5. Responsibility

Accountability within the company’s management with regard to sustainability is disclosed.

Sustainability is firmly anchored in HOCHTIEF's organization: Various bodies with clear responsibilities are permanently in place - as laid down in the CR guideline. The CR organization includes the CR Committee with the participation of the Board of Management, the Sustainability Competence Team and the CR Staff Office. CR committees also exist in the HOCHTIEF Americas and Asia Pacific divisions. The evaluation and implementation of committee topics and resolutions is just as much a part of CR work as the Group-wide exchange of results. The Turner and CIMIC Group companies have implemented their own operational competence teams, which met several times in the year under review. Data on sustainability is collected via the Group-wide SoFi software, which was rolled out in the year under review.

The CR Committee was established in 2007. One member of the Executive Board attends the meetings. This body has the task of further developing the sustainability strategy. To this end, it identifies CR topics that affect the entire Group and derives general strategic goals from them. In close coordination with the operating units, objectives and measures are developed from this and their implementation and implementation is supported and monitored by the Committee. The committee also assesses the demands of HOCHTIEF stakeholders on the topic and, if necessary, initiates programs and measures to take these interests into account in the strategy and activities. The CR Committee makes decisions within the scope of its competencies and makes recommendations to the Board of Management.

The Executive Board of HOCHTIEF Aktiengesellschaft bears overall responsibility for the topic CR/sustainability. Controlling the department is the task of the CR function, which closely cooperates with all Management Boards and corporate departments.The work of the CR function and different CR committees serves the continuous strategic operational further development of sustainability at HOCHTIEF.

6. Rules and Processes

The company discloses how the sustainability strategy is implemented in the operational business by way of rules and processes.

To firmly anchor our commitment, sustainability is part of HOCHTIEF's vision, the principles of our Group and HOCHTIEF's strategy. This forms the basis for the sustainability strategy.

In addition, binding guidelines and guidelines ensure implementation within the Group. These specifications always comply at least with international standards, comply with applicable laws and regulations and in some cases go well beyond these.

Environmental protection is integrated into the project processes in the operating units. The management systems implemented for this purpose comply with international standards (ISO 14001). The proportion of units in the HOCHTIEF Group certified in accordance with environmental management systems, measured in terms of the number of employees, was 75.3 percent in 2018 (2017: 77.3%). The occupational health and safety management system is certified according to OSHAS 18001.

For information on CR organization, see criterion 5 "Responsibility".

The Executive Board of HOCHTIEF Aktiengesellschaft bears overall responsibility for the topic CR/sustainability. Controlling the department is the task of the CR function, which closely cooperates with all Management Boards and corporate departments.The work of the CR function and different CR committees serves the continuous strategic operational further development of sustainability at HOCHTIEF.

HOCHTIEF realizes a large number of projects that take long-term influences into account. In the case of certified projects (for example by the DGNB or LEED), HOCHTIEF is required to prepare an ecological balance sheet. For projects implemented in a public-private partnership (PPP), we must always carry out a life cycle analysis.

7. Control

The company states how and what performance indicators related to sustainability are used in its regular internal planning and control processes. It discloses how suitable processes ensure reliability, comparability and consistency of the data used for internal management and external communication.

In the course of GRI reporting in the combined Group Report 2018, we have defined indicators for each topic area. For these indicators, data and information were collected Group-wide and consolidated at Group level. This data is checked internally and externally by an auditing institute. The sustainability software SoFi, which was introduced Group-wide in 2015, provides a comparable database.

Occupational safety is a very high priority at HOCHTIEF: the non-financial performance indicator of accident frequency (LTIFR) was established as a key performance indicator as early as 2015. In the reporting year, the LTIFR for HOCHTIEF was 1.37 (2017: 1.23), due to an increase of the number of accidents in the HOCHTIEF Europe division. Our goal is to reduce this rate to 0.9 by 2030.

Key Performance Indicators to criteria 5 to 7

Key Performance Indicator GRI SRS-102-16: Values
The reporting organization shall report the following information:

a. A description of the organization’s values, principles, standards, and norms of behavior.

Sustainability: an integral part of our vision and corporate strategy

HOCHTIEF wants to promote the interaction between economy, ecology and social issues within the company. Sustainability is part of our corporate vision and our guidelines. Sustainability is also integrated as a guiding principle in the Group strategy.

Vision and guidelines: HOCHTIEF is building the world of tomorrow.
Innovation, competence, partnership and transparency characterize HOCHTIEF's business. We are a reliable, trustworthy partner for our customers and rely on quality - in all project phases.
Five principles stand for the Group's canon of values:
underpinned by the principle of safety. Our competent employees achieve HOCHTIEF's success on the basis of these values. That is why we attach the highest importance to human resources work in our companies. They serve as a guide to the convictions and values on which we act at HOCHTIEF. They are specified for our employees in binding guidelines, guidelines and principles of conduct. These comply at least with international standards, comply with applicable laws and regulations and in some cases go well beyond them.

Further information on HOCHTIEF's vision and the Group's principles can be found here.

HOCHTIEF is also a member of various organizations and follows their guidelines and standards.

8. Incentive Systems

The company discloses how target agreements and remuneration schemes for executives and employees are also geared towards the achievement of sustainability goals and how they are aligned with long-term value creation. It discloses the extent to which the achievement of these goals forms part of the evaluation of the top managerial level (board/managing directors) conducted by the monitoring body (supervisory board/advisory board).

HOCHTIEF provides a series of Group-wide tools with which employee suggestions can be recorded and evaluated transparently and easily. Employees of the European units can use the Ideas Room to submit proposals.

In our subsidiary CIMIC, 20% of the amount that could be earned as Short-Term-Incentive was based on performance against safety targets and/or other non-financial measures relevant to the role.

Turner also pays a bonus to employees accredited as LEED professionals. The Chief Sustainability Officer may receive bonus payments in connection with the achievement and communication of emission reduction targets, for example. Turner employees who participate in sustainability initiatives and activities are recognized on the Turner website and through other media.

Key Performance Indicators to criteria 8

Key Performance Indicator GRI SRS-102-35: Renumeration policies
The reporting organization shall report the following information:

a. Remuneration policies for the highest governance body and senior executives for the following types of remuneration:
i. Fixed pay and variable pay, including performance-based pay, equity-based pay, bonuses, and deferred or vested shares;
ii. Sign-on bonuses or recruitment incentive payments;
iii. Termination payments;
iv. Clawbacks;
v. Retirement benefits, including the difference between benefit schemes and contribution rates for the highest governance body, senior executives, and all other employees.

b. How performance criteria in the remuneration policies relate to the highest governance body’s and senior executives’ objectives for economic, environmental, and social topics.

Executive Board compensation for 2018

The system of the executive board compensation is geared to long-term and sustainable corporate management. The total remuneration of the members of the Management Board is determined by the Supervisory Board. The remuneration system for the Management Board is also resolved and regularly reviewed by the Supervisory Board. The Personnel Committee of the Supervisory Board prepares the corresponding resolutions of the full Supervisory Board.

The remuneration of the members of the Management Board for the 2018 financial year is composed of
1. Fixed compensation,
2. Fringe benefits,
3. Pension plan,
4. Variable compensation.

1. The fixed remuneration is paid pro rata as a monthly salary.

2. Fringe benefits include the value of the private use of the company car and benefits worthy of assets to be recognized in accordance with tax guidelines.

3. All members of the Board of Management have received individual contractual pension commitments as a company pension, which provide for the earliest drawdown of the pension from the age of 65. The amount of the pension is determined as a percentage of fixed compensation, the percentage rising with the number of years in office. The maximum amount a member of the Executive Board can receive is 65 percent of their final fixed remuneration. The survivor's pension amounts to 60 percent of the pension entitlement.
4. Variable compensation is intended as remuneration for performance. If targets are not met, variable compensation can be zero. Between 60 and 70 percent of variable compensation is not at the immediate disposal of Executive Board members.This amount is dependent upon de development of future performance indicators and so is aligned to the long-term business performance. In order to determine variable compensation, overall taget attainment is calculated annually on the basis of Group performance in the year concerned in relation to adjusted free cash flow and consolidated net profit.

Overall target fulfillment can range between zero and 200 percent of the budgeted amount. The Supervisory Board has the right to increase or decrease the overall degree of target achievement resulting from the achievement of the economic targets, while assessing the achievement of agreed strategic targets. The variable remuneration achieved is met by three variable components as follows:

a. Short-term Incentive Plan (STIP) , paid out in cash;
b. Long-term Incentive Plan I (LTIP I) , paid out by transfer of shares in HOCHTIEF AG in the net amount subject to a two-year bar;
c. Long-term Incentive Plan II (LTIP II) , paid out by the granting of an annual long-term incentive plan.

Key Performance Indicator GRI SRS-102-38: Annual total compensation ratio
The reporting organization shall report the following information:

a. Ratio of the annual total compensation for the organization’s highest-paid individual in each country of significant operations to the median annual total compensation for all employees (excluding the highest-paid individual) in the same country.

In 2018, the Group-wide ration between the total annual compensation of the 
Chief Executive Officer and the mean employee compensation was 86,76.

HOCHTIEF is an internationally active group with branches and subsidiaries in a wide variety of regions around the world. The respective cultural differences and living conditions make a representative comparison difficult, since, for example, a different compensation system exists in America than in Europe or Australia. 

9. Stakeholder Engagement

The company discloses how the socially and economically relevant stakeholders are identified and integrated into the sustainability process. It states whether and how an ongoing dialogue takes place with them and how the results are integrated into the sustainability process.

A transparent approach and continuous dialog with our various interest groups is very important to us. HOCHTIEF is in regular contact with all stakeholder groups.

A detailed description of our stakeholder management approach can be found on CR Organization - HOCHTIEF.

HOCHTIEF has identified stakeholders as those groups that have a significant impact on HOCHTIEF's economic, ecological and social performance and could have a significant impact in the future, as well as those groups that are materially affected by the Group and could be affected in the future. In particular, experience from our long-standing customer relationships, project business, communication work and regular market surveys were taken into account.

HOCHTIEF's stakeholder groups: analysts, shareholders, bank representatives, investors, journalists, clients, suppliers, employees, neighbors and local residents, subcontractors, schoolchildren, students and graduates, the state and government, universities and colleges, associations and NGOs, academia.

Further information about the identification process of the stakeholder group can be found in Stakeholder management at HOCHTIEF. Dialogue with different stakeholders takes place in the ongoing business process, when operational and central units of the Group come into contact with the stakeholder groups. Examples of target group specific activities and formats used for the communication in the daily business are active construction site communication with clients, local residents, and subcontractors, employee feedback, press relations. More examples can be found on Stakeholder-Management at HOCHTIEF, page 5.

We use various tools to encourage stakeholder involvement:

Annual materiality analysis:
In order to check the validity of the sustainability focus areas that we have identified and to adapt them where necessary, we have conducted an online survey among selected stakeholder groups on a regular basis for several years. The aim is to establish a relevance assessment and to prioritize the focus areas for HOCHTIEF. The latest materiality analysis confirms the orientation of HOCHTIEF's sustainability strategy. (see Materiality - HOCHTIEF)

Annual CR Stakeholder Day:

At our annual CR Stakeholder Days, we disuss specific CR topics with HOCHTIEF's key stakeholder groups. By involving stakeholders in the development and design of HOCHTIEF's CR activities, we aim to improve our sustainability management. The results are taken into account in HOCHTIEF's CR work and in some cases developed into concrete projects.

Key Performance Indicators to criteria 9

Key Performance Indicator GRI SRS-102-44: Key topics and concerns
The reporting organization shall report the following information:

a. Key topics and concerns that have been raised through stakeholder engagement, including:
i. how the organization has responded to those key topics and concerns, including through its reporting;
ii. the stakeholder groups that raised each of the key topics and concerns.

Stakeholder engagement

A dynamic and reciprocal exchange between the relevant interest groups is of great importance for HOCHTIEF. The knowledge and consideration of the stakeholder perspective contributes significantly to the success of the company and its projects, as already explained in criteria 9.

Strategic stakeholder management:

The selection of key sustainability focus areas is subject to annual internal and external review with regard to business relevance, impacts, and stakeholder interests (see matrix). Materiality analysis in the reporting year revealed a uniform picture across the various survey groups2): Occupational safety and health, green building, resource conservation, and respect of human rights are shown to be highly relevant in terms both of their importance to HOCHTIEF and of their impacts. Unprompted mention was notably made of aspects relating to ecology and working conditions. Internal evaluation by the functions and by HOCHTIEF management confirm this relevance assessment. At the same time, we still see significant responsibility for our company with regard to corporate citizenship. Overall, HOCHTIEF continues to be well placed with regard to the six CR focus areas and is now moving on to specifically process the analysis findings within its CR program.

Operational stakeholder management - example:

At present, a great deal of importance is attached to coordination among all parties involved in the expansion of the A7 motorway north of Hamburg. It is very important for HOCHTIEF that residents and commuters, clients, politicians, subcontractors, later users and other interested parties are always informed at an early stage. The use of social media significantly increases the chances of reaching as many people as possible. "Via Solutions Nord", led by HOCHTIEF, works closely with the Ministry of Transport. The team is in direct contact with journalists, residents and commuters and answer all questions.

10. Innovation and Product Management

The company discloses how innovations in products and services are enhanced through suitable processes which improve sustainability with respect to the company’s utilisation of resources and with regard to users. Likewise, a further statement is made with regard to if and how the current and future impact of the key products and services in the value chain and in the product life cycle are assessed.

Innovative strength as added value

Innovation for project success Innovation is a key factor of competitiveness. Alternative proposals that are custom-developed for construction projects account for a substantial proportion of HOCHTIEF’s project success. That is because they enhance quality, efficiency, and sustainability in our projects. Our outstanding position in this arena is due to our innovative workforce as well as our Group-wide research and development activities. Innovation is one of our guiding principles: We continuously grow our technical expertise and are constantly seeking new ways to optimize. 

The strategic goals of the work HOCHTIEF puts into innovation are to improve operational efficiency and safety as well as to ensure all our operating companies’ competitiveness and the marketability of our services on a long-term basis. At HOCHTIEF, innovation is embedded in project activities. We aim to inspire our employees to adapt improved technologies and processes as well as to generate innovations themselves, thereby contributing to progress. That calls for a flexible organization that can learn, and the tools to support that. It also means maintaining a comprehensive view of the big picture and assessing trends that can impact the construction industry long-term. Chief among today’s trends are new technologies that optimize construction methods, which offer significant opportunities to leverage potential.

Detailed information on HOCHTIEF's innovation organization can be found in the Group Report starting on page 91

New focus for innovation management

HOCHTIEF is currently concentrating on harnessing opportunities presented by digitalization, where fields such as artificial intelligence, virtual reality, machine learning, the Internet of Things, and Industry 4.0 are opening up new opportunities and perspectives. Innovation management, which forms part of the Risk Management, Organization and Innovation corporate department, will further accelerate innovation activities. Our goal is to drive digital processes forward effectively and ensure that all team members are optimally connected. With this in mind, HOCHTIEF established a new organization in 2018: Nexplore.

Innovation focus Building Information Modeling (BIM)

We remain focused on growing expert BIM skills throughout the Group. We want to make the use BIM our standard for all projects in the long term. BIM relies on actively networking all those involved with the help of a 3D computer model, which can incorporate additional information such as schedules and budgets. All parties work in one model so that they can quickly respond to changes in planning—which helps make risk management more effective, especially with complex projects. Thanks to coordinated communications and organization, project operations can be adapted to suit current circumstances while downtime and collisions are avoided. Furthermore, BIM helps in the designing of optimally integrated logistic concepts, ensuring that unnecessary transportation and the greenhouse gases this produces are eliminated. Based on the model, project participants can also calculate the carbon footprint as well as possible savings.

Examples of our innovative projects can be found from page 94 in the Group Report.

CO2 reductions from sustainable construction

Green buildings make a substantial contribution when it comes to cutting carbon emissions. Certified
buildings are made to be resource-efficient, using sustainably produced or recycled materials, contracting out works regionally, and favoring short transportation distances. Social and environmental criteria are included in subcontractor selection. Green buildings deliver considerable benefits during their subsequent operation. According to the World Green Building Council, their carbon emissions are nearly a third lower. In a U.S. study, certified buildings showed an average energy saving of 36% relative to conventional buildings.

Instead of new builds, many HOCHTIEF projects involve converting, modernizing, revitalizing, or refurbishing existing structures. This prevents additional ground surface sealing, preserves the urban skyline, and ensures that materials are reused. Environmental benefits include less transportation, smaller waste volumes, and reduced resource use, while more energy-efficient design significantly improves energy performance. An example is the Werk 4 project in Munich, Germany, where
HOCHTIEF is converting and adding to what was formerly a potato silo. Pulling down the silo would have resulted in a negative energy footprint.

HOCHTIEF handled projects totaling some EUR 8.2 billion in the green building and green infrastructure
segments in 2018 (2017: EUR 7.6 billion).

Key Performance Indicators to criteria 10

Key Performance Indicator G4-FS11
(report also in accordance with GRI SRS): Percentage of assets subject to positive and negative environmental or social screening.(Note: the indicator should also be reported when reporting to GRI SRS)

HOCHTIEF's financial assets pursue the overriding goal of preserving assets. As part of our long-term investment strategy, which is defined by internal investment guidelines, the provisions for this are based on an appropriate balance of the objectives
HOCHTIEF works with external asset managers to invest in various asset classes. As a rule, they check whether an installation is feasible from an environmental, social or governance point of view. Equities that are associated with child labour, for example, are therefore no longer an investment form.