GOV-5 – Risk Management and Internal Controls Over Sustainability Reporting

Organizationally, responsibility for preparing the sustainability statement lies with the department of the Chief Financial Officer (CFO) and, in particular, with the Accounting department in collaboration with Strategy, Corporate Development & Sustainability. Vonovia considers failure to meet legal sustainability reporting requirements to be a material risk associated with the sustainability statement. Appropriate measures have been taken to address this risk, which was identified as part of the Group-wide risk management process: as well as keeping a constant eye on the development of regulatory requirements and ensuring the associated dialogue in associations and working groups, the company places particular emphasis on implementing and establishing robust data collection processes. Controlling is responsible for identifying and preparing key sustainability figures. These include, in particular, key environmental and HR-related figures, as well as the key SPI figures relevant to management. Consistent data quality can be ensured by bundling responsibility in the central Controlling function. Plausibility checks and data quality assurance are carried out by Controlling and Strategy, Corporate Development & Sustainability. Please refer to our Risk Report for information on how we prioritize the risks identified.

The aim of the accounting-related internal control and risk management system is to ensure due and proper and legally compliant financial and sustainability reporting pursuant to the relevant regulations. The accounting-related internal control and risk management system – which includes sustainability reporting – is embedded in the overarching Group-wide risk management system. The Internal Control System (ICS) comprises the basic principles, procedures and regulations aimed at supporting the effectiveness and cost-effectiveness of our business activities, ensuring due and proper, and reliable internal and external accounting, including sustainability reporting, and ensuring compliance with the legal provisions that apply to the company. A separate ICS process, including the associated key controls, is in place for sustainability reporting in line with the requirements that apply to the internal control system. This process is audited and validated annually by the Internal Audit department. For information on the controls implemented for the risks identified, please refer to our Risk Report, in particular the details on the ICS. Risk mitigation strategies are also described in topical standards.

All key processes and key indicator definitions are documented centrally using a data governance tool, as are the corresponding internal controls. This documentation illustrates the relevant process steps and data flows and is supplemented by our risk management tool, which is used to record the material risks and mitigating measures. The implementation of internal controls is documented and audited on a spot check basis by the Internal Audit department. These systems provide the binding basis for subsequent evaluations, audits and reporting to Vonovia’s executive bodies on the effectiveness of the ICS within the meaning of Section 107 (3) sentence 2 of the German Stock Corporation Act (AktG).

As part of the management report, the sustainability statement is submitted to the Audit, Risk and Compliance Committee of the Supervisory Board. The Audit, Risk and Compliance Committee then makes a recommendation for the Supervisory Board to adopt or approve the entire annual and consolidated financial statements. The Supervisory Board examines the combined management report and the sustainability statement. This examination may include discussion with the auditor and is subject to the auditor’s report. The Audit, Risk and Compliance Committee is continually involved in the establishment and refinement of the accounting-related internal control and risk management system, which includes the sustainability information.

The Internal Audit department reports annually to the Management Board on the audit process that has been completed, which includes the sustainability-related ICS process. The Head of Strategy, Corporate Development & Sustainability reports also to the Management Board/CEO at least once a month on sustainability matters and related processes and reporting.