive analysis of physical climate risks in the reporting year as part of our risk management activities. The climate risk analysis was carried out using a recognized software platform based on the climate scenarios defined by the Intergovernmental Panel on Climate Change (IPCC). In connection with the taxonomy-eligible activities, no significant harm to the environmental objective “Climate change adaptation” (CCA) was identified, as individual local climate risks are minimized by existing mitigation measures.

The minimum social safeguards require a management system to monitor compliance with the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights, including the ILO Core Conventions and the International Bill of Human Rights. We have made an express commitment to the principles listed above. We perform human rights due diligence using a risk-based management system encompassing both the Group and our supply chain that we use to monitor compliance with social and environmental standards. We also maintain a process of trust-based dialog with employees’ representatives and trade unions. To prevent corruption and safeguard fair competition, Deutsche Telekom has established a compliance management system that is aligned with the company’s risk situation and is externally certified at regular intervals.

For further information on minimum social standards, please refer to the sections “Collaboration with employees’ representatives and trade unions,” “Connect the unconnected,” “Due diligence processes in the Group,” “Labor standards at our suppliers,” and “Compliance management system,” and to the 2023 CR Report.

Economic activities that are relevant to turnover

The taxonomy-eligible economic activity Data processing, hosting and related activities (CCM 8.1) covers “Storage, manipulation, management, movement, control, display, switching, interchange, transmission or processing of data through data centers, including edge computing.” Of our Group-wide business activities, our Systems Solutions operating segment (T‑Systems) comes under this sector. As well as data centers operated by T‑Systems, we also included data centers operated on co-locations in the assessment.

Only data centers that comply with the European Code of Conduct for Energy Efficiency in Data Centres can be considered as making a substantial contribution to climate change mitigation in accordance with the EU Taxonomy. Five of the eight locations directly managed by T‑Systems comply with this code. As we have not yet verified compliance with the Code of Conduct through external audits in accordance with EU Taxonomy requirements, we are not classifying the data centers used for economic activity CCM 8.1 as taxonomy-aligned in the reporting year. In addition, in accordance with the EU Taxonomy, the global warming potential of refrigerants that need to be used in data center cooling systems may not exceed a value of 675 GWP (Global Warming Potential). This criterion is currently met by one data center that was fully refurbished in 2022. The other sites currently still use industry-typical refrigerants that meet the criteria of the EU directive on fluorinated greenhouse gases. We will make the change to taxonomy-aligned refrigerants as part of the regular refurbishment program for our data centers. We will carry out a detailed review of the individual data centers’ compliance with the criteria for preventing significant harm to the remaining environmental objectives in each case as soon as they fulfill the aforementioned climate change mitigation requirements in full.

We associate those solutions and products in the Group that, in accordance with the description in the EU Taxonomy, are “predominantly aimed at the provision of data and analytics enabling GHG emission reductions” with the economic activity Data-driven solutions for GHG emissions reductions (CCM 8.2). These are solutions and products that have clear potential to enable users to save CO₂ emissions. When selecting them, we take into account solutions and products that are incorporated into our Enablement Factor and Sustainable Revenue Share ESG KPIs, and/or that have been awarded our #GreenMagenta label. We thus identified the following taxonomy-eligible services within our Group-wide business activities:

• Business-related video conferencing solutions (saves travel-induced CO₂ emissions)
• Workplace and cloud solutions (increases energy efficiency by improving server utilization)
• IoT solutions (saves CO₂ emissions)

We provide these services to a significant financial extent in the Germany operating segment, in our major national companies in the Europe operating segment, and local business units in the Systems Solutions operating segment.

The technical screening criteria require a life-cycle analysis as evidence of the taxonomy alignment of the solutions in question. These must show that a solution results in substantial greenhouse gas emission reductions both over and beyond its entire life cycle in comparison with the relevant reference solution available on the market. We understand reference solutions to be alternative solutions that would typically be used in a company in our footprint markets. This assumes that the companies are aligned with best practices. The technical screening criteria do not stipulate a specific threshold for “substantial” reductions in greenhouse gases in comparison with the reference solution. In the prior year, we therefore defined a threshold based on scientific findings; greenhouse gas reductions resulting from taxonomy-eligible solutions exceeding this threshold value are thus considered “substantial.” The requisite life-cycle analyses have been prepared for business-related web conferencing solutions and for the cloud solutions Future Cloud Infrastructure, Open Telekom Cloud, and SAP Cloud Services. Deutsche Telekom offers a number of IoT solutions that can reduce CO₂ emissions. As we have not yet prepared any life-cycle analysis to demonstrate the effects of these solutions, they are not reported as taxonomy-aligned for the reporting year.

In contrast to the prior year, the taxonomy-eligible business-related web conferencing solutions were analyzed by comparing them with hybrid meetings to take account of market trends. Significant greenhouse gas savings were demonstrated. For instance, compared with hybrid meetings, virtual-only meetings reduce greenhouse gas emissions by around 62 % (small meetings) or 32 % (large meetings).

Of the workplace and cloud solutions covered by the life-cycle analysis, the Future Cloud Infrastructure, including the SAP Cloud Services run on this infrastructure, reduced greenhouse gas emissions by around 9.7 % in comparison with decentralized data centers operated by our customers themselves. However, this effect was below the threshold value defined in the prior year. Future Cloud Infrastructure and SAP Cloud Services are thus reported as non-taxonomy-aligned for the 2023 financial year. The life-cycle analysis also found that using the Open Telekom Cloud reduced greenhouse gas emissions by 47 % compared with the reference scenario. The reference scenario is based on the assumption that our customers use their own, decentralized server infrastructure for storing and processing data rather than the cloud solution. We therefore classify the Open Telekom Cloud and all web conferencing solutions included in a life-cycle analysis as taxonomy-aligned.

For the aforementioned solutions, we exclusively use infrastructure located in Germany. The requirements for the “Circular economy” (CE) conform to current EU legislation, which we implement as part of our environment management activities at our EU sites. We also require our business partners to provide evidence that the hardware used in the data centers is actually reconditioned or recycled at the end of its service life.

We record leases of devices to business customers and consumers in the Germany operating segment under the taxonomy-eligible economic activity Product-as-a-service and other circular use and result-oriented service models (CE 5.5). As required by law, we will begin publishing disclosures on the taxonomy alignment of this economic activity for the 2024 reporting year.

Cross-cutting activities

Deutsche Telekom has a vehicle fleet that includes both company cars and service vehicles. The economic activity Transport by motorbikes, passenger cars, and light commercial vehicles (CCM 6.5) is therefore relevant as a cross-cutting activity that applies to the purchase, the lease, and the operation of vehicles of the classes M1 (passenger cars) and N1 (light commercial vehicles with a maximum weight of 3.5 t). As we are pushing forward with the transition to a fully electric fleet, especially in Germany and the EU, some of the new vehicles purchased already meet the CO₂ thresholds set in the EU Taxonomy. We were also able to provide evidence of the alignment of these vehicles with the other key EU Taxonomy requirements, which are based on current EU legislation for new vehicles. As the choice of tires is left to the vehicle users themselves, we could not provide evidence of the taxonomy alignment of tires for the reporting year. We therefore report capital expenditure associated with our vehicle fleet as non-taxonomy-aligned.

Calculation of the Taxonomy KPIs

The total Group figures used as the basis for calculation in accordance with the EU Taxonomy in the reporting year amounted to EUR 112.0 billion in turnover (2022: EUR 114.2 billion), EUR 24.3 billion in capital expenditure (2022: EUR 38.5 billion), and EUR 0.4 billion in operating expenditure (2022: EUR 0.4 billion). The definition of turnover according to the EU Taxonomy is equivalent to net revenue in our consolidated income statement contained in the consolidated financial statements. The relevant capital expenditure was determined on the basis of the consolidated statement of financial position contained in the consolidated financial statements and is determined as the sum of additions under property, plant and equipment, intangible assets (excluding goodwill), and right-of-use assets. In line with the EU Taxonomy requirements, the disclosures on capital expenditures do not form part of a capital expenditure (capex) plan. The EU Taxonomy defines costs that relate to research and development; building remediation measures; short-term leases; maintenance and repair; and any other direct expenditures relating to the day-to-day maintenance of property, plant and equipment as relevant operating expenditure.

The disclosures on taxonomy eligibility and taxonomy alignment in terms of turnover, capital expenditure, and operating expenditure are directly assigned at the level of product groups to either the operation of data centers in accordance with economic activity CCM 8.1, the provision of ICT solutions in accordance with economic activity CCM 8.2, and lease of devices in accordance with economic activity CE 5.5. We do not generate any turnover with cross-cutting activities. Exclusively capital expenditure was assigned to economic activity CCM 6.5.

To avoid double counting within the meaning of the EU Taxonomy, we have almost exclusively allocated taxonomy-eligible cloud solutions from T‑Systems to economic activity CCM 8.2; we only report one solutions portfolio under economic activity CCM 8.1, as this is not taxonomy-eligible in accordance with economic activity CCM 8.2. The lease of devices to our customers in accordance with economic activity CE 5.5 does not overlap with the solutions that fall under economic activities CCM 8.1 and CCM 8.2. In addition, capital and operating expenditures were only assigned to cross-cutting activity CCM 6.5 if a direct correlation with the reported turnover-relevant economic activities was excluded.

As the EU Taxonomy does not yet adequately cover our core business, an aggregate view of the taxonomy eligibility of all economic activities results in very low proportions again in 2023 of turnover (2.5 %; 2022: 1.8 %), capital expenditure (2.1 %; 2022: 0.8 %), and operating expenditure (33.2 %; 2022: 33.5 %) for the Deutsche Telekom Group. The changes against the prior year relate mainly to the first-time disclosure of taxonomy-eligible turnover and capital expenditure from the lease of devices in accordance with economic activity CE 5.5. The largest proportion of taxonomy-eligible operating expenditure can be allotted to property, plant and equipment (76.4 %; 2022: 69.6 %), followed by right-of-use assets (15.5 %; 2022: 12.3 %) and intangible assets (8.0 %; 2022: 18.1 %).

The largest proportion of taxonomy-eligible turnover, capital expenditure, and operating expenditure can be allotted to economic activity CCM 8.1: based on the relevant total figures for the Group, taxonomy-eligible business activities for data processing and hosting represented 1.0 % of turnover (2022: 1.0 %), 0.9 % of capital expenditure (2022: 0.4 %), and 19.1 % of direct expenses (2022: 19.0 %). To enable a statement of taxonomy eligibility at segment level, too, we also report supplementary KPIs for the Systems Solutions operating segment. The taxonomy-eligible portion, determined using the same calculation logic, is 35.0 % (2022: 36.0 %) in relation to net revenue of the segment, and 66.0 % (2022: 62.6 %) in relation to capital expenditure.

In second place, with 0.8 % (2022: 0.8 %) taxonomy-eligible turnover, is economic activity CCM 8.2, to which the business-related web conferencing solutions make a substantial contribution. We also generated relevant taxonomy-eligible turnover from leases of devices, which we added as new economic activity CE 5.5 in the reporting year due to the expanded taxonomy criteria and amounted to 0.6 % of the Group’s total turnover. Economic activity CE 5.5 is additionally associated with relevant capital expenditure of 0.7 % based on the total figures for the Group. Cross-cutting activity CCM 6.5 has only a supporting function for Deutsche Telekom’s core business.

In the 2023 financial year, the taxonomy-aligned proportion of all economic activities of the Deutsche Telekom Group was 0.2 % of turnover (2022: 0.5 %), 0.0 % of capital expenditure (2022: 0.0 %), and 0.5 % of operating expenditure (2022: 0.4 %). The taxonomy-aligned proportion results from economic activity CCM 8.2. The decrease in taxonomy-aligned turnover is largely due to an optimization of the reference scenario with which emissions savings from our cloud solutions are compared. For the Systems Solutions operating segment, the taxonomy-aligned proportion of turnover was 3.6 % (2022: 12.3 %), 0.0 % of capital expenditure (2022: 0.1 %), and 0.0 % of operating expenditure (2022: 0.8 %).

Taking the Future Cloud Infrastructure and SAP Cloud Services additionally into account, which reduced greenhouse gas emissions by 9.7 % according to the life-cycle analysis, the taxonomy-aligned proportion for the Group would come in at 0.5 % (turnover), 0.0 % (capital expenditure), and 0.5 % (operating expenditure). For the Systems Solutions operating segment, including Future Cloud Infrastructure and SAP Cloud Services would lead to a proportion of 11.5 % (turnover), 0.0 % (capital expenditure), and 0.4 % (operating expenditure).

Given the high standards laid down in the technical screening criteria, the transformation is expected to be a lengthy process. We plan to increase the taxonomy alignment of our economic activities on a continual basis.

For further information on turnover, please refer to the consolidated income statement in the consolidated financial statements or to Note 20 “Net revenue” in the notes to the consolidated financial statements.

For further information on capital expenditure, please refer to Notes 6 “Intangible assetsIntangible assets,” 7 “Property, plant, and equipment,” and 8 “Right-of-use assets” in the notes to the consolidated financial statements. The capital expenditure given here also includes the additions of all non-current assets and disposal groups held for sale in the 2023 financial year.

For further information on operating expenditure, please refer to Note 26 “Other operating expenses” in the notes to the consolidated financial statements.