ESRS S1 Own Workforce

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 six material impacts, risks and opportunities (IROs) related to our own workforce:

• Employee satisfaction due to fair remuneration
• Employee satisfaction based on work-life balance
• Employee satisfaction through opportunities for participation
• Lack of a sense of belonging due to insufficient promotion of diversity
• Employee satisfaction through professional development opportunities
• Lower employee turnover and targeted recruitment of skilled workers through working conditions that are tailored to the needs of employees and the company

In order to successfully implement Vonovia’s business strategy and model in all business areas (see ESRS 2 SBM-1), a broad-based workforce comprising highly qualified employees is a must. This is why Vonovia’s HR strategy is aimed at recruiting suitable employees for the company and its new business areas in a targeted manner as well as to retaining existing employees and providing them with further training. This allows the HR strategy to support change processes within the company and support the company with its transformation. It contributes to all material IROs relating to Vonovia’s own workforce. Employee satisfaction plays a key role in this respect. It is influenced by various factors.

The positive impact “Employee satisfaction due to fair remuneration” aims to boost employee productivity and reduce/counteract employee turnover. This is to be ensured through fair and transparent pay for all occupational groups. This impact is directly linked to Vonovia’s business model, as qualified employees are required for the company’s operations and to implement transformation processes, and ensuring competitive pay for these very employees has a direct impact on personnel expenses.

Comprehensive social management, flexible working hours models and appropriate investment in employee issues have a positive impact on “Employee satisfaction based on work-life balance.” This means they can help give the company a competitive edge in terms of recruiting and retaining relevant employee groups.

We prioritize co-determination as a topic in our overarching HR strategy and continuously take action to achieve the positive impact of “Employee satisfaction through opportunities for participation.” Within this context, social dialogue as well as general information for, and representation of, the workforce regarding employee rights, are strengthened by works council members.

We see diversity as an important part of our corporate culture and have made it a firm component of our corporate mission statement. Vonovia’s various business areas, spanning different countries and urban areas, call for a diverse workforce, both professionally and personally, and comprehensive diversity management. This makes promoting diversity essential for our business model. It is a separate component of our HR strategy and addresses the negative impact of a “Lack of a sense of belonging due to insufficient promotion of diversity.” As a result, we take ongoing action to avoid scenarios in which diversity is not given the priority it deserves among managers and in hiring or promotions, for example. If a corporate culture that is free from discrimination is not promoted proactively and only insufficient internal diversity targets are set, this has a direct impact on our employees, e.g., in the form of potential individual cases of discrimination and a reduced sense of loyalty to the company. Promoting diversity will become even more important going forward as the shortage of skilled workers becomes more pronounced. If a lack of a sense of belonging leads to employee turnover and staff shortages, this could have an impact on the continuation of our rental business and the associated service quality. This means that the action Vonovia takes to promote diversity has a material impact on the sense of belonging and, as a result, on reducing this negative impact.

The positive impact “Employee satisfaction through professional development opportunities” results from the long-term career prospects offered by various training and career paths as well as further training opportunities for all Vonovia employees. Well-trained employees in both the technical trades and in commercial positions within our core business are crucial for our business model, especially in light of innovations in business operations with regard to the energy and heating revolution, and new regulatory requirements. We have also established a comprehensive training and development approach as a central component of our HR strategy. First, our efforts serve to increase expertise and knowledge as well as to foster an exchange of experience among employees, which gives them more opportunities for advancement. This results in higher levels of satisfaction and longer staff tenure. What is more, our customers benefit from improved service quality thanks to better trained employees.

The impacts described above mean that implementing a successful HR strategy opens up the material financial opportunity of “Lower employee turnover and targeted recruitment of skilled workers through working conditions that are tailored to the needs of employees and the company.” By securing jobs in the long term and creating fair working conditions, Vonovia can position itself as an attractive employer, enabling it to keep employees at Vonovia as it competes with other companies on the labor market. At the same time, a differentiated and efficient recruitment strategy as well as action to strengthen the employer brand and reputation can have a positive impact on the recruitment of new skilled employees and, as a result, on our transformation and growth process. This can also increase the level of professionalism and innovation potential in the workforce, improve service quality and feed into higher levels of customer satisfaction as a result. Making our employees more likely to stay with our company also reduces employee turnover and, in doing so, reduces transaction costs. As a result, we expect to see a positive impact on our financial position, financial performance and cash flows. The period spanning the current or following reporting year is too short to allow us to pinpoint any major positive financial effects on Vonovia’s financial position.

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). In order to evaluate the resilience of our business model in terms of its ability to cope with the material impacts and opportunities, we monitor the development of our key performance indicator “employee satisfaction” on an ongoing basis. As a central KPI, it provides information regarding our appeal as an employer, which, in turn, is important for the targeted recruitment of skilled workers and for reducing employee turnover. The development in this KPI shows that employee satisfaction remains at a high level. The half-yearly risk assessment carried out by Risk Management identified the shortage of skilled workers as a potential risk with regard to the company’s own workforce. This risk is closely linked to employer attractiveness and employee satisfaction. It is, however, currently considered to be low in terms of both potential damage and probability of occurrence. We can therefore conclude that our existing measures strengthen the resilience of our business model with regard to the workforce, and prevent material risks from emerging for our business model.

Target Groups

All individuals in Vonovia’s workforce who could be affected by the company’s material impacts are covered by the disclosures made in accordance with ESRS 2 and are therefore included in them.

Vonovia’s employees can be split into two categories: employees working in the technical trades and employees with commercial and administrative roles. Only individuals employed by Vonovia are included in the analysis of the workforce affected by those impacts that have been identified as material. Self-employed workers, non-salaried employees, workers of third-party companies and agency workers may be involved in Vonovia’s core business in Germany in both a commercial/administrative and technical/trades-based role. However, our strategic concepts and measures in response to the impacts are primarily applicable to our in-house employees who are directly employed by Vonovia. As they have fixed employment contracts with Vonovia, they are legally bound by our employment agreements and conditions and have access to our company user infrastructure.

The impacts described affect the two groups of employees as follows: Tasks that are central to our value chain – from caretaker work and green space maintenance to the implementation of modernization work – are largely carried out by our own technical and trades employees. Despite a targeted insourcing strategy aimed at ensuring the availability of skilled tradespeople and technical workers on construction sites, the shortage of skilled workers is, however, having a significant impact on the skilled trades at Vonovia. We will therefore only be able to prevent quality restrictions, mounting workloads and, as a result, dissatisfied employees who end up leaving the company, if we manage to position ourselves as an attractive employer.

Our commercial and administrative employees work in particular in administration, customer service and portfolio management in our business areas. As we place particular emphasis on fast and reliable customer service, we have our own customer service centers in Essen, Dresden and Berlin, where over 1,000 employees deal with our customers’ concerns on a daily basis and in several languages. These areas of activity are also being impacted by demographic change, meaning that we expect to see a shortage of qualified staff here, too, in the future.

As part of the transition plans to reduce any negative impact on the environment and achieve environmentally friendly and greenhouse gas-neutral activities, there is an opportunity for Vonovia’s employees to explore new (training) occupations, fields of activity and training areas. Our measures to achieve a greenhouse gas-neutral housing stock by 2045 include the refurbishment of building structures/envelopes and the installation of photovoltaic modules and heat pumps, which require the appropriate technical expertise in the trades for installation and maintenance. Commercial employees also require expertise in areas such as sustainability strategy, innovation management, digitalization and HR, which will also call for corresponding changes to existing job profiles and the creation of new functions. 

Ambitious transition plans combined with a shortage of skilled workers in the areas concerned could, however, create a heavy workload for employees in these areas.

In our Declaration of Respect for Human Rights, we specifically highlight the relevance of global human rights standards to us. Neither we, nor any of our partners tolerate forced or child labor under any circumstances. We also make sure to comply with all relevant legislation in Germany, Austria and Sweden. We make sure that all changes to the law are reflected in our processes. Our Code of Conduct provides clear expectations for how the company and its employees are expected to behave.

We strive for full transparency in our compliance with human rights and all relevant standards along the entire supply chain. Our stakeholders, too, increasingly expect this transparency – from raw material extraction to sales. We therefore oblige external partners and service providers to comply with the following requirements:

• Business Partner Code,
• General Terms and Conditions of Purchasing,
• Vonovia SE’s general terms and conditions for building services
• Vonovia SE’s general terms and conditions for planning services
• Individual agreements as part of our structured supplier management

In the context of the overall statutory framework set out above and thanks to the precautions taken, no cases of forced labor or child labor have come to light at any of our business locations in Germany, Austria or Sweden, or in any area of activity within our value chain. Given the preventive measures taken, we do not anticipate any elevated risk of forced labor or child labor.

Lower employee turnover and targeted recruitment of skilled workers through working conditions that are tailored to the needs of employees and the company presents a financial opportunity for the company in connection with its entire workforce.

The revision of our materiality assessment (for details, see ESRS 2 IRO-1) resulted in the following changes regarding the material IROs for ESRS S1:

• The title of the material positive impact “Promotion of employees’ professional development” used in the previous year has adjusted and is now referred to as “Employee satisfaction through professional development opportunities.”
• In order to provide the best reflection of our HR strategy, the material impacts identified in the previous year, “Employee dissatisfaction due to lack of co-determination,” “Employee satisfaction through co-determination” and “Promotion of diversity in the workforce” were rephrased as “Employee satisfaction through opportunities for participation” and “Lack of a sense of belonging due to insufficient promotion of diversity.” At the same time, the positive impacts relevant to our HR strategy, namely “Employee satisfaction based on appropriate remuneration” and “Employee satisfaction based on work-life balance” were identified as material.
• The material opportunity “Financial opportunity through appeal as an employer” was refined linguistically and renamed “Lower employee turnover and targeted recruitment of skilled workers through working conditions that are tailored to the needs of employees and the company.”