Sustainable corporate governance

Sustainability management

Materiality analysis

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A comprehensive materiality analysis was carried out in 2021 in order to determine which sustainability topics are particularly relevant for the Mercedes-Benz Group and its stakeholders. This was completed in 2022.

This materiality analysis addressed the six strategic areas of action as well as further potentially relevant sustainability topics and trends. A total of 17 topics were evaluated, and these were further divided into sub-topics.

In its analysis, the Mercedes-Benz Group considered two perspectives:

• Inside out: The positive or negative influences of the Group’s business activities on the economy, the environment and society are brought into focus.
• Outside in: The impact of external requirements and expectations of the Group’s sustainability performance on its business activities, business results and general situation is considered.

The analysis consisted of several components.

The basis for assessing the relevance of the sustainability topics and trends was a comprehensive desk analysis and an international online survey. The survey queried approximately 15,000 people from 52 countries who depicted relevant stakeholder groups such as employees, private and business customers, interested consumers, suppliers and business partners, investors, politicians and government officials, scientists, and representatives of government administrations and non-governmental organizations (NGOs).

In addition, the Mercedes-Benz Group conducted around 20 interviews with both internal and external experts the aforementioned stakeholder groups. The goals here were to assess the sustainability performance of the Group to date and identify sustainability trends in order to gauge the relevance of the sustainability topics.

The Mercedes-Benz Group also took the first steps to evaluate the effects of its business activities on the environment and society. The results were taken into account when assessing the relevance of topics in the inside-out dimension.

In order to assess topics from an outside-in perspective, the Mercedes-Benz Group analysed the reporting of relevant competitors on their business development and sustainability performance, the media reporting on selected sustainability topics over a longer time period, central NGO positions, regulatory requirements, as well as information relevant to the capital market, and had these weighted by the stakeholder groups according to their relevance.

In a subsequent step, the sustainability topics that resulted from this analysis were assessed by the Mercedes-Benz Group with regard to financial position, liquidity, cash flows, profitability and business development in order to define the topics for the Non-Financial Declaration.

The materiality analysis thus conforms with the reporting requirements of the Global Reporting Initiative (GRI) and the CSR Directive Implementation Act (CSR-RUG).

Procedure for materiality analysis

The materiality matrix shows the topics according to their relevance: “Climate protection and adaptation”, “Emission reduction” and “Resource conservation” have the highest importance based on the analysis and the stakeholder survey. The same applies to the thematic complexes of “Respecting human rights” and “Sustainable mobility”, which have become even more relevant. This confirms the Group’s own strategic fields of action. A new addition is the topic complex “Responsible corporate transformation”.

The results of the materiality analysis were discussed in depth with all responsible departments and were presented to the Group Sustainability Board (GSB). They provide an important basis for critical consideration and further development of the sustainable business strategy. In addition, the Mercedes-Benz Group bases its identification of sustainability-related opportunities and risks on the topics identified in the materiality analysis. The Mercedes-Benz Group discloses significant ESG risks and opportunities in the Risk and Opportunity Report included in the Annual Report.

Materiality matrix^{1, 2}

Managing sustainability

Mercedes-Benz Group AG is responsible for the Group governance and provides services for all corporate entities. As the parent company, it also defines the strategy of the Mercedes-Benz Group. It decides on strategically important matters in its operational business and ensures regulatory, legal and compliance functions throughout the Group.

The Group’s own governance structure consists of the Board of Management and the Supervisory Board and corresponds to the dual management structure required for a joint stock company under German law. The Board of Management manages the Mercedes-Benz Group, while the Supervisory Board monitors and advises the Board of Management. The two bodies work together very closely in the interests of the well-being of the Group. The Mercedes-Benz Group adheres to the German Corporate Governance Code, as documented by the annual Statement of Compliance.

The remuneration for the Board of Management and Level 1–3 executives, as well as for Level 4 managers in some cases, includes both financial and sustainability targets in the form of the variable components of the company bonus. These consist primarily of transformation targets including those involving CO₂ emissions, due diligence obligations in raw material procurement, and traffic safety in addition to further non-financial targets. These targets relate to the topics of customers, integrity and employee commitment and diversity.
In addition, the Mercedes-Benz Group defines further criteria in the areas of the environment, social concerns and governance in order to determine the annual bonus for the Board of Management and senior executives. Since 2020, this has also included the achievement of CO₂ fleet targets.

The Mercedes-Benz Group manages the work in the strategic areas of action - alongside other tasks - by means of an internal reporting process that uses detailed scorecards. This process is supported by clear lines of responsibility in the management and organizational structures used at all of the divisions.

Governance

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The Group Sustainability Board (GSB) is the central management body for all sustainability topics and reports to the Board of Management. The GSB is chaired jointly by Renata Jungo Brüngger (the Board of Management member responsible for Integrity and Legal Affairs) and Markus Schäfer (the Board of Management member responsible for Development and Procurement, who is also the Chief Technology Officer). The Chairman of the Board of Management and all other Board of Management members, as well as the managers of all relevant functions and departments, are members of the GSB. – for example Finance, Investor Relations, External Affairs, Marketing & Communications and Human Resources. The management processes with cross-divisional and functional relevance in relation to sustainability are covered by this governance structure in order to regularly review and improve the Mercedes-Benz Group’s performance.

The GSB decides on relevant sustainability issues and assigns tasks to the respective areas of responsibility. The GSB regularly submits progress reports and proposals for decisions to the Board of Management regarding the action fields included in the Group’s sustainable business strategy. The Supervisory Board monitors and advises the Board of Management in its deliberations relating to the transformation targets, which also include non-financial and sustainability-related targets.

The operational work is done by the Sustainability Competence Office (SCO), which consists of experts from the units managed by the two Co-chairs of the GSB as well as additional specialists from Corporate Strategy, Finance and Corporate Communications. The SCO provides advice to the specialist units and helps them complete the tasks assigned to them by the GSB. The SCO also monitors the progress made in the six areas of action and the three enablers defined in the sustainable business strategy. The results are reported to the GSB and the Board of Management of Mercedes-Benz Group AG in the form of detailed scorecards at least twice a year.

An internal dialogue format ("Sustainability Forum”) has been established to strengthen the exchange between the SCO at the Group’s headquarters in Stuttgart-Untertürkheim and the specialists at the various national and international companies. The forum focuses on information and dialogue on current developments of the sustainable business strategy, the associated goals as well as the six fields of action and three enablers. In addition, there is an active exchange of information and knowledge on developments in the different countries and national companies as well as on best-practice approaches.

The Mercedes-Benz Group has also developed specific training measures to encourage employees in sales branches to adopt sustainable practices. Since 2021, for example, it has regularly offered online sales training to promote the economical use of resources such as water and electricity.

The Supervisory Board of Mercedes-Benz Group AG monitors the implementation of the sustainable business strategy. It is therefore important that the Supervisory Board and its committees are adequately informed about the sustainability issues related to the environment, society or corporate governance (ESG). To ensure this, ESG topics are regularly addressed at the Supervisory Board meetings. ESG experts from different departments are consulted for this purpose. ESG-related topics were also discussed during the strategy meeting of the Supervisory Board. In addition, the members of the management and supervisory bodies regularly discuss the progress made in implementing the sustainable business strategy with the Advisory Board for Integrity and Sustainability. On the Supervisory Board, Dame Polly Courtice in particular contributes her extensive expertise in the area of sustainability at various points.

Policies, standards and principles

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Integrity, compliance and legal responsibility are cornerstones of sustainable corporate governance and are obligatory for the actions of all employees of the Mercedes-Benz Group. The central requirements for this are set out in the Group’s Integrity Code. This is supplemented by other in-house principles and policies.

The “House of Policies” is the digital platform for policies. All internal policies and works agreements at the Mercedes-Benz Group are stored here in a user-friendly database, which is accessible to all employees. The policies are available in several languages. Employees can also access compact web-based training on policies, while Group companies can access advice on local policy implementation.

The Mercedes-Benz Group also uses the ten principles of the UN Global Compact (UNGC) as a fundamental guide for its business activities. As a founding member, it is strongly committed to the UN Global Compact (UNGC).

The Mercedes-Benz Group’s internal principles and policies are founded on this international frame of reference and other international principles, including the Core Labour Standards of the International Labour Organisation (ILO), the OECD Guidelines for multinational enterprises and the UN Guiding Principles on Business and Human Rights.

Risk and opportunity management

The Mercedes-Benz Group is exposed to a large number of risks that are directly linked with the business activities of Mercedes-Benz Group AG and its subsidiaries or that result from external influences. The Mercedes-Benz Group defines risk as the danger that events, developments or actions will prevent the Group or one of the business divisions from achieving their goals. This includes monetary and non-monetary risks. At the same time, it is important to identify opportunities in order to safeguard and enhance the competitive capability of the Mercedes-Benz Group. The Group defines an opportunity as the possibility of securing or exceeding the planned goals of the Group or a business division as a result of events, developments or actions.

In order to identify these risks and opportunities at an early stage and assess and manage them systematically, adequate and effective management and control systems, which are clustered into a risk and opportunity management system, are applied. Opportunities and risks are not offset.

The risk management system is intended to systematically and continually identify, assess, control, monitor and report risks threatening the Mercedes-Benz Group’s existence and other material risks in order to sustainably support the achievement of the corporate targets and to enhance risk awareness at the Group. The risk management system is integrated into the value-based management and planning system of the Mercedes-Benz Group and is also an integral part of the overall planning, management and reporting process in the legal entities, divisions and corporate functions.

The opportunity management system at the Mercedes-Benz Group is based on the risk management system. The objective of opportunity management is to recognise the possible opportunities arising in business activities early on and to use them in the best possible way for the benefit of the Group. This should result in planned targets being met or exceeded.

As part of the planning process, risks and opportunities are recorded within an observation horizon of up to five years. Strategic risks and opportunities are also considered in the risk and opportunity management process. The employees responsible for risk management have the task of defining and, if necessary, initiating measures for the identification, assessment, avoidance or mitigation of risks or for the protection of the Group against such risks. In the context of opportunity management, measures are to be taken for seizing, improving and (fully or partially) realising opportunities.

Firm integration of sustainability-related risks and opportunities

Risk and opportunity management is a firm component of the Group-wide planning, controlling and reporting process. It is designed to support the sustained achievement of the corporate targets and to ensure risk awareness at the Mercedes-Benz Group. In identifying sustainability-related risks and opportunities, Mercedes-Benz Group is guided by the topics identified by the materiality analysis and thus includes the areas of action of the sustainable business strategy, for which concrete goals have been assigned. Sustainability-related risks and portunities are understood to be conditions, events, or developments involving environmental, social or  governance factors (ESG), the occurrence of which may have an actual or potential impact on the Mercedes-Benz Group’s profitability, liquidity and capital resources. This further includes any risks and opportunities whose occurrence may have a positive or negative impact on the economy, the environment, or society.

Sustainability aspects - as they relate to the environment - include, among other things, the effects of climate conditions and changes, as well as the impact of the Group’s transformation process as a result of changed political conditions, technological developments and changing markets.

Labour law standards, occupational and product safety, product liability and suppliers’ compliance with labour law standards are examples of circumstances categorized as social issues. The area of governance is concerned with matters such as honesty in tax affairs, measures taken to prevent corruption, and ensuring data protection.

ESG-related risks and opportunities associated with the Mercedes-Benz Group’s own business activities, business relationships and products and services, and which are very likely to have a serious negative impact on the non-financial aspects in accordance with Sections 315c, 289c of the German Commercial Code (HGB), are not currently apparent. Climate-related risks and opportunities in connection with the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD) are environment factors and are thus also identified and assessed as part of the risk management process.

Further information can be found in the Risk and Opportunity Report.

Communicating and assessing risks and opportunities

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The organisational embedding of risk and opportunity management is carried out by the risk management organisation established at the Group. The responsibility for operational risk management and for the risk management processes is borne by the divisions, corporate functions, organisational units and companies. They report on the concrete risks and opportunities at regular intervals to their superordinate units. Unexpectedly occurring material risks must be promptly reported. The information for reporting to the Board of Management, Audit Committee and Supervisory Board is passed on to corporate risk management by the business divisions.

The Group Risk Management Committee (GRMC) is responsible for ensuring the continuous improvement and evaluating the efficiency and effectiveness of the risk management system. The GRMC is composed of representatives from the Accounting & Financial Reporting, Legal Affairs, Compliance and Group Security units, as well as the members of the Board of Management of Mercedes-Benz Group AG, Mercedes-Benz AG and Mercedes-Benz Mobility AG responsible for Finance, and is chaired by the members of the Board of Management of Mercedes-Benz Group AG responsible for Finance & Controlling, Mercedes-Benz Mobility, and Integrity and Legal Affairs. Corporate Audit contributes significant findings through the internal controlling and risk management system.

Dialogue with stakeholders

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The Mercedes-Benz Group attaches great importance to engaging in a dialogue with its interest groups. This dialogue enables it to look at its sustainability commitment from different angles, to identify and pick up on new trends and to exchange experiences. It also aims to engage in discussions of controversial topics at an early stage. The key concern for the Mercedes-Benz Group is to be part of a dialogue that is fruitful and productive for all parties involved.

The prerequisite is that the Mercedes-Benz Group knows its stakeholders. Stakeholders are individuals and organisations that have legal, financial, ethical or ecological claims on or expectations of a company. Whether an individual, organisation or group is a stakeholder of a company depends on the extent to which decisions of the company influence them or, conversely, the extent to which they can influence the company’s decisions. Based on this, the Mercedes-Benz Group has identified customers, employees, investors and suppliers as its primary stakeholders. In addition, the Mercedes-Benz Group regularly exchanges views with civic bodies such as non-governmental organisations. The Group also maintains contact with associations, trade unions, the media, analysts, local authorities, people from the surrounding neighbourhood of the company’s locations, and figures from the worlds of science and politics.

Exemplary instruments of the Stakeholder Management approach

In order to implement dialogue with its stakeholders across the organisation, the Mercedes-Benz Group has defined clear responsibilities and communication channels for this process and established specific forms of dialogue. The various dialogue formats are initiated by experts from Integrity and Legal Affairs or other departments such as External Affairs (EA).

The Mercedes-Benz Group makes use of various formats in order to engage in dialogue with relevant stakeholders. Among other things, it organises annual “Sustainability Dialogue” events and conducts stakeholder surveys as well as expert conferences and thematic exchanges – for example in the form of workshops or through the Advisory Board for Integrity and Sustainability. In addition, it monitors current public discussions and gathers information about related expectations by participating in sector-specific and cross-sector networks and initiatives. Studies and other scientific publications are also evaluated and internal media analyses undertaken. These measures help the Group to identify developments and the associated expectations in areas beyond the dialogue events that it has initiated at an early stage.

The Mercedes-Benz Group aims to strengthen trust in the Mercedes-Benz brand with innovative and significantly more sustainable solutions, as sustainability is one of the brand promises of Mercedes-Benz. It guides the Group as a key operating principle, not only in strategic decisions but also in direct customer contact. The aim is to inspire customers with respect to sustainability and make it tangible for them at every touchpoint. The Net Promoter Score (NPS) is a fixed element of the Mercedes-Benz Group’s customer satisfaction measurement for the overarching evaluation of customer satisfaction: with this internationally recognised indicator, customers are asked how likely they are to recommend a company or a brand to people close to them. The Mercedes-Benz Group also uses the NPS as part of the remuneration component.

Sustainability Dialogue

An important instrument for implementing these goals is the communication with stakeholders in the form of the Sustainability Dialogue, which has been held annually in Stuttgart since 2008 and brings various stakeholder groups together with members of the Board of Management of Mercedes-Benz Group AG and executive management. The participants attend a range of workshops, where they discuss selected issues related to sustainability and work together to further develop their approaches. The experts responsible for specific topics take up the momentum generated by the participants and work together with the stakeholders to incorporate these ideas into their work. They then report on the progress achieved at the following year’s event.

The Mercedes-Benz Group held the Sustainability Dialogue as a hybrid event in 2022. More than 200 external and internal participants in a total of seven working groups engaged in discussions of various topics both on-site in Sindelfingen and online and also participated in a public stakeholder dialogue.

In addition, organizational and thematic preparations were made for the Sustainability Dialogues in China and India scheduled for early 2023.

Advisory Board as an important driving force

The Advisory Board for Integrity and Sustainability has been providing support for the company’s sustainability work since 2012. The board’s members are independent external specialists from the fields of science and business, as well as from civic organizations, and include experts who possess specialized knowledge regarding environmental and social policy, the development of transport, traffic and mobility, and human rights and ethical issues. The members of the Advisory Board support the Mercedes-Benz Group with constructive criticism on questions related to integrity and corporate responsibility.

The Advisory Board convenes several times a year in meetings that are chaired by the member of the Board of Management responsible for Integrity and Legal Affairs.
One of these meetings specifically serves to share information with other members of the Board of Management and members of the Supervisory Board. As part of a Sustainable Strategy Week, the responsible managers from the various specialist units meet with the Advisory Board members to discuss the areas of action and enablers identified in the sustainable business strategy and also
talk about targets, strategies, measures and the results achieved with these. The Advisory Board also holds regular meetings with managers and other employees to discuss specific topics. Two new working groups were established in the reporting year in order to strengthen this dialogue. The goal here is to promote more extensive discussions on the topics of “Integrity and employees” and “Climate change mitigation and resource conservation”. In 2022, the Advisory Board also addressed, among other things, the new Corporate Citizenship Strategy, the social dimension of sustainability and its impact on the Mercedes-Benz Group, and the topic of climate neutrality.

Sustainable investment

The strong demand for ESG funds among institutional and private investors leads to a demand for more transparency on how ESG factors are taken into account in asset management and investment decisions. At the same time, this offers companies an added opportunity to differentiate themselves in the competition for equity and debt capital by demonstrating a sustainable business strategy, ambitious goals and transparent ESG reporting along the entire value chain. A variety of reporting frameworks are now available to provide this evidence. For example, investors expect companies to publish reports conforming to standards such as those of the TCFD (Task Force on Climate-related Financial Disclosure) and the SASB (Sustainability Accounting Standards Board). The International Sustainability Standards Board (ISSB) also developed a global minimum standard for sustainability reporting in 2022, which is to be used from the 2023 reporting year. The extent of legal disclosure obligations is also increasing – for investors, for example, through the Sustainable Finance Disclosure Regulation (SFDR) – for companies, for example, through the EU taxonomy, the Corporate Sustainability Reporting Directive (CSRD) and the European Sustainability Reporting Standards (ESRS). The ESG reporting is thus becoming increasingly more complex and demanding.

The external reporting of the Mercedes-Benz Group focuses on the reporting standards relevant to the Group’s investors (including TCFD, SASB and GRI). Meanwhile, the Mercedes-Benz Group continuously monitors the way in which the ESG reporting requirements of its capital providers are evolving and reviews their implementation in its own reporting.

Financing the sustainable business strategy

The implementation of the Mercedes-Benz Group’s sustainable business strategy requires a major amount of investment. For this reason, one of the Group’s goals is to ensure that its securities are viewed by the capital market as a sustainable investment. To this end, the Mercedes-Benz Group maintains a continuous dialogue with players on the capital market as representatives of investors in equity and debt. Various platforms are used here. In 2022, the Mercedes-Benz Group presented this approach to investors and analysts at its first digital ESG conference (Environmental, Social and Governance). 

The Investor Relations & Treasury unit at Mercedes-Benz Group AG works closely together with the company’s in-house sustainability departments and is also integrated into the relevant committees. This is how the Mercedes-Benz Group is responding to the fact that sustainable investment has become a central investment strategy - in particular for institutional investors, who set especially high standards of transparency for external reporting according to ESG criteria.

In the reporting year, Mercedes-Benz Group AG converted the existing credit line of €11 billion into a sustainability linked loan (SLL). In this way, the company links its credit line to sustainability achievements in the area of climate change mitigation - for example, the global share of all-electric vehicles in the Mercedes-Benz fleet. The arrangement fee for the existing credit line is reduced if the Mercedes-Benz Group achieves the selected sustainability targets. With this transformation, the company also continues to implement its “Ambition 2039” in the area of sustainable financing.

Ratings and green bonds

ESG rating agencies such as MSCI, Sustainalytics, ISS ESG and CDP are additional important players in the capital market and in the sustainability-oriented investment process. Today the rating and ranking results of most providers are made available to the public and serve as an additional source of information for many investors.

Among other things, the Mercedes-Benz Group has therefore been using the CDP framework for more than 15 years to disclose data on climate-related activities, and once again reached the leadership category in the reporting year with an A rating. Since 2021, the Mercedes-Benz Group has also reported its water-related activities in the separate CDP Water Questionnaire and was able to achieve an B rating in the reporting year. In 2022, it once again received an A rating from MSCI. Sustainalytics continues to rank it strongly in its peer group of automobile manufacturers. The Group’s ISS ESG rating once again corresponded to the best possible rating in the automotive sector (Prime Status C+).

The various specialist units of the Mercedes-Benz Group work closely together with the aim of providing the rating agencies with adequate information. The Group intends to continue the ongoing development of its external reporting, close any gaps and initiate internal change processes.

In 2020, the Group developed a Group-wide Green Finance Framework in order to position the Mercedes- Benz Group even more effectively as a sustainable company worthy of investment and to enable it to utilize ESG-based capital for its business development. It makes it possible for the Group to finance investment targeted at the development, production and customer financing of all-electric vehicles through bonds and loans, for example. The Mercedes-Benz Group has issued green bonds in September 2020 and March 2021. In November 2022, Mercedes-Benz Group issued its first green bond outside the European market as a  green panda bond in China.

The framework is based on the Green Bond Principles(the voluntary process guidelines of the International Capital Market Association - ICMA) and the Green Loan Principles, which are the joint voluntary process guidelines of the Loan Market Association (LMA) and the Asia Pacific Loan Market Association (APLMA). It is planned to be developed to be consistent with the significant contribution to the environmental objective of climate change mitigation under the technical screening criteria of the EU taxonomy. In addition, the Mercedes-Benz Group strives for the certification with the highest rating - “Dark Green” - for the planned 2023 framework update from the respected Centre for International Climate and Environmental Research (CICERO).

Sustainable investment of pension funds

The Mercedes-Benz Group operates as an investor itself when it invests the company’s pension assets. ESG criteria are also playing an increasingly important role in this area.

For German pension assets, the following objectives have been defined for the consideration of ESG criteria: Creation of transparency in dealing with sustainability aspects, exploitation of opportunities from sustainable developments and the appropriate consideration of sustainability risks. For the majority of German pension assets the investments are made by asset managers to whom the Mercedes-Benz Group issues individual mandates. In coordination with the Investment Committees, the Mercedes-Benz Group pays, as part of its sustainability concept, increased attention to the consideration and transparency of sustainability aspects in the investment process. In addition, the risk and return aspects associated with sustainable investments are also taken into account. For liquid asset classes of the German pension assets, the Mercedes-Benz Group only works with investment managers who have signed the UN Principles for Responsible Investment.
 
It also uses a negative list to exclude investing in companies and countries that do not fulfil the Group’s core requirements. Furthermore, the Mercedes-Benz Group focuses on gradually integrating sustainability aspects - via benchmarks or sustainability performance indicators, for example - into its mandates. In 2022, the Mercedes-Benz Group also further expanded its ESG-themed investments and took its first steps to create an internal reporting system for various sustainability metrics for its German pension assets.

The measures implemented as part of the Group’s sustainability concept are regularly assessed and adapted to current developments. Sustainability is also one of the investment principles of Daimler Pensionsfonds AG. In other countries, the Group takes country-specific requirements into account.

Tax obligation

The Mercedes-Benz Group views itself as a responsible company that endeavours to meet all of its global tax obligations and use public funding responsibly. In this
way, the Group can also fulfil its social and ethical responsibilities.

The Group’s tax strategy operates according to the following principles in particular:

• With efficient, high-quality and reliable expertise, processes, systems, methods and controls, the Mercedes-Benz Group wants to ensure that the tax obligations of the Group companies are met and integrity standards are maintained.
• In line with the principle of being a good corporate tax citizen (i.e. fulfilling its resonsibility as a taxpayer), the Mercedes-Benz Group conducts legal, proactive and non-aggressive tax planning activities on the basis of economic considerations (“tax follows business”). The
  Mercedes-Benz Group also strives to work cooperatively, transparently and constructively with the tax authorities. In this process, it maintains its legal standpoints and defend its interests wherever it believes such actions are appropriate and legitimate.

The Group tax strategy drawn up by the board of management of the Mercedes-Benz Group AG defines the limits of action here, and this strategy is further specified and implemented by means of organizational and content-related
policies, guidelines and instructions. The tax strategy is regularly reviewed for appropriate adjustments.

The tax policies define the responsibilities, tasks and obligations of those individuals at the Group who deal with tax issues, and also contain specific provisions for ensuring that legal requirements are met, thus raising the awareness of tax issues among employees. Management is kept informed about relevant tax issues by means of monthly reports and regular communications, as well as when required. Moreover, it is involved in compliance processes:

• Regular communication between CFO and Head of Taxes
• Regular information to the Supervisory Board on risks and opportunities as well as current regulatory issues

The Code of Conduct stipulates that all intentional violations of external and/or internal tax guidelines must be reported and investigated. The same applies to any failure to make corrections to procedures performed in an erroneous manner, as outlined in our internally valid Treatment of Violations Policy.

The Mercedes-Benz Group has established a Tax Compliance Management System (Tax CMS) in order to ensure effective tax compliance throughout the Group. The Tax CMS is a separate sub-unit of the general intra-Group Compliance Management System. The Tax CMS also operates an active tax-risk management system that is consistently applied throughout the Group in order to monitor and check whether tax obligations are being fulfilled, and also to support those responsible for ensuring such fulfilment. Another goal here is to identify and reduce tax risks at the Group, and thus the associated personal risks that may be faced by the employees active in this area. The system includes numerous measures - for example, continuous monitoring of tax risks and the
incorporation of tax risk issues into the internal control system and the Group-wide risk management process in line with the company’s risk management policy. >
The Mercedes-Benz Group did not become aware of any criminally relevant material violations of tax laws during the reporting year.