Sustainable corporate governance

Sustainability management

Sustainability as value added

At the Mercedes-Benz Group, sustainability means stably generating economic, environmental and social value added for our stakeholders: customers, employees, investors, business partners and society as a whole. Sustainable development is therefore part of the brand essence of Mercedes-Benz and a guiding principle of our actions and all our interactions with our customers. This holistic strategic approach applies not only to our own products and manufacturing locations but also to our complete upstream and downstream value chain and the entire . Specifically, this means that we drive change and implement measures that strengthen sustainable processes, products and interactions in direct customer contact throughout the customer journey. One of our goals therefore is to also make our customers passionate about sustainability.

Sustainable business strategy

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The Mercedes-Benz Group acts in line with the sustainable business strategy adopted by the Board of Management in 2019. This means that rather than merely supplementing our business strategy, sustainability aspects are integral components of it.

Our strategic goals are closely based on the UN Sustainable Development Goals (SDGs) — especially SDGs 8 and 9 and 11 to 13 — among other factors. In addition, they take into account recognised international frameworks, the requirements of our external and internal stakeholders and global trends. From this order of priorities we have also derived Group-wide areas of action and areas of responsibility as well as business-specific targets, processes and measures. Regular materiality analyses provide a basis for re-discussing the areas of action and determining whether they need to be updated.

We have also formulated strategic ambitions for each of the six areas of action:

  • Climate protection & air quality: Plans call for our new vehicle fleet to be carbon-neutral over the entire life cycle by 2039 and to no longer have any relevant impact on NO2 levels in urban areas by 2025.
  • Resource conservation: We will decouple resource consumption from business volume growth.
  • Sustainable urban mobility: We will offer our leading mobility and transport solutions in order to improve the quality of life in cities.
  • Traffic safety: We are working to make our vision of accident-free driving a reality as we develop automated driving systems while also taking social and ethical issues into account.
  • Data responsibility: Sustainable, data-based business models are our future. In line with these business models, we focus on the needs of our customers and the responsible handling of data.
  • Human rights: We assume responsibility for respecting and upholding human rights along our automotive value chain.

We work together in relationships based on trust with our partners in industry, government and society at large in order to make these ambitions a reality.

We also rely on the dedication and commitment of our employees, who are helping to shape the transformation. Accordingly, we have defined three “enablers” that are essential for our success in these six areas of action:

  • Integrity: In order to firmly anchor integrity at all levels and in all areas, we are engaging in regular dialogue. We are also supporting our employees as they make business decisions in order to promote their sense of individual responsibility.
  • People: As an attractive employer, we promote the diversity of our workforce and help our employees acquire the skills they need in order to master the challenges of digitalisation.
  • Partnerships: Our principles regarding political dialogue and the communication of our interests form the basis of responsible and reliable action that aims at harmonising our corporate interests with the interests of society at large.

Materiality analysis

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We conducted a comprehensive materiality analysis in 2020 in order to determine which sustainability issues are particularly relevant for the Group and its stakeholders. The results of this analysis are still being used in our current reporting at the Mercedes-Benz Group. In the reporting year, due in particular to the restructuring of the Group at the end of 2021, we started to carry out a new materiality analysis for the new Group. This is due to be completed in 2022.

The materiality analysis conducted in 2020 addressed the existing strategic areas of action as well as further potentially relevant sustainability issues and trends. We assessed a total of 15 issues.

The analysis consists of several components: a comprehensive competition and media analysis, regulatory requirements and information relevant to capital markets, an SDG impact assessment, an online stakeholder survey and interviews with experts. In our analysis, we used two different perspectives:

  • Inside out: What positive and negative effects do our business activities have on the economy, the environment and society?
  • Outside in: To what extent do external expectations regarding our sustainability performance affect business development, business results and the company’s situation?

As a result of these parameters, the materiality analysis complies with the reporting requirements of the Global Reporting Initiative (GRI) and the CSR Directive Implementation Act (CSR-RUG).

Materiality analysis methodology

Our materiality analysis (Graphic)

The materiality matrix shows the issues in accordance with their relevance. Climate protection, air quality and resource conservation have the greatest importance in terms of the analysis and the stakeholder survey, and a sustainable supply chain, customer orientation and sustainability are also very important. This confirms our selection of the strategic areas of action.

We have extensively discussed the results of the materiality analysis with all of the responsible specialist units and presented them to the Group Sustainability Board (GSB), as well as to the Advisory Board for Integrity and Sustainability. The results form an important foundation for the further development of our sustainable business strategy.

Our materiality matrix

Our materiality matrix (Graphic)

Managing sustainability

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In the new structure, Mercedes-Benz Group AG has taken on the steering function and provides services for the Group companies. As the parent company, it also defines the Mercedes-Benz Group’s strategy. In addition, it makes decisions about strategically significant issues related to the Mercedes-Benz Group’s business operations and ensures the effectiveness of organisational, legal and compliance-related functions throughout the Group.

Our governance structure, which consists of the Board of Management and the Supervisory Board, corresponds to the dual leadership structure required by German law for a stock corporation. The Board of Management manages the company and the Supervisory Board monitors and advises the Board of Management. The two bodies work together very closely for the welfare of the company and are guided in their efforts by the German Corporate Governance Code.

The Company Bonus provides short-term and medium-term variable components of remuneration for the Board of Management and Level 1–3 managers, as well as for Level 4 managers in some cases. These components are linked not only to financial targets but also to sustainability-related transformation targets and non-financial targets that focus on customers, integrity and employee commitment and diversity.

We are managing our work in the strategic areas of action — alongside other tasks — by means of an internal reporting process that uses detailed scorecards. Clear lines of responsibility in the management and organisational structures used at all of our divisions exist to support this process.

Governance

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Governance (Graphic)

The Group Sustainability Board (GSB) is our central management body for all sustainability issues and reports to the Board of Management of Mercedes-Benz Group AG. The GSB has a shared management structure, with 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 & Purchasing; also Mercedes-Benz Cars Chief Technology Officer) serving as Co-chairs. The members of the GSB are the Chairman of the Board of Management and the Board of Management members responsible for Finance, Marketing & Sales as well as representatives of further important functions and divisions. The GSB regularly submits progress reports, as well as proposals for decisions regarding the areas of action that are part of the Group’s sustainable business strategy, to the Board of Management. The Supervisory Board decides on the Board of Management’s transformation goals, which include non-financial goals as well as sustainability-related targets.

The operational work is done by the Sustainability Competence Office (SCO), which consists of representatives from the units managed by the two Co-chairs of the GSB as well as additional representatives from Corporate Strategy, Finance and Corporate Communications. Besides performing its other tasks, 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 in the form of detailed scorecards at least once a year. With the help of a tracking list, the GSB also monitors whether the activities that have been decided on have been implemented.

During the reporting year, we established the new internal “Sustainability Forum” dialogue format, whose goals are to intensify the exchange between the SCO and employees who work in the various markets around the world, and to more extensively link internal sustainability experts with one another. The Sustainability Forum holds virtual meetings at regular intervals. The focus is on information and discussions about current developments concerning the sustainable business strategy, the associated targets, and the six areas of action and the three enablers. In addition, the participants actively share information and knowledge about the developments in the various markets and about best-practice approaches in the different regions. Moreover, the Sustainability Forum on the company’s intranet has its own interactive platform for networking and communication that extends beyond the digital formats themselves. Although the content is designed primarily for sustainability experts, any employee can access the content and obtain information on this platform.

We also launched a web-based training course regarding the six pillars of the Mercedes-Benz Cars strategy in September 2020. Among other things, the course explains how the topic of sustainability is both the foundation and an integral component of our strategy. The training course also enables participants to obtain in-depth information about the six sustainability-related areas of action as well as about the three enablers. In 2021, we also developed and rolled out a new sales training course about sustainability. This course is targeted at our colleagues in the Mercedes-Benz dealerships worldwide. It addresses our company’s sustainable business strategy and shows how Sales can help the Mercedes-Benz Group achieve its sustainability targets. The training course also offers recommendations for handling an increased demand for electric mobility and is intended to encourage participants to incorporate various sustainability aspects into their daily work.

One of the key tasks of the members of Mercedes-Benz Group AG Supervisory Board is to monitor the implementation of our sustainable business strategy. It’s 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). In order to ensure the provision of such information, ESG topics are regularly addressed during the joint meetings of the Board of Management and the Supervisory Board. ESG experts from our specialist departments are brought in when such topics are discussed. Our various management and supervisory bodies also regularly exchange information with our Advisory Board for Integrity and Sustainability on the progress made in the implementation of our sustainable business strategy.

Policies, standards and principles

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Integrity, compliance and legal responsibility are the cornerstones of our sustainable corporate governance and serve as the basis of all our actions, as defined by our Integrity Code. The Integrity Code is supplemented by other in-house principles and policies.

The “House of Policies” is our digital platform for policies. All the internal policies and works agreements at the Mercedes-Benz Group are compiled here in a user-friendly database that is accessible to all employees. The policies are available in several languages. Here our employees can also access a compact web-based training course about the policies, and the Group companies can receive advice about local policy management.

We also use the ten principles of the as a fundamental guide for our business operations. As a founding member, the Mercedes-Benz Group is strongly committed to the UN Global Compact.

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 Organization (ILO), the Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights. Within the framework of our participation in the UN Global Compact, our specialist units are active in a variety of working groups — for example, regarding transparency, reporting and responsibility in global supply chains.

Risk and opportunity management

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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. A risk is understood as the danger that events, developments or actions will prevent the Group or one of its divisions from achieving its targets. This includes monetary and non-monetary risks. At the same time, it is important to identify opportunities in order to safeguard and enhance the competitiveness of the Mercedes-Benz Group. An opportunity is understood as the possibility, due to events, developments or actions, of safeguarding or surpassing the planned targets of the Group or of a division.

In order to identify these risks and opportunities at an early stage and to 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 company’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 noted within an observation horizon of up to five years. The employees responsible for risk management have the task of defining measures and, if necessary, initiating such measures to avoid or reduce risks or to protect the Group against them. Within 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 fixed component of the Group-wide planning, controlling and reporting process. It is designed to sustainably support the achievement of the corporate targets and to ensure risk awareness at the Group. The sustainability aspects are integrated into the Group-wide risk management process at the Mercedes-Benz Group. These aspects are understood as conditions, events or developments related to the environment, social issues or corporate governance (ESG) whose occurrence could actually or potentially impact the earnings, financial position, asset situation and reputation of the Mercedes-Benz Group. Circumstances categorised as environmental issues include CO2 emissions, extreme weather events, waste prevention and recycling.

Labour law standards, occupational and product safety, product liability and suppliers’ compliance with labour law standards are examples of circumstances categorised as social issues. The area of corporate 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 non-financial aspects in accordance with the CSR Directive Implementation Act (CSR-RUG) do not exist from today’s perspective. One non-financial risk with reporting relevance in terms of integrity and compliance was identified during the reporting year. Further non-financial risks with reporting relevance do not exist from today’s perspective. Climate-related risks and opportunities that are related to the recommendations of the are part of the Environment unit’s responsibilities and are therefore also identified and evaluated during 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 that has been 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 reported immediately. The divisions pass along this reporting information to the corporate risk management unit, which presents it to the Board of Management, the Audit Committee and the Supervisory Board.

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 consists of representatives from Accounting & Financial Reporting, the Legal Affairs department, Compliance, Corporate Security and the Management Board members responsible for finances at Mercedes-Benz Group AG, Mercedes-Benz AG and Mercedes-Benz Mobility AG. It is headed by Mercedes-Benz Group AG Board of Management members who are responsible for Finance & Controlling/ Mercedes-Benz Mobility and Integrity and Legal Affairs. The Internal Auditing department takes into account material findings via the internal controlling and risk management system.

Stakeholder dialogue

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The Mercedes-Benz Group attaches great importance to engaging in a dialogue with its interest groups. This allows the group to consider various perspectives on our involvement with sustainability issues, identify and address new trends and share experiences. We also want to engage in discussions of controversial topics at an early stage. We focus on conducting a dialogue that is fruitful and productive for all the parties involved.

Our knowledge of our stakeholders is a prerequisite for this. Stakeholders are individuals and organisations that have legal, financial, ethical or ecological claims on or expectations regarding the company. Whether an individual, organisation or group is a stakeholder of the company depends on the extent to which decisions of the Group influence them or, conversely, the extent to which they can influence the Group’s decisions. Thus the primary stakeholders are our customers, employees, investors and suppliers. We also communicate regularly with groups in civil society such as non-governmental organisations, as well as associations, trade unions, the media, analysts, municipalities, residents in the communities where we operate and representatives of science and government.

Exemplary instruments of our Stakeholder-Management approach

Examples of instruments of our stakeholder dialog (Graphic)

Areas of responsibility and communication channels

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In order to implement the dialogue with our stakeholders throughout the Group, the Mercedes-Benz Group has defined clear areas of responsibility, communication channels and specific dialogue formats. These various dialogue formats are initiated by experts from the Integrity and Legal Affairs division and other divisions such as the External Affairs (EA) unit. For example, EA organises political dialogues. The Integrity and Legal Affairs unit coordinates the Sustainability Dialogue. Our sustainability committees, the Group Sustainability Board and the Sustainability Competence Office manage other dialogue activities.

Dialogue formats

The Group uses various dialogue formats to engage in a dialogue with our relevant stakeholders. For example, we organise our Sustainability Dialogues annually and conduct stakeholder surveys, specialist conferences and thematic dialogue sessions that can also take the form of workshops or are held by the Advisory Board for Integrity and Sustainability. On the other hand, the latest discussions in the public sphere are followed. We keep ourselves up to date on the associated expectations by participating in industry-specific and cross-industry networks and initiatives. Studies and other scientific publications are also evaluated and our own media analyses conducted. These measures help the Group to identify developments and the associated expectations in areas beyond the dialogue events that have been initiated.

The Sustainability Dialogue

One essential tool of the dialogue with the stakeholders is the Sustainability Dialogue, which has been held annually in Stuttgart since 2008 and brings various stakeholder groups together with members of the Group Board of Management 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 themes take up the momentum generated by the participants and work together with the stakeholders to incorporate these ideas into their work. They then report at the event in the following year on the progress made in the interim.

In 2021, as in the previous year, we held the two-day Sustainability Dialogue via a digital meeting platform due to the covid-19 pandemic. Five representatives of the Board of Management of Mercedes-Benz Group AG presented a comprehensive status report. The public section of the meeting on the first day was broadcast over the Internet for the first time. More than 700 interested viewers followed the panel discussions live and were able to join the discussion and pose questions via a platform. Over 200 external and internal participants in a total of seven working groups engaged in discussions of various topics. One of the topics discussed was what the resolutions of the United Nations Climate Change Conference COP26 in Glasgow mean for the company. What joint efforts are necessary to achieve a more sustainable supply chain was a further topic.

As a globally operating company, the Group has set itself the goal of establishing sustainability at its business units and specialist units all over the world. For this reason, we organise Sustainability Dialogue events in other countries and regions as well. Such international dialogue events have been held in China, Japan, the United States and Argentina. During the reporting year, more than 160 stakeholders participated in the Sustainability Dialogue in Beijing (China), which was organised as a hybrid event (virtual and in-person). Along with keynote presentations by two Mercedes-Benz Group AG Board of Management members who talked about the Group’s sustainable business strategy and initiatives in China, the event also featured a keynote presentation by an external expert about responsible management of data in China, and a panel discussion focusing on traffic safety in connection with new technologies..

The Advisory Board as an important source of support

The Advisory Board for Integrity and Sustainability has been a source of input for the Group’s sustainability activities since 2012. The board’s members are independent external experts from the fields of science and business, as well as from civic organisations. They also possess specialised knowledge regarding environmental and social policy, the development of transport, traffic and mobility, and various human rights and ethical issues. The board’s members offer us constructive criticism in questions related to integrity and corporate responsibility. The Advisory Board meets three 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 annual meetings focuses in particular on discussions with other Board of Management members and members of the Supervisory Board. A regular exchange between the Advisory Board, company managers and employees takes place in other meetings that are devoted to specific topics. In 2021, the Advisory Board dealt with a range of issues, among them social compliance, sustainable finance and the transformation of the automotive industry, including its social aspects — for example, the balance between climate protection and the preservation of jobs.

Sustainable investment

Sustainability criteria () are becoming increasingly important for asset management. This trend is also reflected by the increasing number of investors who have committed themselves to the which were presented in 2006. The share of ESG-based investments on the equity and debt markets is continuously increasing.

One of the key drivers of this development has been the global regulatory framework, which is increasingly gaining momentum, especially in Europe, where the EU initiated an Action Plan on Financing Sustainable Growth in 2018 and has also announced plans for a European Green Deal. The trend is also being reinforced by higher demand for ESG investment funds among both institutional and private investors. Sustainability is no longer viewed solely as a way to minimise risks to shareholders and asset managers on the basis of social, environmental and governance criteria but also increasingly as a good investment opportunity in and of itself. That’s because the trend towards a more sustainable economy also offers companies the opportunity to set themselves apart from their competitors as they seek to attract equity and external investment.

In order to differentiate themselves positively here, the companies need to implement sustainable business strategies, set ambitious goals and ensure transparent ESG reporting along the entire value-added chain. The associated requirements regarding the transparent disclosure of data by companies are also leading to the use of a variety of reporting frameworks. 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 . Meanwhile, the extent of statutory disclosure obligations is also continually growing — for example, as a result of the and the ongoing development of legislation concerning non-financial reporting. ESG reporting is thus becoming increasingly complex and demanding.

Financing the sustainable business strategy

The sustainable business strategy of the Mercedes-Benz Group requires substantial investments. It’s therefore, among other things, our goal that our shares are viewed on the capital market as a sustainable investment. This proves our commitment to the sustainable transformation of our company in terms of our business operations, our environmental policies and our commitment to society. In order to disseminate this message, we maintain a continuous dialogue with players on the capital market as representatives of investors in equity and debt. We conduct this dialogue via platforms such as ESG conferences and ESG roadshows and we also engage in individual talks with investors and investor initiatives.

The Investor Relations unit at Mercedes-Benz Group AG works closely together with the company’s in-house sustainability experts and is also integrated into the relevant committees. This is our response 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.

Our external reporting focusses on reporting standards that are relevant to our investors (including TCFD, SASB, GRI), and we continuously monitor the way the ESG-related requirements of our investors are developing.

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, we have been using the CDP standards to disclose data concerning climate-related activities for more than 15 years. In 2021, we once again made it into the Leadership category in the CDP climate rating system with an “A”-rating. We were also able to significantly improve our MSCI and Sustainalytics results in the reporting year. We were issued an “A”-rating from MSCI, and in Sustainalytics we take a leading position among the comparable group of automakers. Our 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 to provide the rating agencies with information as appropriate. We intend to continue the ongoing development of our external reporting, close any gaps and initiate internal change processes.

In 2020, we developed a company-wide Green Finance Framework in order to position ourselves even more effectively as a sustainable company for investments and to enable ourselves to exploit the opportunities that ESG-based capital offers for corporate development. This framework makes it possible for us to finance investment in sustainable technologies in a targeted manner — for example, through bonds and loans. On the basis of the Green Finance Framework, we issued green bonds with a total volume of €2 billion in September 2020 and March 2021.

The framework is based on the voluntary process guidelines — the Green Bond Principles — of the International Capital Market Association (ICMA). The Green Finance Framework was presented in 2020 in a virtual roadshow and has attracted a great deal of interest among investors. The framework received certification with the highest rating — “Dark Green” — from the Center for International Climate and Environmental Research (CICERO) in 2020.

Sustainable investment of pension assets

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 our selection process for capital investments. When we make sustainable investments, we also take the associated risk and return aspects into account.

In Germany, the capital investment process for most of our German pension assets is handled by asset managers to whom we grant individual mandates. Within the framework of our sustainability concept, we are increasingly making sure that the investment process takes sustainability aspects into account and makes them transparent, and we work exclusively with investment managers who have signed the UN Principles for Responsible Investment. We also use a negative list to exclude investing in companies and countries that do not fulfil our core requirements. We expanded our ESG-themed investments in 2021. In addition, we are focussing on more extensively integrating sustainability aspects, via benchmarks as well, into our active equity mandates, and we also plan to establish an ESG reporting system.

The measures we have implemented as part of our sustainability concept are regularly assessed and adapted to current developments. Sustainability is also one of the investment principles of Daimler Pensionsfonds AG. For our investments abroad, we take the country-specific requirements into account.

EU taxonomy

One of the important goals of the Commission Action Plan on Financing Sustainable Growth is to divert capital flows to sustainable investments as part of the European Green Deal. This is also the logic behind the EU taxonomy regulation that came into force in mid-2020. This regulation governs the establishment of a standardised and legally binding classification system that defines which economic activities in the EU are considered to be aligned with the taxonomy — and thus environmentally sustainable with regard to the six environmental objectives established by the regulation. Companies are required to apply the taxonomy regulation if they have to draw up a non-financial declaration pursuant to Article 19a or Article 29a of the EU accounting directive, which is implemented in Germany in Section 289b Subsection 1 and Section 315b Subsection 1 of the German Commercial Code (HGB). As a result, the Mercedes-Benz Group is obliged to apply the taxonomy regulation. The proportions of revenue, capital expenditure and operating expenses accounted for by environmentally sustainable economic activities are to be reported on an annual basis. These proportions are determined on the basis of IFRS amounts.

In accordance with an exemption granted by the EU for the regulation’s initial application period, only the proportions of revenue, capital expenditure and operating expenses accounted for by taxonomy-eligible and taxonomy non-eligible economic activities have to be reported in the 2021 reporting year. For an economic activity to be taxonomy-eligible, that activity must be mentioned and explained in further detail in the delegated acts. In addition, only the first two environmental objectives (climate-change mitigation and climate adaptation) are relevant for the current reporting period. Descriptions of relevant activities and technical screening criteria have already been made available via delegated acts. Climate mitigation in particular is to be regarded as the relevant environmental objective for the Mercedes-Benz Group

From 2022, taxonomy alignment will have to be assessed alongside taxonomy eligibility. 

In the future, only taxonomy-eligible activities can be considered as environmentally sustainable activities, or as being taxonomy-aligned, provided they meet certain technical screening criteria. Here, the fulfilment of certain technical screening criteria with regard to the relevant economic activities must make an substantial contribution to an environmental objective defined by the taxonomy regulation and, on the basis of defined “do no significant harm criteria”, also exclude the possibility of significant interference with another environmental objective. In addition, compliance with minimum social standards with regard to occupational safety and human rights must be ensured.

Through its descriptions of economic activities in the delegated acts, the taxonomy regulation specifies which activities are basically taxonomy-eligible. The Group used these descriptions as a basis for determining whether, and to what extent, specific economic activities are taxonomy-eligible. Activities such as manufacture of low carbon vehicles and activities in the “transport” sector involving low carbon transport solutions for people and goods were identified as being taxonomy-eligible. Thereby, outside the technical screening criteria, the taxonomy regulation does not define low carbon.

In a draft document that the European Commission published on 2 February 2022 in order to clarify open interpretation questions that have arisen as a result of the EU taxonomy (“Draft Commission notice on the interpretation of certain legal provisions of the Disclosures Delegated Act under Article 8 of EU Taxonomy Regulation on the reporting of eligible economic activities and assets”, hereinafter “Interpretation Document”), the Commission stated that the term “low carbon” only relates to the assessment of taxonomy alignment within the framework of the technical screening criteria and is not relevant for reporting on taxonomy eligibility in the current reporting period, and is therefore not taken into consideration by Mercedes-Benz Group AG for the depiction of the taxonomy-eligible proportions.

With regard to car manufacturers in particular, question nine of the document shows as an example that the activity “manufacture of low carbon vehicles” also includes vehicles with combustion engines. At the same time, the document shows that reporting on taxonomy eligibility generally does not yet amount to an assessment of environmental sustainability within the framework of taxonomy alignment. For Mercedes-Benz Group AG, this clarification by the European Commission means that the manufacture of all Group vehicles is reported as taxonomy-eligible in financial year 2021.

For reasons of transparency, we are also already voluntarily reporting this year on the proportions of vehicles with emissions below 50g CO2/km per vehicle (in accordance with the WLTP) as defined in the technical screening criteria. All battery-electric vehicles and all plug-in hybrid vehicles that emit less than 50g CO2/km are accordingly considered to be low carbon vehicles. By disclosing the proportions of these low carbon vehicles, we are already adopting an important measure for taxonomy alignment reporting that will not become mandatory until 2023. Additional measures for achieving taxonomy alignment will include the reviews of compliance with the “do no significant harm criteria” and minimum social standards.

Mandatory reporting on taxonomy eligibility

The individual figures for revenue, capital expenditure and operating expenses are precisely allocated to a specific economic activity and environmental objective. This prevents double counting.

Scope of companies to be included

Overview of the proportions of taxonomy-eligible economic activities

 

Absolute total (denominator)
in millions of euros

Proportion of taxonomy-eligible economic activities
in %1

Proportion of non-taxonomy-eligible economic activities
in %1

Revenue

133,893

99%

1%

Capital expenditure

27,946

100%

0%

Operating expenses1

6,576

100%

0%

1

The key figures were audited in the form of a limited assurance.

Generally, we include all consolidated Group companies in the calculations for Group key figures. However, companies that are included in the consolidated financial statements using the equity method are excluded here.

Revenue

For the share of taxonomy-eligible revenue, the taxonomy-eligible revenue is considered in relation to the total revenue of the Group.

In this process, the denominator takes into account all the revenue generated at the Group companies that are to be included in the calculations, with the exception of companies that have been separately disclosed as discontinued operations in the statement of income. This revenue, as disclosed in the consolidated statement of income, amounted to €133,893 million in the 2021 reporting year.

The numerator was calculated by examining this revenue to determine how much of it was generated in connection with manufacturing or the leasing/financing of vehicles. This applies to almost all of the revenue generated by the Mercedes-Benz Group.

Capital expenditure

For the share of taxonomy-eligible capital expenditure, the taxonomy-eligible capital expenditure is considered in relation to the total relevant capital expenditure of the Group.

According to the taxonomy regulation, the denominator of the key figure for capital expenditure is calculated by taking into account all additions to intangible assets, equipment on operating leases and property, plant and equipment, as well as additions to rights-of-use assets as defined in International Financial Reporting Standard (IFRS) 16 including the additions to the named assets within the framework of corporate acquisitions. Goodwill acquired is not taken into account here. If a divestment is planned, capital expenditure on non-current assets is only taken into account until the point in time at which they were first classified as available for sale or disbursement in accordance with IFRS 5. The relevant additions to the assets to be taken into account amounted to €27,946 million in the 2021 reporting year.

According to the aforementioned interpretation document by the European Commission, the definition of an economic activity is characterized by the achievement of an output. In line with our business model, the numerator was therefore determined by examining whether capital expenditure is needed for the manufacture of vehicles or in connection with transport solutions for people and goods. This applies to nearly all of our capital expenditure.

Operating expenses

For the share of taxonomy-eligible operating expenses, taxonomy-eligible operating expenses is put in relation to the relevant operating expenses of the Group.

The operating expenses to be taken into account in the denominator include non-capitalised research and development expenditure and expenses from shortterm leasing agreements. In addition, expenditure from building renovation measures and certain maintenance and repair expenses relating to property, plant and equipment in accordance with the delegated act specifying Article 8 of the taxonomy regulation are included. These components of the relevant operating expenditure were collated exclusively from our manufacture companies on the basis of materiality considerations. The operating expenses at the Group companies that are to be taken into account are included, with the exception of companies that have been separately disclosed as discontinued operations in the statement of income.

According to the approach taken for capital expenditure, the relevant operating expenses were also examined here for the determination of the numerator on the basis of the materiality considerations mentioned above to determine whether they are related to the manufacture of vehicles. This applies to nearly all of our operating expenses.

Voluntary reporting on the proportions of low carbon vehicles (below the limit value of 50g CO2/km)

 

Proportion of economic activities relating to low carbon vehicles1

Proportion of economic activities relating to non low carbon vehicles1

Revenue

7%

93%

Capital expenditure

21%

79%

Operating expenses

24%

76%

1

The key figures were audited in order to obtain limited assurance.

Revenue

In order to additionally calculate the proportion of economic activities relating to low carbon vehicles, revenue was examined to determine the extent to which it was generated with low carbon vehicles. For the major proportion of the revenue, in particular from the new and used-vehicle business and leasing and sales financing activities, a direct attribution was made of the amount of revenue accounted for by low carbon vehicles. With regard to other revenue components, especially revenue from the spare-parts business and service and maintenance contracts, or attribution of discounts granted for large procurement volumes, it is not possible to directly and clearly match revenue to low carbon vehicles. In these cases, suitable allocations were therefore used for the various revenue components. These classifications are based on current or historical vehicle sales data or production volume data for the fleet that is currently on the market.

By the end of this decade, Mercedes-Benz intends to be all-electric wherever market conditions allow. With the step from electric-first to electric-only we are accelerating the transformation and laying the foundation for the achievement of our climate-protection goals. Further information can be found in the Environmental Issues section. In line with this strategy and the associated planned sales figures for low-emission vehicles, we expect the share of the revenue generated by low carbon vehicles to rise considerably in the years ahead.

Capital expenditure

In order to additionally calculate the proportion of economic activities relating to low carbon vehicles, capital expenditure was examined to determine the extent to which it is associated with low carbon vehicles. For most of the capital expenditure relating to the industrial business, a direct attribution was made to all-electric or low carbon hybrid-vehicle projects. In the case of capital expenditure in assets that are used to produce both vehicles with combustion engines and low carbon vehicles, suitable allocations based on planned vehicle sales figures for the respective model series or vehicle platforms were used. Our capital expenditure on low carbon vehicles features a start of production within the deadline specified by the EU taxonomy regulation and is embedded in the investment planning approved by the Board of Management and the Supervisory Board. Capital expenditure that is not directly related to the manufacturing process was allocated on the basis of the planned sales figures for low carbon vehicles. With regard to financial services, it is possible to match the additions to the leased products directly to low carbon vehicles.

The share of capital expenditure for low carbon vehicles is mainly impacted by the additions to the equipment on operating leases. As a result, this share only partially reflects our capital expenditure in sustainable products for the future. A separate additional review of capital expenditure in capitalised research and development expenditure on low carbon vehicles, and capital expenditure in other intangible assets and property, plant and equipment of the Mercedes-Benz Group in connection with low carbon vehicles, shows much higher shares of capital expenditure in low carbon vehicles. 

On the basis of our “electric-only” strategy, we intend to significantly increase these investments in the coming years.

Operating expenses

In order to additionally calculate the proportion of economic activities relating to low carbon vehicles, operating expenses were examined to determine the extent to which they are associated with low carbon vehicles. The non-capitalised research and development expenditure can mostly be directly incorporated into the calculation of the numerator on the basis of its allocation to all-electric or low carbon hybrid vehicle projects. Appropriate allocations based on anticipated future sales figures of the low carbon share of the model series or the vehicle platform were used for research and development expenditure that cannot be directly allocated (model series or vehicle platforms that include plug-in hybrids as well as purely combustion engine vehicles).

The table Voluntary additional figures on the proportion of economic activities at the Mercedes-Benz Group relating to low-carbon vehicles shows the component of our expenditure on non-capitalised research and development expenditure for low carbon vehicles. Other components of the relevant operating expenditure were recorded exclusively at our manufacture companies on the basis of the materiality analyses. Here as well, it was not possible to achieve a direct match to low carbon vehicles. The inclusion in the numerator is based on suitable allocations of current production volumes.

Voluntary additional figures on the proportion of economic activities at the Mercedes-Benz Group relating to low-carbon vehicles1

 

Capital expenditure
(CapEx)

Operating expenses
(OpEx)

Capitalised research and development expenditure

> 40%

 

Non-capitalised research and development expenditure

 

> 25%

Investments in property, plant and equipment as well as on other intangible assets

> 35%

 

1

The key figures were audited in order to obtain limited assurance.

Tax obligation

GRI 103-1/-2/-3

GRI 207-1/-2/-3

The Mercedes-Benz Group views itself as a responsible company that strives to meet its global tax obligations while taking into account its social and ethical responsibility.

The Group tax strategy is oriented according to the following principles in particular:

  • By our actions, we aim to ensure that Group companies meet all of their tax obligations and integrity standards through the use of measures such as efficient, high-quality and reliable expertise, processes, systems, methods and controls.
  • We live an active risk management system for the Group and its relevant employees through the application of an appropriate Tax Compliance Management System (Tax CMS).
  • In line with the principle of being a good corporate tax citizen, we follow legal, proactive and non-aggressive tax planning activities on the basis of economic considerations (“tax follows business”). We also strive to work cooperatively, transparently and constructively with the tax authorities. In the process, we maintain our legal standpoints and defend our interests wherever we believe such actions are appropriate and legitimate.

The Group’s tax strategy defines the limits of our actions, and this strategy is further specified and implemented by means of organisational and content-related policies, provisions and instructions.

Our tax policies define the responsibilities, tasks and obligations of those individuals in the Group who deal with tax issues and also contain specific provisions for ensuring that legal requirements are met. In this manner, they also make the responsible employees throughout the Group more familiar with tax issues. Our Code of Conduct stipulates that all intentional violations of internal and/or external tax provisions 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 rule violation policy.

The Mercedes-Benz Group has established a Tax Compliance Management System (Tax CMS) in order to ensure effective tax compliance throughout the organisation. The Tax CMS is a separate sub-unit of our general Compliance Management System.

The Tax CMS also includes an active tax-risk management system tasked with monitoring, checking and supporting the fulfilment of tax obligations. The goal of this consistent Group-wide risk management system 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 our risk management policy. No significant violations of these regulations regarding the tax laws became known to us in the reporting year.

Provider/Privacy

Mercedes-Benz AG Mercedesstraße 120
70372 Stuttgart
Germany
Phone: +49 7 11 17-0
E-Mail:
dialog@mercedes-benz.com

Represented by the Board of Management: Ola Källenius (Chairman), Jörg Burzer, Renata Jungo Brüngger, Sabine Kohleisen, Markus Schäfer, Britta Seeger, Hubertus Troska, Harald Wilhelm

Chairman of the Supervisory Board: Bernd Pischetsrieder

Court of Registry: Stuttgart; commercial register no. 762873
VAT ID: DE 32 12 81 763

Customer journey

The customer journey refers to the various stages of a (potential) customer’s interaction with a product, brand or company via various touchpoints.

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UN Global Compact

The United Nations (UN) Global Compact is a pact concluded between companies and the UN in order to make globalisation more socially and environmentally friendly. The companies regularly report to the UN on the progress they make.

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OECD

Based in Paris, the Organisation for Economic Cooperation and Development (OECD) is an international organisation encompassing 37 member countries that are committed to democracy and a market economy.

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Task Force on Climate-related Financial Disclosures (TCFD)

The Task Force on Climate-related Financial Disclosures (TCFD) is a corporate reporting initiative that was created by the Financial Stability Board. Its long-term goal is to incorporate climate-related opportunities and risks into companies’ business and financial reports. To this end, it published recommendations in 2017 on how businesses should conduct uniform climate reporting.

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ESG criteria

The acronym ESG stands for Environment, Social and Governance. Within the context of sustainable finance, this abbreviation is used when investment decisions take into account environmental, social and responsible governance aspects.

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UN Principles for Responsible Investment (PRI)

The six UN Principles for Responsible Investment were initiated by an international investor network. They aim to make it easier to understand the effects of investment activities on ESG issues and help the signatories to take ESG criteria into account in their investment decisions.

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Sustainability Accounting Standards Board (SASB)

The Sustainability Accounting Standards Board (SASB) is a non-profit organisation in the United States that has developed sector-specific standards for sustainability reporting.

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EU taxonomy

EU taxonomy (also referred to as Sustainable Finance Taxonomy) is a classification system that was developed by the European Commission in order to create a shared understanding of the sustainability of business operations within the EU. The aim is to assess business activities throughout the EU according to their sustainability in order to facilitate corresponding financial decisions.

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