ESRS S2 – Workers in the value chain

ESRS 2 SBM-3 S2 – Material impacts, risks, and opportunities and their interaction with strategy and business model

The table below shows the material impacts of our business activities on society and the environment that we have identified through the double materiality assessment. We included the findings of our regular risk analysis in accordance with the German Act on Corporate Due Diligence in Supply Chains (Lieferkettensorgfaltspflichtengesetz – LkSG), which we conducted in 2023, in the assessment.

We provide overarching information on how material impacts, risks, and opportunities interact with our strategy and business model in the “ESRS 2 SBM-3 – Material impacts, risks, and opportunities and their interaction with strategy and business model” section.

Workers in our value chain who are affected by material impacts include the following:

• All workers working for direct and indirect suppliers in the upstream value chain
• Workers who are particularly vulnerable to negative impacts whether due to their inherent characteristics or to the particular context, such as trade unionists, migrant workers, home workers, women, or young workers

They do not include:

• Workers who work at Deutsche Telekom locations but are not members of our own workforce. These include self-employed workers and workers provided by third-party entities primarily engaged in ‘employment activities’
• Workers working for entities in our downstream value chain (e.g., those involved in the activities of logistics or distribution providers, franchisees, retailers)
• Workers working in the operations of a joint venture or special purpose vehicle in which Deutsche Telekom holds investments

In section “ESRS S1‑1 – Policies related to own workforce,” we explain in the context of describing our Code of Human Rights how we have identified whether workers with specific characteristics or in certain working environments and performing specific tasks may be at greater risk.

ESRS S2‑1 – Policies related to value chain workers

We assess all material negative impacts on society and the environment related to value chain workers. Management of these impacts and the resulting requirements are embedded in our procurement practices, which we explain in the following.

With its Supplier Code of Conduct, Deutsche Telekom excluding T‑Mobile US requires its suppliers to act in accordance with the principles and values set out in the Code of Conduct (see section “ESRS G1‑1 – Business conduct policies and corporate culture”) and the Code of Human Rights (see section “ESRS S1‑1 – Policies related to our own workforce”) and to implement them along their value chains. Both the Code of Human Rights and the Supplier Code of Conduct are based on the requirements of the LkSG.

The Supplier Code of Conduct is a component of Deutsche Telekom’s general purchasing terms and conditions of purchase, but is not intended to replace the laws and regulations in force in any country where our suppliers operate. It seeks to encourage and respect these laws and regulations and ensure that they are faithfully and effectively enforced. In accepting our Supplier Code of Conduct, our suppliers make a commitment to respect internationally applicable human rights and, where necessary, to take effective actions to remedy human rights abuse of any kind and fair labor violations. They also agree to disclose any such incidents, including potential violations, and to cooperate in investigations into such happened or alleged violations. Our principles and expectations formulated in the Supplier Code of Conduct include the following:

• Protection of freedom of association and the right to collective bargaining
• Promotion of occupational health and safety at work
• Prohibition of unequal treatment in employment
• Payment of adequate living wage
• Prohibition of child labor, forced labor and all forms of slavery such as trafficking in human beings
• Prohibition of the use of raw materials that are the subject of conflict

With Deutsche Telekom AG’s Supplier Code of Conduct, we have made a commitment to ensure compliance with the following internationally recognized standards:

• Conventions of the International Labour Organization (ILO) and the Organization for Economic Cooperation and Development (OECD)
• The United Nations’ Universal Declaration of Human Rights (UN)
• UN Global Compact
• ILO Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy (MNU Declaration)
• United Nations Guiding Principles on Business and Human Rights (Ruggie Principles)

T‑Mobile US does not fall under the scope of the LkSG and has its own Code of Conduct (see section “ESRS G1‑1 – Business conduct policies and corporate culture”), Human Rights Statement, and Supplier Code of Conduct, which also addresses the above-mentioned principles and expectations. In addition, the T‑Mobile US Responsible Sourcing Policy applies to purchases of goods that include raw materials potentially sourced from conflict and high-risk regions.

All persons who identify compliance issues along our supply chain with respect to the relevant supplier codes of conduct can report their observations through the channels described in detail in section “ESRS S2‑3 – Processes to remediate negative impacts and channels for value chain workers to raise concerns”. If we become aware of a violation of the requirements laid down in Deutsche Telekom’s Supplier Code of Conduct, we have a risk incident process in place in accordance with the LkSG, which we describe in the following. The information we receive is incorporated into the regular LkSG risk analysis. This analysis is part of risk management and serves to identify human rights and environmental risks, including those at our direct suppliers. The information on the LkSG risk processes presented in this topical standard refers exclusively to the approach pursued by Deutsche Telekom’s central procurement organization. T‑Mobile US performs a risk assessment using its own methodology.

We provide information on T‑Mobile US’ entity-specific risk assessment in section “ESRS S2‑4 – Taking action on material impacts on value chain workers, and approaches to managing material risks and pursuing material opportunities related to value chain workers, and effectiveness of those actions.”

Responsibility for sustainability in procurement lies with the Board of Management department for Finance and the Group’s procurement functions. Other functional units and sustainability management provide topic-specific support.

In section “ESRS S2‑4 – Taking action on material impacts on value chain workers, and approaches to managing material risks and pursuing material opportunities related to value chain workers, and effectiveness of those actions,” we address cases in which the risk analysis to be carried out regularly in accordance with the LkSG has revealed that there are compliance risks related to the aforementioned requirements and standards in the upstream value chain, and explain the actions derived from these findings.

ESRS S2‑2 – Processes for engaging with value chain workers about impacts

We (Deutsche Telekom excluding T‑Mobile US) regularly review the working conditions at our suppliers’ production sites within the scope of audit programs. To do this, we ask workers in the upstream value chain to incorporate their perspectives into our due diligence process as part of the mobile workers’ surveys. This gives our suppliers’ employees an opportunity to provide anonymous information about the social and ecological situation at their company. The surveys are primarily used to gain an impression of the local working conditions in order to then initiate further actions as needed, such as specific on-site reviews (social audits). The social audits are conducted by external auditors. T‑Mobile US has not put a process in place to take into account the perspectives of the workers in the upstream value chain. However, the company does conduct audits of suppliers as needed in order to review the supplier requirements.

We focus our audit activities on strategically important and particularly risky suppliers. They are audited regularly. This is how we obtain transparency about the risks in our supply chain. If production facilities are outsourced, their operators – and therefore indirect suppliers – are also audited.

The social audits are conducted within the framework of our cooperation with the Joint Alliance for CSR industry initiative (JAC, formerly Joint Audit Cooperation), which comprises 29 globally active telecommunications companies (Deutsche Telekom excluding T‑Mobile US). This alliance enables us to cover a larger number of relevant suppliers in our supply chain. At our suppliers, labor and social standards are audited this way.

ESRS S2‑3 – Processes to remediate negative impacts and channels for value chain workers to raise concerns

If it is known that suppliers have violated specific human rights or environmental regulations, the risk incident process in place at Deutsche Telekom excluding T‑Mobile US provides for the following. In the first step, the central procurement organization verifies the plausibility of the suspected case as part of an ad hoc risk analysis and, if the result is positive, forwards it to an expert committee. This committee comprises representatives from GCR, Law & Integrity, and Procurement and is coordinated by the corporate procurement organization. If the committee decides to obtain a statement from the supplier concerned, it contacts the supplier without delay in the second step of the process. Where the violation of a human right or environmental obligation is confirmed, we may require the supplier concerned, if necessary with support from Deutsche Telekom, to define mitigation measures and agree deadlines for their implementation with us. If the steps taken prove to be insufficient, the expert committee escalates the case to the “LkSG Risk Board.” If there is a risk that the supplier will not meet the requirements, the expert committee can recommend the temporary suspension of business relations. If the violation is severe or cannot be ended, then termination of the business relationship may be considered as a last resort.

Where indirect suppliers infringe the rules, we likewise seek contact with our direct suppliers that have a business relationship with the indirect suppliers, as we ourselves do not have a contractual relationship with them. We are committed to working with all parties involved to create an approach for preventing, eliminating or minimizing human rights violations, including for indirect suppliers, and to implement this in a spirit of partnership.

T‑Mobile US expects its suppliers to monitor their compliance with the Supplier Code of Conduct. They are expected to report any concerns or suspected violations of the requirements of the Supplier Code of Conduct through the T‑Mobile US Integrity Line and to promptly remediate any violations that are identified. T‑Mobile US reserves the right to audit suppliers to confirm that they comply with the supplier requirements. Violations of the requirements of the Supplier Code of Conduct may jeopardize the business relationship with T‑Mobile US, up to and including termination of that relationship.

Deutsche Telekom’s suppliers must give their workers effective processes and a safe environment to provide their grievances and complaints and feedback in accordance with the relevant supplier codes of conduct. We expect our suppliers to regularly inform their employees about the grievance mechanisms, train them how to use them and regularly review the reporting procedures. Additionally, they are expected to regularly document the progress made in clarifying the allegations made and resolving the reported issues. The grievance mechanisms must be accessible and include an option to report anonymously where reasonable or possible. Workers and/or their representatives must be able to openly communicate and share ideas and concerns with management regarding working conditions and management practices without fear of discrimination or retaliation.

We describe our strategies for protecting individuals against retaliation in section “ESRS G1‑1 – Business conduct policies and corporate culture.”

Furthermore, our suppliers must inform their workers about how to use Deutsche Telekom’s TellMe whistleblower portal or T‑Mobile US’s Integrity Line, both of which are publicly available. If a supplier does not have its own complaints mechanism, this information is sufficient.

For more information on the whistleblower mechanism, see section “ESRS G1‑3 – Prevention and detection of corruption and bribery.”

The contracts entered into with our suppliers and the supplier codes of conduct make explicit reference to TellMe and Integrity Line and provide a link to these channels, which means that all contracting parties are aware of and have access to the complaints mechanism.

For more information on how availability of the channels is supported, see sections “ESRS S1‑3 – Processes to remediate negative impacts and channels for own workforce to report concerns” and “ESRS G1‑1 – Business conduct policies and corporate culture.”

We also receive information about potential grievances in the upstream value chain (Deutsche Telekom excluding T‑Mobile US) through the audits described in section “ESRS S2‑2 – Processes for engaging with value chain workers about impacts” as part of the multi-sector JAC initiative or through reports in the media.

No severe human rights incidents connected to workers in the upstream value chain (e.g., forced labor, human trafficking, or child labor) were reported through the aforementioned channels in the reporting year.

We describe how the grievances raised are tracked and monitored in section “ESRS G1‑3 – Prevention and detection of corruption and bribery.” We provide information on the effectiveness of our grievance mechanism related to reports from workers in the upstream value chain in section “ESRS S1‑3 – Processes to remediate negative impacts and channels for our own workforce to report concerns.”

ESRS S2‑4 – Taking action on material impacts on value chain workers, and approaches to managing material risks and pursuing material opportunities related to value chain workers, and effectiveness of those actions

As part of the LkSG management system, we conduct regular risk analyses for the own business operations of the consolidated Group companies (Deutsche Telekom excluding T‑Mobile US) and their direct suppliers. We also perform ad hoc risk analyses of suppliers about whom we have substantiated knowledge of misconduct, as described above.

The LkSG risk analyses include information from internal and external sources. These include publicly available reports on country and industry risks, information from our existing management processes, grievance mechanisms, employee surveys, or audits. In addition, we make use of the knowledge of internal and external human rights experts. The information is checked for plausibility and prioritized. Thus, we have been preparing an annual risk matrix for our own business areas and for suppliers. A company’s own business activities are defined in § 2 (6) of the LkSG as “any activity of the company to achieve its business objective” and are the same as Deutsche Telekom’s “own business activities” referred to consistently elsewhere in the Annual Report. The results of the risk matrix are adopted by the Board of Management. They form the basis for deriving further actions.

In the case of selected high-risk, strategically important suppliers, we perform additional supplier assessments over and above this risk analysis. We use the EcoVadis platform throughout the Group for this purpose. This platform enables us to assess and monitor the environmental, social and governance practices of companies worldwide.

As a U.S.-listed company, T‑Mobile US conducts its own enterprise risk assessments according to its own methodology, the results of which it regularly reports to the relevant bodies, including representatives of Deutsche Telekom AG. Additionally, before T‑Mobile US selects suppliers, it utilizes a centralized third-party risk management process to screen potential suppliers for human rights violations and environmental risks, among other things. T‑Mobile US also continuously subjects its suppliers to supplier risk assessments adapted to their risk profile and reserves the right to audit suppliers to confirm compliance with its Supplier Code of Conduct.

In 2023, we identified risks and human rights violations at our suppliers in connection with working conditions, equal treatment and equal opportunities for all, as well as other work-related rights, as part of the LkSG risk analysis. We assessed the risks based on various criteria, taking into account, e.g., the extent to which our suppliers contribute to the emergence of these risks as a result of their business activities. We have prioritized the following risks at our direct suppliers for follow-up: “Disregard for occupational safety and work-related health hazards,” “Destruction of natural living conditions through pollution,” and “Prohibition of unequal treatment in employment.” We also know from press reports that there are human rights and environmental risks associated with the extraction of raw materials for the production of telecommunications terminal equipment as well as with civil engineering works. We have therefore developed industry-specific measures for both civil engineering and the procurement of raw materials that have verifiably been extracted in conflict or high-risk regions. We already implemented most of these in 2024.

We did not classify as high any risks that we identified in connection with collective bargaining, freedom of association and forced labor based on the results of the LkSG risk analysis in 2023. As part of the 2024 LkSG risk analysis, we prioritized risks related to the topics of “Forced labor at lower levels of the supply chain” and “Violation of freedom of association” at suppliers in the ICT and automotive sectors (fleet suppliers) and started developing further actions.

In the following, we describe the prevention and mitigation measures that we (Deutsche Telekom excluding T‑Mobile US) have taken to address the prioritized risks identified in the 2023 LkSG risk analysis up to and including 2024. As a matter of principle, we have contacted all high-priority direct suppliers and discussed our human rights and environment-related expectations with them. Our dialogue with suppliers serves to raise awareness and can therefore avoid risks and violations.

Our influence is considerable when it comes to sourcing products for our own brands (e.g., T Phone and T Tablet). For this reason, we (Deutsche Telekom excluding T‑Mobile US) took the following measures during the reporting period to mitigate negative impacts on workers in the upstream value chain when sourcing own-brand products manufactured using raw materials extracted in conflict or high-risk regions:

• Dialogues to raise supplier awareness of risks related to the extraction of raw materials
• Analysis of products to determine whether they contain raw materials from conflict and high-risk regions or a proportion of raw materials from certified smelters
• Defining processes and responsibilities for reducing risk

We completed these process stages at the end of June 2024. Regardless of whether they are our own or third-party brand products, our technical requirements for mobile devices additionally include the requirement that conflict minerals must not be used. If this is not possible for technical reasons, we require our suppliers to make the mineral supply chain transparent by using the Conflict Minerals Reporting Template (CMRT) developed by the Responsible Minerals Initiative (RMI).

The annual audits conducted as part of the JAC industry initiative also help to minimize negative impacts associated with the working conditions at the production sites of ICT suppliers. We also include suppliers at lower levels of the supply chain that produce or offer ICT hardware. As the production sites of most of the suppliers audited as part of the JAC audits are in Asia, the audits primarily happen there. Building on this, we concentrated in the reporting period on developing specific mitigation measures in a JAC working group, particularly in connection with working conditions at the locations of ICT suppliers. These actions include measures such as close collaboration with suppliers and the creation of greater transparency in the ICT supply chain. Through our involvement in networks and associations, such as the UN Global Compact, econsense, and the Global enabling Sustainability Initiative (GeSI), we also want to help ensure that the ICT industry does a better job of implementing sustainability requirements in the global supply chain over the long term. That is why we exchange information on best practices and pool resources for improving labor standards as part of the initiatives.

U.S. law requires companies to conduct due diligence on the source of conflict minerals necessary to the functionality or production of products that they manufacture or contract to manufacture. The T‑Mobile US Responsible Sourcing Policy outlines that suppliers must source conflict minerals responsibly, either from recycled or scrap sources or from smelters or refiners that have completed or are progressing towards completing an audit by a recognized third-party verification program. Suppliers are required to conduct their own due diligence into the source and chain of custody of any conflict mineral used in products or components supplied to T‑Mobile US. They must provide full transparency of the mineral supply chain, using a verifiable traceability system such as the RMI Conflict Minerals Reporting Template (CMRT). Additionally, suppliers must adopt a conflict minerals policy and supplier due diligence practices.

To mitigate negative impacts on workers in the field of civil engineering works in the optical fiber rollout in Germany, we have defined special contractual terms for our business partners in this industry. These include, for example, the stipulation that work may not be subcontracted from subcontractor to sub-subcontractor. This clause helps to avoid complex subcontracting chains that can increase the risk of human rights violations. In addition, safety and health inspectors monitor mandatory compliance with occupational safety and environmental protection regulations during construction site inspections, using a set of guidelines that has been aligned with the LkSG requirements since 2024. Moreover, we audit civil engineering suppliers and have also been factoring the LkSG requirements into these audits since 2024.

During the reporting period, we published an informational bulletin for our German-speaking civil engineering suppliers on our website for the first time. In this we draw the attention of our direct suppliers to their obligation to contractually ensure that employment contracts are drawn up and that workers in the upstream value chain, especially migrant workers, are able to understand the text of the contract. To minimize negative impacts on the workforce, we also expect our suppliers in the civil engineering industry to comply with the following principles when subcontracting.

Ensuring fair pay:

• Payment of fair wages, at the very least in accordance with statutory and industry-specific minimum requirements and standards, including payment of all social security contributions
• Correct payment of allowances and overtime work
• Pay slip transparency for employees, taking account of language barriers

Reduced risk of accidents:

• Preparation of the legally required threat assessment and implementation of the occupational health and safety actions to be developed from this
• Provision (free of charge) of the safety equipment needed for the specific threat
• Regular training and instruction material

Ensuring other work-related rights, for example compliance with the ban on exploitative or involuntary labor:

• No retention of identity documents
• Compliance with statutory working time
• Adequate, decent housing
• No threats or use of physical force or violence

To raise awareness for human rights-related risks in civil engineering, we have shown workers on construction sites how to report anything out of the ordinary, e.g., by handing them special business cards. Workers can report information to Deutsche Telekom via TellMe using a QR code printed on them: We also introduced web-based training for workers in civil engineering during the reporting period. This is intended to raise awareness for industry risks in civil engineering and provide information about processes with which they can be minimized.

Since most of the civil engineering projects are based in Germany, the focus of our actions is also there. They are geared towards construction site employees and their management in the upstream value chain, but also towards our own workforce. Large-scale civil engineering and infrastructure projects generally require a large number of workers, which is why migrant workers play an important role in the industry. Migrant workers are considered a vulnerable group who may be exposed to precarious employment and working conditions.

We review the effectiveness of the above-mentioned mitigation and prevention measures once a year or on an ad hoc basis as part of the LkSG risk process. We do this by evaluating predefined metrics that we developed when we drafted the individual actions. The effectiveness of the actions that followed from the 2023 LkSG risk analysis and were implemented in 2024 will be reviewed by the relevant departments in early 2025.

As an overarching action in connection with our own practices, we have incorporated, e.g., the LkSG obligations into the procurement policy and the general terms and conditions for suppliers of Deutsche Telekom. The procurement policy emphasizes the importance of sustainability in procurement. In addition, our procurement employees are continuously informed about the LkSG requirements through mandatory training courses so that they can comply with them. Where possible, we track the attendance rate to monitor the effectiveness of this action. We have also published a web-based training course for suppliers on Deutsche Telekom’s website.

When selecting suppliers, we attach great importance to ensuring that our suppliers are familiar with our sustainability requirements as set out in the Supplier Code of Conduct. As part of the selection process, we also review the risk status of selected suppliers, including by using external data. This may result in no order being placed or no contract being entered into. In the course of tenders, we also weight sustainability criteria alongside quality and cost criteria, wherever possible. These include our suppliers’ carbon emissions and, for certain product groups, respect for human rights. This also creates a strong incentive for suppliers to take greater account of sustainability and to offer more sustainable products and services.

As part of the introduction of the LkSG management system, we created the new role of LkSG officer and established an LkSG Risk Board.

Further information on the monitoring of our LkSG management system by the LkSG officer can be found in the section “ESRS S1‑1 – Policies related to our own workforce.”

In addition, it is not possible to allocate human and financial resources for the management of the described measures with any degree of accuracy due to the complexity of our business activities. As a rule, all actions are implemented using the budgets of the individual units and normally do not require significant operating or capital expenditure.

For more information, please also refer to other Deutsche Telekom publications on human rights on our website, e.g., the LkSG Annual Report and the reports to the supervisory authority in accordance with the LkSG.

ESRS S2‑5 – Targets related to managing material negative impacts, advancing positive impacts, and managing material risks and opportunities

We monitor the effectiveness of our policies and actions related to the improvement of working conditions, equal treatment and equal opportunities, and other work-related rights in the upstream value chain through the LkSG risk process described in detail in this topical standard. Compliance with T‑Mobile US’s human rights policy and Supplier Code of Conduct is continuously monitored; TellMe and Integrity Line are used to record violations of supplier requirements. Over and above this, we have not defined any specific time-bound or outcome-based targets that apply to the entire Group.