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 competitive factor. 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.
A leading role in the field of ESG also offers extensive opportunities for DB Group, such as from the climate-related advantages of rail transport compared to other modes of transport.
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 activities sparingly.
Climate-related opportunities and risks
Climate-related transitory opportunities and risks associated with the transition to a decarbonized economy and physical 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 the RMS and our medium-term planning, climate risks are treated like other risks.
In 2021, we commissioned an external study that identified physical and transitory risks in accordance with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) in an initial impact analysis of DB Group’s activities for two extreme scenarios. The result showed, 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, medium-term and long-term.
A shift in the mode of transport toward more climate-friendly passenger and freight rail transport is an important lever for achieving German and European climate protection targets. However, this results in an increased energy requirement for DB Group, which in turn poses an energy price and procurement risk for us. Making passenger and freight transport more climate-friendly through measures such as the use of renewable energies and alternative drives, or supporting it with robust climate resilience management, can, for example, help us enhance our reputation among our customers and thereby strengthen our business model. 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 medium-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 is having a positive effect on the shift in the mode of transport 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.
To mitigate these risks, we are, for example, accelerating 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.
Extreme weather events resulting from climate change pose a physical risk to 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 in nature. While climate change will lead to more frequent and severe episodes of extreme weather in the long term – and therefore requires that we take it into account at an early stage in our planning – we are already seeing noticeable short-term effects today, which we are addressing with corresponding countermeasures. Through the use of scenario analyses – such as those conducted as part of the PIK study – and the further development of climate resilience management, DB Group is moving toward a proactive approach to managing both acute and chronic physical risks associated with climate change. The findings of the 2021 PIK study also form the basis for DB Group’s own, more in-depth climate risk analyses, such as in the climate-resilient rail technology program in 2024.
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. Therefore, they are consistently monitored as well as recorded by the Group Risk Management.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 medium-term planning. To reduce acute physical risks, DB Group has continuously increased its expenses for vegetation management measures 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 are also addressing chronic physical risks, such as rising temperatures combined with heat stress, which place increased demands on our operational processes, vehicles, buildings and infrastructure.
Human resources
To fulfill our corporate mission, we rely on having a sufficient number of 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. We are working to make DB Group more modern, efficient and more powerful. To this end, we are restructuring DB Group and empowering local teams to take on more responsibility. We expect this to lead to increased productivity while simultaneously reducing personnel-related requirements in the long term. 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 aim to address the shortage of skilled labor in operational DB professions through our recruitment efforts, combined with a high level of employer attractiveness that is built on the development of attractive employment conditions.
Through sustainable and effective knowledge management, we aim to mitigate the risk of knowledge loss. 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 and measures for strategic succession planning are at the heart of this approach.
Risks with regard to employee satisfaction 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.