ESG risks

Risks in the areas of environment, social and governance can have a significant impact on the net assets, financial position or income situation. ESG risks affect various areas of the risk categories established in DB Group and are recorded and managed by the relevant departments.

ESG factors have become a key factor in competition, both in mode of transport comparisons and within sectors such as logistics. If transformation is too slow, there is a threat of a loss of competitive advantage or competitiveness. DB Group is therefore working on extensive transformation programs.

At the same time, a leading role in ESG also offers extensive opportunities for DB Group, such as from the climate-­related advantages of rail transport compared to other modes of transport, as anchored in the Strong Rail strategy.

Environmental management

An elementary component of the Group-wide environmental management system according to DIN ISO 14001 is an opportunity and risk assessment. It is the starting point for DB Group’s environmental risk prevention. Since 2023, the precautionary principle has been supplemented by the risk management of due diligence obligations along our supply chains. At the same time, it is part of our strategy to use the (natural) resources of our economic activity sparingly (resource conservation targets).

Climate-related opportunities and risks

Climate-related transitory opportunities and risks associated with the transition to a decarbonized economy and risks associated with climate change are recorded in our RMS and are reported in the affected risk categories if certain threshold values and probabilities of occurrence are exceeded. As part of RMS and our mid-term planning, climate risks are treated like other risks.

Through the use of scenario analyses, for example as part of the PIK study and the strategic and operational further development of climate resilience management, DB Group is paving the way for forward-looking management of acute and chronic physical risks related to climate change. In 2021, we commissioned another external study that identified physical and transitory risks in accordance with the TCFD recommendations in an initial impact analysis on the activities of DB Group for two extreme scenarios. The result shows, among other things, that transitory risks from the political, market and technology categories according to the TCFD classification should be classified as relevant for DB Group. In the following section, we list examples of climate-related opportunities and risks in accordance with the TCFD classification of transitory and physical opportunities and risks, which are short-term, mid-term and long-term.

Transitory opportunities and risks

With the green transformation of DB Group and through a shift to climate-friendly rail transport, we are making a central contribution to achieving the German and European climate protection targets. At the same time, however, there is also an increased susceptibility to extreme weather conditions and an increased energy requirement, which in turn represents an energy price and procurement risk for us. Making passenger and freight transport climate-friendly through measures such as the use of renewable energies and alternative drive concepts or through robust climate-resilience management can, for example, enhance our reputation with our customers. Our climate protection measures aim to reduce our greenhouse gas emissions, to become climate-neutral by 2040 and to meet the Federal Government’s climate protection target for the transport sector. In order to achieve the national climate protection targets, the Federal Government is adopting necessary regulations. These are often mid-term regulations and hold opportunities for DB Group, especially in rail transport, such as through the permanent reduction of value-added tax for long-distance transport tickets. The introduction and continuation of the Germany-Ticket has positive effects on the shift in the mode of tranwsport from road to rail. However, individual environmental regulatory measures may also have a negative impact on our activities. The CO₂ price introduced by the Fuel Emissions Trading Act (Brennstoffemissionshandelsgesetz; BEHG) represents, for example, both an opportunity and a risk for us:

• it gives us an opportunity when compared to other means of transport, as it makes fossil-fueled means of transport more expensive and thus rail travel more attractive,
• it presents a risk for our procurement, as we are one of the largest energy consumers in Germany and still have diesel-powered vehicles in operation.

In order to counteract the risks, we are driving the phase-out of fossil fuels. However, technological developments that lead to other climate-friendly mobility solutions that do not involve rail transport can also represent a risk for us.

Physical risks

Extreme weather events resulting from climate change represent an acute physical risk for DB Group, which we have been recording in more detail in our risk catalog since 2021 and which we are responding to with resilience measures. These risks are both short-term and long-term, because they are short-term when they occur, but due to their more frequent occurrence due to climate change, we must take them into account over the long term. The findings of the PIK study from 2021 form the basis for DB Group’s own, more extensive climate risk analyses, such as in 2024 in the Climate-Resilient Rail Technology program. We also address physical climate risks as part of our Group-wide business continuity management to ensure the continuation of critical business processes in the event of damage. The consequences of climate change are impacting our core business. Extreme weather-related damage to our infrastructure can lead to losses in revenues and contractual penalties. It also requires additional expenses and capital expenditures in order to repair damage and implement preventive measures. In addition to the infrastructure, rail and road vehicles can also be affected. In recent years, acute physical risks affecting operations and punctuality have increased significantly. Group Risk Management therefore consistently monitors and records these risks. In this context, the importance of preventive vegetation work and track-related safety work to ensure the smooth running of operations has greatly increased. The potential financial impacts of extreme weather events is taken into account in the RMS or mid-term planning. In order to reduce acute physical risks, DB Group has increased its expenses for vegetation measures, from € 100 million to about € 160 million per year since 2014. We use satellite technology, for example, to record and measure tree populations nationwide. In combination with the expert assessment on-site and the operating conditions, vegetation measures are given priority. This ensures that trees with the highest risk potential are processed first. We also deal with chronic physical risks, such as rising temperatures, which place increased demands on our operational processes, vehicles, buildings and infrastructure.

Human Resources

To implement the Strong Rail strategy, we rely on an adequate supply of qualified skilled employees. DB Group has a high annual need for new employees, particularly for personnel in the operational rail business. This situation is exacerbated by the age-related retirement of numerous employees.

At the same time, DB Group finds itself in a tense economic situation. One important lever here is personnel costs, which must be kept at a sustainable level. As part of the S3 restructuring program, the aim is to reduce personnel requirements by at least 10,000 positions by 2027 and to ensure that this has an impact on profitability by reducing the number of employees accordingly, particularly in administration.

We are working to make DB Group more efficient and powerful: “Strong together” is a Group program which addresses the levers of efficiency and effectiveness (omission, simplification, standardization, automation and digitalization). We expect this to lead to a long-term reduction in personnel requirements at DB Group while simultaneously increasing productivity. We are supporting this process with targeted measures and instruments.

However, the shortage of skilled labor, exacerbated by demographic change, remains a core risk for our business. It continues to be difficult and time-consuming to fill vacancies, particularly in the operational rail business. This in turn results in risks such as low personnel coverage to ensure ongoing business and the long-term loss of knowledge, especially for rail-specific professions.

We seek to address the shortage of skilled labor in operational DB professions through our recruitment activities combined with a high level of employer attractiveness, which should be based on the development of attractive employment conditions.

We aim to counteract the risk of knowledge loss through sustainable and effective knowledge management. To this end, we intend to further develop our learning infrastructure in the sense of an open, Group-wide learning ecosystem. The expansion and digitalization of qualification capacities, the reorganization of vocational training and functional training (retraining) and measures for strategic succession planning are at the heart of this approach.

Risks with regard to employee retention and productivity arise if we do not meet our employees’ expectations of a modern working environment due to inflexible working methods and also fail to meet the constantly changing (market) requirements. We aim to counter this by further developing modern working environments and working methods as part of numerous programs, initiatives and communities within DB Group.

One important challenge and opportunity in this respect is shaping digitalization in close cooperation with employees and stakeholders. By developing guidelines and standards, we want to make the use of AI at DB Group secure and lower the entry barriers for employees by providing appropriate training and tools, for example. In order to continue to provide our executives with the appropriate skills and methods to be successful in modern, digitalized working environments, we aim to constantly develop the DB Academy’s training and continuing education program for executives.

Against the backdrop of economic crises with unclear outcomes, the personnel cost structure plays an important role. In terms of the labor market and transport market, our target is therefore to always conclude competitive collective bargaining agreements. Against this background, we are attempting to conclude collective bargaining agreements in negotiations with the trade unions which, on the one hand, express the appreciation for employees, while at the same time ensuring competitiveness.