ESRS G1 – Business Conduct

ESRS 2 SBM-3 – Material Impacts, Risks and Opportunities and Their Interaction with Strategy and Business Model

Material Impacts, Risks and Opportunities

Within the scope of our materiality assessment, we identified two material impacts, risks and opportunities (IROs) related to business conduct:

• Violations of applicable bribery and corruption regulations undermine the confidence that relevant stakeholders place in the company’s integrity
• Positive impacts on employees through the Code of Conduct and the development of a corresponding corporate culture

The two IROs are closely linked to our strategy, as adherence to our Code of Conduct and the promotion of a corporate culture aligned with it can be positively influenced internally through strategic initiatives and targeted measures. By ensuring that our Code of Conduct is put into practice, we reduce the potential for violations of bribery and corruption regulations. Disregarding these regulations may result in strategic adjustments.

Moreover, our corporate culture and Code of Conduct have direct impacts on people, especially our employees, who benefit from a culture of trust and respect, business conduct that considers the interests of all parties and strict adherence to legal requirements. The negative impact also has direct implications for our employees and other stakeholders (e.g., business partners, customers, shareholders).

Violations of bribery and corruption regulations can have a negative impact on the trust placed in Vonovia’s integrity and accountability, particularly with regard to the reliability of management decisions, governance structures and the effectiveness of the compliance culture. Consequently, violations of this nature could have a negative impact on Vonovia’s reputation, which could present various challenges for the business model, mainly a decline in its appeal as an employer or a scenario in which shareholders and business partners decide they no longer wish to be involved with Vonovia. As a result, any reported violations are promptly investigated and, if necessary, sanctioned. Further details can be found in the “Resilience of Our Business Model” section and under Disclosure Requirement G1-3.

A strong corporate culture, on the other hand, can enhance our appeal as an employer and help address the challenge of skilled labor shortages as well as promoting equality of opportunity (also because the Code of Conduct bans any sort of discrimination).

Our corporate culture strategies have to be viewed in the context of our HR strategy (see ESRS S1).

Resilience of Our Business Model

In general, the resilience of Vonovia’s strategy and business model is analyzed and evaluated annually as part of risk management (see ESRS 2 GOV-2). To evaluate the resilience of our business model in managing our material impacts, we continuously monitor potential violations of our Code of Conduct and the number of confirmed cases of corruption and bribery. Analyses from past reporting periods indicate that our systems for detecting bribery, corruption, and violations of the Code of Conduct remain effective in the short, medium and long term. Reported violations are promptly investigated and, if necessary, sanctioned. In the event of a serious corruption or bribery incident, appropriate and effective measures are implemented, including internal investigations into each allegation. The necessary resources are immediately allocated by the Management Board. We also take a preventive approach by raising awareness of compliance topics among employees through mandatory online training on the Code of Conduct and other relevant policies, as well as face-to-face training in some cases. We continuously monitor legal developments to ensure our training programs and policies, such as the Code of Conduct and Anti-Corruption Policy, are promptly updated in response to any regulatory changes. Our annual risk analysis also helps us identify compliance risks and implement mitigating measures. We can therefore conclude that our current measures strengthen the resilience of our business model and ensure that no material risks emerge for our business model. Although the functionality of our measures is assured, complete protection against such incidents cannot be guaranteed.

The revision of our materiality assessment (for details, see ESRS 2 IRO-1) resulted in the following changes regarding the material IROs for ESRS G1:

• The material risk reported in the previous year “Financial risk from corruption and bribery” is no longer classified as material. This is to ensure consistency and connectivity between the Sustainability and Risk Reports, as this risk is not classified as material in the latter. As no material financial impacts resulting from potential bribery and corruption incidents are expected at Vonovia, this risk is not classified as material and is not included in the Sustainability Report.
• The negative impact “Violations of applicable bribery and corruption regulations undermine the confidence that relevant stakeholders place in the company’s integrity” was classified as material in the current fiscal year. Although no material financial effects are expected to arise due to potential violations of corruption and bribery regulations, there may be an impact on Vonovia’s various stakeholders if potential violations attract significant media attention. Vonovia addresses this issue by reporting on the material impact of “Violations of applicable bribery and corruption regulations undermine the confidence that relevant stakeholders place in the company’s integrity” in the current fiscal year.