2017 Integrated Report – Departure into a new era

Management approaches to our material sustainability topics

The GRI Standard GRI 103 foresee that for material economic, environmental and social aspects so-called management approaches should be displayed. These give us the opportunity to explain how we address material sustainability topics within DB Group. 

Product quality (DB 01)

There are a number of levers to improve product quality, the most important of which is punctuality. Other levers include the use of modern vehicles, reliable and comprehensive customer and transport information, the quality and reliability of services offered, as well as reasonable travel and transport times. For this reason, we continuously invest in our fleets and infrastructure, optimize cooperation with our suppliers and our industry partners and pursue numerous activities aimed at improvement. We also grasp the opportunities offered by digitalization. Most of the initiatives to increase product quality and improve customer satisfaction are bundled in Railway of the Future (Departure Economic). These topics are steered across all business units by the Group Management Board. 

We place customers at the center of our actions. Customer satisfaction is therefore the most important indicator. It provides a measure of our success from the point of view of our customers. We gain insights from this indicator, which we use to create specific improvement measures. In addition to the various aspects of product quality, continuous optimization of the price-performance ratio (PPR) and product innovations, especially in the context of digitalization, are the main levers for increasing customer satisfaction.

In order to increase customer satisfaction, we work intensively on the high-quality delivery of our basic service. We focus on the optimization of product and service quality, and offer customers comprehensive services to meet their information needs. Our goal is to provide our mobility and logistics solutions at a reasonable PPR in order to meet the expectations of our customers. The focus is on measures that increase the quality of our services and the efficiency of our processes. We use both direct indicators, such as revenues and number of customers, and the results of regular surveys to assess the success of the measures taken from the customer’s point of view. These surveys are carried out in each business unit and, as with the cooperation with the Passenger Advisory Board, they serve to identify further areas where customers believe there is potential for improvement.

Key indicators for customer satisfaction are customer satisfaction in passenger transport and customer satisfaction in freight transport and logistics. Success is measured on the basis of the targets achieved along the development path defined in our strategy DB2020+.

Punctuality is a central component of our promise of performance. The relevant figures are recorded daily and made available online to the executives and employees involved in punctuality management in the Digital Situation Room. In addition, punctuality data, together with the associated indicators, are prepared regularly and used by the Group Management Board to determine what currently needs to be acted upon and where decisions are required.

Punctuality is the key indicator of product quality at the Group level and is a determining factor in calculating the amount of the variable compensation of DB Group’s executives. #PUNCTUALITY

Customer demand for comprehensive, understandable and current (real-time) information plays a very important role. For this reason, we are continually improving passenger information for our customers in passenger transport as well as the transport information for our logistics customers.

A further component of the product quality is a highperformance infrastructure. The capital expenditures for maintaining a high-performance infrastructure is governed by the performance and financing agreement (Leistungs- und Finanzierungsvereinbarung; LuFV), through which the Federal Government and DB Group are comprehensively modernizing the existing network. Compliance with the quality specified for the existing network is continuously monitored on the basis of contractually agreed key figures. Monitoring findings are published in the annual infrastructure state and development report (Infrastrukturzustands- und -entwicklungsbericht; IZB).

In addition to maintaining the existing infrastructure, capacity increases and the digitalization of infrastructure are also very important for the high performance of the infrastructure and for infrastructure users. Together with the Federal Government, we are working on comprehensive new and expansion projects (Departure Economic) and on digitalization (Departure Economic).

Interlinked mobility is the combination of different means of transport in order to individualize the design of the mobility and transport chain; this is made possible by the digital information service for travel and transport planning. For us, interlinked mobility is crucial in order to offer our customers individualized and tailored solutions. In this area, digitalization offers new opportunities to provide innovative services. Existing combined services, such as our door-to-door mobility portfolio for passenger transport comprising our tried and trusted products Flinkster and Call a Bike, are being steadily improved and expanded to incorporate future digital forms of mobility, such as autonomous driving, on-demand transport services and platforms for cus­­­tomers to use these services in future. One such example, to start with, is the new ioki (Departure Future) brand. New forms of mobility are also being further developed in logistics. DB Schenker and MAN have entered into a platooning partnership, for example.

There are no indicators for interlinked mobility.

Digitalization and innovation (DB 02)

We have grasped the significance of digitalization: the digital revolution reaches farther and deeper than any prior changes witnessed in industry. New customer requirements and technologies, in particular, are causing disruptive changes in the marketplace at a pace not seen before. 

Over the past years, we have passed key milestones on our digital journey, and developed new products and services, processes and businesses. In addition, we have created the material structural framework needed to grasp the opportunities offered by digitalization. The Chief Digital Officer (CDO), working with an interdepartmental team, drew up the digitalization strategy for DB Group in the year under review. The competence center Digitalization is responsible for operationalizing the digitalization strategy.The digitalization decision makers from the business units and Group headquarters meet regularly in this center. Thanks to their interdepartmental approach, they are managing to align and link centralized and decentralized activities in a digital context along an overarching management system.

The content of the digitalization strategy was designed with technology trends in mind, and includes clear positioning with regard to our material target markets “Smart Mobility” and “Smart Logistics.” The focus is on two areas of action: firstly, the development and digitalization of our core business (Departure Economic) by developing new digital services at all interfaces to our customers, such as WiFi in ICE trains (Departure Economic). Secondly, we are focusing on developing new business models, such as ioki (Departure Future) or platooning (Departure Future). Alongside the areas of action at the interfaces to our customers, our digitalization strategy also describes the areas of action for “Smart Assets,” smart infrastructure and production, while “Smart Admin” focuses on the opportunities to be gained from digitalizing administrative processes.

To successfully secure our planned positions in our markets, we are systematically advancing DB Group’s digital ecosystem (Departure Economic).

The workforce at DB Group is a key driver of digital transformation. A Group-wide initiative has been put in place to give executives and employees the chance to expand their digital expertise, through training programs and learning opportunities, for example. Networking opportunities and events also encourage learning, exchange and the initiation of interdepartmental digital projects. In addition, the Intrapreneurship Program launched for our em­­ployees in the year under review gives employees the opportunity to put their own business ideas into practice.

The digitalization strategy constitutes a digital compass for DB Group and provides an important general framework.

Profitability (DB 03)

At DB Group, profitability is a material requirement for financing capital expenditures in our core business, further developing our businesses, and grasping opportunities for future growth. Entrepreneurial leadership is indispensable for improving profitability. 

Profitability as an overarching target in value management ensures a reasonable long-term rate of return over several economic cycles. On the basis of market values, we calculate the annual cost of capital as a weighted average from risk-adequate market returns on equity and debt capital. The actual yield, the Return on Capital Em­­ployed (ROCE), is calculated as the ratio of operating profit before interest and taxes (EBIT adjusted) to capital employed. The ROCE target is set higher than the cost of capital. The long-term objective is to achieve an ROCE whose multi-year average is above the target value, ensuring that costs of capital are covered. This ROCE target corresponds to the minimum required rate of return (MRR).

Financial stability is an essential component for sustainable economic activity. For DB Group as an asset-intensive company, it is essential that we have access to the capital market at all times under favorable conditions. A major objective is therefore to achieve adequate key debt ratios. Our key indicator for managing indebtedness is redemption coverage.

Employee satisfaction (DB 04)

Committed and motivated employees mean satisfied customers and thus sustainable business success. We therefore constantly strive to further develop our corporate culture to enhance the performance capability of DB Group. Alongside customer focus and performance capability, our corporate culture also encourages interdepartmental collaboration, leadership skills and the willingness to take on responsibility. Following our third Group-wide employee survey, a far-reaching follow-up process was launched at team, business unit and Group levels in the year under review, based on the findings of the 2016 survey. For example, specific recommen­­dations for improvement and change were agreed at the team level in follow-up workshops throughout the Group. 

Our indicator of employee satisfaction is calculated on the basis of an employee survey that we conduct every two years. In the years between surveys, the follow-­­­up workshop implementation rate serves as the indicator.

Employer attractiveness (DB 05)

We work inten sively on increasing our attractiveness as an employer. A visible and persuasive presence in the labor market is decisive for success in the competition for specialists and executives. 

The close linkage of all the key elements of talent acquisition in our holistic talent acquisition approach forms the basis for a strong competitive position in an increasingly difficult market for employers. This approach includes: our employer branding campaign (Departure Social), professional and modern recruiting (Departure Social), innovative social media activities and a candidate experience oriented toward the target group. But it takes even more than that to be and remain attractive as an employer, so we offer our employees diverse and responsible tasks and activities, attractive employment conditions and a corporate culture that is perceived as being based on partnership and fit for the future.

Our indicator of employer attractiveness is calculated on the basis of the employer rankings published by trendence.

Climate protection (DB 06)

Environmental and climate protection is in our genes. We set ourselves a new and ambitious climate target in the year under review. It represents a huge step toward becoming a completely climate-neutral Group. To achieve this goal, we are further raising the share of renewable energy in DB’s traction current mix in Germany. DB Environment, one of our central Group divisions, is working closely with the environmental officers and production functions in the business units to implement it. By using energy-efficient production equipment and by continuously replacing our fleet, we are striving to use energy as efficiently as possible. We want to further increase the environmental benefits of rail transport and, in addition, create incentives to bring more traffic to the rails. Shifting traffic to rail is the key to meeting the national climate targets in the transport sector. To monitor our progress, we have defined proprietary energy efficiency targets in our business units, which are measured at regular intervals. 

Our climate protection indicators are specific COe emissions (carrier) compared to 2006 and the share of renewable energies in the DB traction current mix.

Noise reduction (DB 07)

We want to noticeably relieve residents of rail transport noise as a crucial prerequisite for raising acceptance of rail transport and shifting traffic from road to rail. We will therefore strive to reduce this noise by half by 2020. This target builds on two pillars: firstly, noise remediation through building noise protection walls and fitting homes with soundproofed windows on existing rail lines, and secondly, conversion of the existing fleet to quiet brake shoes and procuring quiet new freight cars. Under the leadership of the noise protection officer, the department for noise protection in our Group area DB Environment tracks and coordinates the progress of our actions, our collaboration with the Federal Government, and our communication with stakeholders.

Progress measurement is based on the indicators of track kilometers noise-remediated and quiet freight cars in operation at DB Cargo in Germany.

Security (DB 08)

Security is an important commodity and a basic requirement of our customers and employees. We have a great deal of responsibility for many people and goods – around the clock. The security units of DB Group cooperate closely with the security authorities. In the railway joint security center, Group security exchanges status information with the Federal police around the clock. 

Since March 2017, moreover, six new operations centers in DB Security’s regional area coordinate all regional safety topics and are available to talk to DB Group business units around the clock.

In total, more than 5,000 Federal police officers and about 4,000 security staff from DB Security are deployed. In order to further increase safety, in the year under review, DB Security continued increasing its staff by a total of 500 employees. In the year under review, 185 young people followed the 100 predecessors who had completed their three-year training in the previous year to become protection and security specialists in DB Group.

Performance capability (DB 09)

Our strategy DB2020+ comprises ambitious goals that we have set ourselves in three central areas of action: culture of quality, digital expertise and performance capability. It is the responsibility of the two competence centers (CC) Operative Excellence (OPEX) (charged with enhancing the culture of quality) and Digitalization (charged with increasing digital expertise) as well as of the executive center Transfor­mation (charged with raising the performance capability of the entire organization) to populate these areas of action. 

Meeting these targets will require far-reaching change; a transformation in the mindsets, actions and cooperation of everyone. This transformation process will only succeed if we align our actions strictly with DB’s target culture with its five dimensions. We need:

  • an unwavering focus on our customers,
  • better and more trusting collaboration transcending divisional, business unit and functional boundaries,
  • convincing proactive leaders,
  • greater willingness to take on personal responsibility and
  • improved performance capability throughout the organization, whereby this higher performance is all destined for our customers’ benefit.

An executive center (EC) Transformation will be set up, starting in 2018, to link this transformation more closely with our business. It will be headed by the Group Strategy and Transformation Officer. The EC will be responsible for the entire management of the intra-Group transformation process while complying with legal regulations. The HR department is key to the success of the transformation. Change management will be organized as an independent Group function within the division. The unit will be responsible for flanking and implementing the transformation until it is firmly anchored throughout the Group.

Performance management/leadership

We plan to replace the former management planning process (MPP) and senior management/staff dialog with a system of regular feedback sessions focusing on individual performance from different perspectives. In five business units, we are piloting new methods of improving transformational leadership performance in order to enhance the effectiveness and efficiency of our leadership. These methods will then be transferred to operational management in all business units as “blueprints.” In addition, alterations to the rotation and career rules will give our executives a broader knowledge base to enable them to gain a better understanding of the railway system as a whole and to successfully undertake different management tasks in the course of their development.

Competence building

A standardized qualification architecture makes it possible for our employees to contribute to transformation. However, qualification and education are not always sufficient to meet the growing requirements. Some tasks – such as automating railway operations, or cyber security – necessitate the recruitment of new employees, whereas other competencies will gradually become less essential. This shift in competence is a long-term issue that will largely take place as new generations rise through the ranks. Experienced employees with traditional technology and process expertise will continue to be crucial in relevant parts of our railway operations.

Change/working environment

Digital transformation is also changing our working environments and structures. We must ask ourselves the question: how can we organize ourselves to tackle the growing complexity and momentum in our markets? Since 2015, we have been designing future work scenarios and developing and piloting appropriate prototypes in our Group initiative “Working Environments 4.0.” The findings and lessons learned are being incorporated into the action field change.

One of the issues to be addressed will be how to reconcile conventional working methods in railway operations and maintenance with the new, extremely digitalized work methods. This is how we are preparing to face the changed approach to cooperation, which will be even more in demand in the future, in the very different work environments within DB Group, and making sure we remain an attractive employer for future high performers and high potentials.