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2016 Sustainability ReportMTU Aero Engines AG
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Table of contents
MastheadPublisherMTU Aero Engines AGEckhard ZangerSenior Vice President CorporateCommunications and Public Affairs
Project management and contact point for questions regarding contentUte SchwingSenior Manager Corporate Online Services, InternalCommunications and [email protected]
AirbusAirbusMTU Aero EnginesJetblue, Airbus, Boeing, IAE,MTU Aero EnginesAirbus BoeingMTU Aero EnginesAirbusMTU Aero Engines Airbus, Bombardier, MitsubishiMTU Aero EnginesAirbusMTU Aero EnginesBauhaus Luftfahrt MTU Aero Engines
Photo creditsCoverPages 2-3Pages 4-5Pages 8-9
Pages 16-23Page 24Pages 25-28Page 29Pages 30-33Page 34Page 37Page 41Pages 42-83Page 85Page 85
Geared Turbofan™ is a registered trademark ofPratt & Whitney.
1 Sustainable governance1.1 Sustainability strategy and organization1.2 Ethics and integrity1.3 Compliance and human rights1.4 Sustained value creation
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2 Responsibility for products and supply chain2.1 Management approach: product responsibility2.2 Innovations2.3 Fuel efficiency 2.4 Climate strategy 2.5 Flight noise 2.6 Product quality and safety 2.7 Responsibility for the supply chain
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3 Environmental protection3.1 Management approach: environmental protection3.2 Energy management 3.3 Emissions 3.4 Water 3.5 Material efficiency and waste
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4 Employees and Society4.1 Management approach: employment4.2 Occupational health and safety4.3 Attractiveness as an employer4.4 Employee development 4.5 Diversity and equal opportunities4.6 Corporate Social Responsibility
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Goals and goal attainment for 2016GRI-Index
Foreword by the Chief Executive OfficerAbout this reportMTU Aero Engines AG
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Foreword by the Chief Executive Officer
We are living in a changing world. Urbanization anddigitalization are shaping our lives and we are be-coming increasingly mobile and interconnected. Atthe same time, climate change and resource scarcityare shifting the very foundations on which we baseour actions. MTU is already engaging with theseongoing developments. As a signatory to the UNGlobal Compact, we are committed to continuouslyimproving the way in which we implement its keyprinciples of protecting the environment, respectinghuman rights, ensuring fair working conditions, andpreventing corruption.
We continuously strive to reduce the environmentalimpact of our production processes and make sen-sible use of natural resources. Sustainability is also our guiding principle across other areas of ourvalue chain. Our working relationships with oursuppliers are based on binding social and environ-mental standards to ensure our joint activities areunderpinned by clear criteria.
To us, sustainability also means applying fair busi-ness practices within our company. MTU offers anattractive working environment for a diverse work-force comprising outstandingly skilled professionalsand managers. In this context, training and devel-oping our employees is particularly important tous, because they are one of the key pillars of oursuccess. This applies equally at all MTU’s locations.As well as continuously developing our company’sleadership culture, we also take full account of theincreasing importance of digitalization in the worldof work.
We hope that this report will provide insights intoour sustainability initiatives at all MTU’s locations,highlighting what we have already achieved andwhat we plan to accomplish down the line. Weintend to continue working across national bound-aries to help advance eco-friendly mobility in thefuture.
We hope you will join us on this journey!
Yours sincerely,
MTU’s commitment to sustainability isdirectly reflected in the way we do busi-ness. We generate sustainable value witha long-term perspective, striving forenvironmental and social improvementsthroughout the entire value chain. Inrecent years, we have been providingdetailed updates on these topics in oursustainability reporting. This is the fifthedition of our sustainability report and,for the first time, it presents our goalsand activities for all the fully consoli-dated sites of the MTU Group worldwide.
We manage our business with a strongsense of responsibility for society andthe environment coupled with the deter-mination to make a key contribution
to rising to the challenges of the 21st century.Product responsibility lies at the heart of our sus-tainability strategy because it is the area wherewe can exert the most influence. The GearedTurbofan™ engines we launched together withour partners in 2016 offer significant reductionsin CO2 emissions and aircraft noise. Powered byGeared Turbofan™ engines, the A320neo is nowflown by the airlines, and the second model inthis engine family also entered regular commer-cial service in 2016. Overall, more than 8,000orders were placed for the Geared Turbofan™engine by the end of 2016. We are continuing to work on additional milestones as part of ourClean Air Engine agenda. We plan to cut CO2
emissions by up to 40 percent and reduce noiselevels by up to 65 percent by 2050. Sustainabilityis a crucial part of our ability to meet future chal-lenges—and that’s why we are resolutely pursuingthe development of eco-efficient engines.
Dear readers,
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Reiner WinklerChief Executive Officer MTU Aero Engines AG
About this report
MTU Aero Engines AGSustainability Report 2016
Reporting in accordancewith GRI
MTU Aero Engines AG has compiled this sustain-ability report to inform its stakeholders aboutcorporate responsibility (CR) within the company.The report provides information about the com-pany’s CR strategy, objectives and performanceand describes the priorities for the various CRspheres of activity in 2016 and the progress madein them. It continues where the previous reportfor 2015 left off and is available for download onour website as a PDF in both German and English.
• MTU Sustainability Report (German)• MTU Sustainability Report (English)
Questions about the report can be addressed to [email protected].
UN Global Compact—Communication on ProgressThis sustainability report incorporates the Com-munication on Progress according to the tenprinciples of the UN Global Compact, a measuredesigned to facilitate stakeholder access to CR-relevant information. Cross-references to theUN Global Compact’s ten principles can be foundin the GRI Index at the end of the report.
Reporting period and scopeof validityThe reporting period corresponds to the 2016calendar year (January 1 to December 31), whichis also the 2016 financial year for MTU AeroEngines AG. To better organize how informationis presented and provide explanatory context forreaders, activities from outside the reportingperiod are also cited in some cases. The reportcovers all of the MTU Group sites that are treatedas fully consolidated in the company’s financialreporting. This includes:• MTU Aero Engines AG, Munich, Germany• MTU Maintenance Hannover, Germany• MTU Maintenance Berlin-Brandenburg,
Ludwigsfelde, Germany• MTU Aero Engines Polska, Rzeszów, Poland• MTU Maintenance Lease Services B.V.,
Amsterdam, Netherlands• MTU Maintenance Canada, Vancouver,
Canada• MTU Aero Engines North America,
Rocky Hill, U.S.• Vericor Power Systems, Alpharetta, U.S.
The 2016 information and key performance in-dicators in the report refer to the above groupreporting entity; any deviations from this are in-dicated. Prior-year figures comprise the Europeanlocations Munich, Hannover, Ludwigsfelde andRzeszów (as indicated), since the integration ofall fully consolidated sites into CR managementwas completed in 2016. There were no signifi-cant year-on-year changes in the company’ssupply chains in 2016.
The Sustainability Report 2016 was drawn up in compliance with the Global Reporting Initiative(GRI) guidelines and meets the GRI G4 standard(“Core” option). Accordingly, we report on all required standard disclosures as well as on man-agement approaches for key aspects and onselected indicators for each aspect (to facilitatecomparison, tables and diagrams are cross-ref-erenced with the corresponding indicator). TheGRI Index at the end of the report indicates howthe contents are mapped to the GRI requirements.A materiality matrix (in Chapter 1, Sustainablegovernance, p.13) presents the sustainabilitytopics that are relevant for MTU and shows howthey are weighted from an internal and externalperspective. It serves as the basis for selectingthe key aspects and performance indicators forthis report.
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Key performance indicators(KPIs)All data and information for the reporting periodwas collected by the relevant departments usingrepresentative methods. Environmental KPIs arecollected via the environmental managementsystems at the individual sites and then consoli-dated centrally in the CR database according toagreed criteria. The HR KPIs are collected andevaluated centrally at the headquarters in Munichfor Germany, and using an electronic HR man-agement system for all non-German sites. Oncethe data is evaluated, it is sent to the CR data-base. All other data is requested from the CRcenter coordinators in the relevant departmentsand compiled centrally in the CR database.Financial KPIs are collected and published inaccordance with the International FinancialReporting Standards (IFRS).
Further informationYou can find supplementary information, moredetailed analyses and older publications online:
• Corporate responsibility at MTU• Compliance at MTU• MTU annual reports
In addition, we regularly report on importantsustainability topics in central MTU publicationsand through various communication channels.
Forward-looking statements
This report contains forward-looking statements.These statements reflect the current under-standing, expectations and assumptions of MTUAero Engines and are based on the informationavailable to management at the present time.Forward-looking statements provide no guaranteethat certain results and developments will actu-ally occur in the future, and they entail risk anduncertainty. Consequently, for a variety of rea-sons, the actual future results of MTU AeroEngines may deviate substantially from theexpectations and assumptions expressed here.MTU Aero Engines assumes no obligation toupdate the statements contained in this report.
The next sustainability report is expected to bepublished in summer 2018, and a non-financialstatement pursuant to the German CSR Guide-lines Implementation Act prior to that, in April2018.
External validation of thereportThe CR reporting for this sustainability report isnot subject to external auditing or validation.The majority of corporate processes that under-lie data collection for CR reporting are certified.
• MTU’s certifications
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MTU Aero Engines AG
MTU Aero Engines in figures
Ziviles Triebwerksgeschäft
Commercial engine business
The engine programs of MTU thatcurrently yield the highest sales
9,0001934
144.7
launched in Munich
employees (including Asia)
company locations around the world
billion euros in sales in fiscalyear 2016
GP7000V2500
GEnxPW2000
for the A320 familiy ofaircraft
for the A380
for Boeing 787 and 747-8
and
CF6-80 for medium- and long-haulaircraft
In the aviation industry, three simple letters stand for top-notch engine technology: MTU. With a workforce ofabout 9,000 people (including Asia) Germany’s leadingengine manufacturer has been providing propulsion systems to power aircraft for more than 80 years now,having become an established global player. The companyengages in the development, manufacture, marketing and support of commercial and military aircraft enginesand industrial gas turbines.
As part of its commercial activities, MTU AeroEngines designs, develops and manufacturesengine modules and components. Its technologi-cal expertise in the field of low-pressure turbines,high-pressure compressors and turbine centerframes as well as manufacturing processes andrepair techniques have made MTU a leading man-ufacturer of subsystems and components in theglobal engine business.
With its products, MTU has content on enginesin all thrust and power categories, from power-plants for small business jets to the world'smost powerful jetliners. The company is a risk-and-revenue-sharing partner in the major com-mercial engine programs. Under the partner-ship arrangements, MTU assumes full develop-ment and production responsibility for the com-ponents and modules forming part of its workshare. Its cooperation partners are the world'sbig-league players in the engine industry—Pratt& Whitney, GE Aviation, and Rolls-Royce.
approx.
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To gird for the future, MTU has taken stakes ina number of significant engine programs and is well positioned in the marketplace. Amongthese future programs are the GP7000 for theAirbus A380 megaliner, the GEnx engine topower the Boeing 787 Dreamliner and Boeing747-8 long-range widebody airliner and theGE9X for Boeing’s 777X. The advanced gearedturbofan™ technology is applied in Pratt &Whitney’s PurePower® engine family. To date,five major aircraft manufacturers have selectedthe PW1000G models to power their latest air-craft. Airbus is offering the PW1100G-JM for theA320neo. Bombardier has chosen the propulsionsystem as the sole engine choice for its C Series,as has Mitsubishi for its MRJ regional jet. Irkutwill equip its MS-21 with the engine. Last, butnot least, Embraer has opted for the PW1000Gfamily as the exclusive powerplant for its second-generation E-Jets. To date, over 80 airlines world-wide have ordered more than 8,000 geared tur-bofan engines.
In the military arena, the company is the GermanArmed Forces’ major industrial partner for prac-tically all engine types flown by them. MTU pro-vides a full range of services, from maturingenabling technologies through developing andmanufacturing engines and engine components,to providing maintenance and comprehensivecustomer support services.
MTU Maintenance, a division of MTU AeroEngines, is one of the top five providers ofmaintenance services for aircraft engines andindustrial gas turbines. With more than 30engine types, it boasts one of the largest port-folios worldwide, including the bestsellers V2500and CFM56, and the world’s largest engine, theGE90-110/-115B. New engine programs arecontinuously added to offer customers the mostpopular variants and to secure the company’sposition in the aftermarket for next generationengines.
MTU Maintenance in figures
Apart from its outstanding technical and engi-neering know-how, customer proximity is one ofMTU’s greatest strengths. A network of locationsin Europe, Asia and North America as well asrepresentative offices, IGT service centers andjoint ventures around the globe ensure that itscustomers’ expectations are fulfilled timely andwith the same high standard of quality. Theseinclude dedicated centers of excellence, e.g. forparts and accessory repairs. In addition, on-siteteams are able to carry out repair jobs at everycorner of the world at short notice.
MTU program work shares dependingon the valuation of the module
4,00017,000
35
employees (approx.)
Shop Visitsover
years of company history
The Munich headquarters
Munich is home to MTU Aero Engines’ corpo-rate headquarters. This is from where thegroup’s subsidiaries and most of its researchand development activities are controlled andwhere military and commercial engine compo-nents are produced in various shops. With itsstake in Pratt & Whitney’s geared turbofanengines, MTU’s production volumes are growingrapidly: Whereas the company manufacturedaround 600 blisks a year so far—for variousengine programs—the total number producedwill exceed 5,000 blisks annually from 2020 on.To cover the demand for titanium compressorblisks, MTU has built a blisk center of excellencethat boasts a high degree of automation and anintelligent control and logistics system. Theshop on the company’s premises in Munichaccommodates the most advanced productionsystem of its kind worldwide.
4,700
up to 20 %
500,000 square meters
employees (approx.)
Commercial engine maintenance
The Munich site in figures
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1 Sustainable governance
We manage MTU’s business in a responsibleand forward-looking manner. Sustainability isalready enshrined in our company as an over-riding principle, and we intend to implementit even more vigorously in our processes in thefuture. Continuous improvement is our goalin every aspect of our CR activities. Long-termvalue creation provides the basis for achievingthis.
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Identified material aspects and boundariesStakeholder engagementEthics and integrityAnti-corruptionPublic policyAnti-competitive behaviorCompliance
Non-discriminationFreedom of association and collective bargainingChild labourForced or compulsory laborAssessmentHuman rights grievance mechanismsEconomic performance
Main GRI aspects covered by this chapter:
1.1 Sustainability strategyand organizationMTU has always demonstrated a sense of res-ponsibility in everything it does. To us, sustain-ability means making environmental and socialaspects part and parcel of our business activities.It means combining long-term business successwith social and environmental responsibility whilealso taking into account our stakeholders’ inter-ests. We have incorporated this responsibility inour annual corporate objectives by declaringthat “sustainability drives our actions.”
Climate change, mobility and scarce resourcesare global challenges that affect society, politicsand the economy—and they are also driving forcesbehind our business. We create products andinnovations that contribute to the sustainabledevelopment of society and the environment.They support our end customers, the airlines, inimproving energy efficiency and reducing emis-sions and aircraft noise.
Our sustainability strategy covers every area ofMTU’s business. It is based on the principle ofmateriality, which means that we give a weightingto each topic to reflect its importance to MTUand our stakeholders. Our strategy takes intoaccount upstream added value and downstreamuse of our products (> Materiality principle, GRIG4-20, 21 in annex). We put product responsi-bility at the heart of our sustainability strategybecause it represents the largest contribution wecan make to sustainable development.
Materiality analysis (GRI G4-18)We focus on key topics that have an impact onthe success of MTU’s business, on society, andon the environment. We identified these topicsusing a materiality analysis and we regularly re-assess them as part of our annual review. Towardthe end of 2016, the CR coordinators reviewedand assessed the topics in an internal workshop.For the first time, we extended our sustainabilitystrategy to all the fully consolidated locations ofthe MTU Group, adding our international sub-sidiaries in the US, Canada and the Netherlands.Two evaluations were carried out prior to theworkshop, one examining sustainability topicsfrom an international perspective to determinetheir current relevance, and the other focusingon top management appraisals from across thegroup. The results were then incorporated in ourmateriality matrix.
Sustainable governance • 1.1 Sustainability strategy and organization
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The materiality analysis covers all our key busi-ness areas and locations as well as the experi-ence and insights gathered from our dialog withstakeholders. Having identified the relevant top-ics, we insert them in a matrix. This materialitymatrix gives a weighting to the topics accordingto their importance from an in-house perspectiveand from the point of view of our most importantstakeholders. We identify our stakeholders’needs and expectations by conducting a dialogwith them and running a survey dedicated to CR topics. The survey questionnaire is availableyear-round on the MTU website and is also sentdirectly to stakeholders.
This year’s updated matrix gives a slightlystronger weighting to aircraft noise in the cate-gory of product eco-efficiency. This reflects theimportant role of noise emissions both for stake-holders—in this case people who live in closeproximity to airports—and for MTU based onstatutory regulations. The inclusion of our NorthAmerican locations has widened our focus tothe entire MTU Group. This has produced a shiftin the topics of diversity and attractiveness as anemployer because diversity has more relevancefor stakeholders in North America than we pre-viously considered it to have for our Europeanlocations. It is also subject to stricter regulationsin the U.S., for example. Attractiveness as anemployer has taken on an even higher prioritywithin the materiality matrix, reflecting the criticalimportance of competing successfully with otherregional employers at our locations in Polandand Canada and at U.S.-based AENA. Occupa-tional safety has taken on increasing importancefor the entire MTU Group. We consider it to bevery important because providing safe work-places is one of the fundamental responsibilitieswe have as an employer.
Our materiality analysis also covers topics thatwill be relevant in the future and that offer op-portunities or risks for our business. The 2016reviews did not add any new topics to MTU’ssustainability agenda. Asked to identify topicsthat would be important to the industry in thefuture, our stakeholders cited topics that MTUhas already taken into account in its currentstrategy. The increasing digitalization of society
Materiality matrix: important sustainability topics for MTU Aero Engines 2016
Relevance for MTU Group
Re
leva
nce
fo
r sta
ke
ho
lde
rs
medium high very high
med
ium
hi
ghve
ry h
igh
Occupational safety
Long-term value creation
Compliance
Productsafety
Product fuel efficiency
Product noise emissions
Product exhaust fumes
Product quality
Innovation
Corporate citizenship
Stakeholder Dialogue Responsible sourcing
Human rights
Demographic change
Attractiveness as an employer
Employee training and development
Environmental management/performance
Diversity
Donating/Sponsoring
Health management
Work-life balance
GRI G4-19
Sustainable governance • 1.1 Sustainability strategy and organization
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and business is gaining momentum and has aclear impact on MTU. We have risen to this chal-lenge and will step up our efforts to address itover the next few years. Digitalization does notchange MTU’s business model, so we have chosen to take an evolutionary approach whilealso evaluating this topic for our sustainabilitystrategy.
MTU’s CR management system
Board of Management
CR Steering Committee
CR Coordination
CR Divisional Coordinators
Sustainable governance • 1.1 Sustainability strategy and organization
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CR-ManagementWe have integrated our responsibility to conductour business in a sustainable manner within theorganization. We use a CR management systemto manage our sustainability strategy, perform-ance and goals. The CR steering committee isan MTU-wide body whose members are drawnfrom the tier-1 senior management team. Thesteering committee reports once a year to theExecutive Board, which decides on the next stepsin the sustainability strategy. As the highest de-cision-making body, the Executive Board is res-ponsible for sustainability at MTU. A central CRcoordination team coordinates the implementa-tion of the sustainability strategy and overseescommunication with stakeholders and reportingon CR topics.
The CR divisional coordinators in the various busi-ness areas play an important role. They developgoals and measures in their areas, implementthem, and take responsibility for monitoring goalachievement. In collaboration with managers andexperts in their technical areas, the coordinatorsplay a key role in shaping the strategic focus ofthe CR goals specific to their area and developingthese goals over time. In this reporting year, wehave expanded CR management to cover all thefully consolidated MTU sites (MTU MaintenanceLease Services, Amsterdam, the Netherlands,MTU Aero Engines North America, Rocky Hill,U.S., Vericor Power Systems, Alpharetta, U.S.,MTU Maintenance Canada, Vancouver, Canada).
Using an integrated database, the CR coordinatorsdeliver an annual report to the central CR coordi-nation team covering validated key performanceindicators, information on the company’s com-mitment to sustainability, and progress achievedso far. In addition, the CR bodies meet regularlyover the course of the year to exchange informa-tion, coordinate measures and approve goals.
To increase employee awareness of sustainabilityand embed it within our internal processes, wehave started running CR training sessions for
Dialog with stakeholders (GRI G424-27)We strive to conduct a proactive and mutuallysupportive dialog with our stakeholders aboutsustainability topics. This dialog gives us the op-portunity to respond to suggestions, expectationsand feedback and act on new topics and chal-lenges in a timely manner. Stakeholders are in-dividuals, groups or organizations that have areciprocal relationship with MTU. Our key stake-holders are employees, customers, business part-ners, suppliers and shareholders. We maintainregular contact with scientists and researchers,analysts, journalists, politicians, industry associ-ations, employee representatives, neighbors andlocal government authorities.
One of the key tools MTU uses to determinewhat people need and expect from our companyin regard to relevant CR topics is the stakeholdersurvey on our website(http://survey.mtu.de/corporate-responsibility).This tool enables us to open up our sustainabilitystrategy for discussion and appraisal. We madeimprovements to the 2016 survey to gain evenbetter insights into the relevant topics and toobtain even more frank and honest feedback. The appraisals and opinions given by surveyrespondents are incorporated in the materialityanalysis in an annual stakeholder workshop. Wealso use target group-specific communicationchannels and forms of dialog to get stakeholdersinvolved and gather feedback (> Stakeholder dia-log diagram). We intend to expand our dialogwith stakeholders in the future.
We pick up and act on topics that come to ourattention through the CR stakeholder survey or other communication platforms. Our stake-holders’ interests are primarily concerned witheco-efficient engines, product responsibility,compliance, MTU as an attractive employer, andthe regional responsibility of MTU’s sites. Nonew topics emerged from our dialog with stake-holders in 2016.
selected areas of our business. The first coursesto be held were a training program for purchasersin fall 2016 and a training session for employeesat our headquarters in Munich. Training courseson sustainability management and data collectionfor the sustainability report were run for thenewly added locations in fall 2016.
In 2017, we will be holding a special one-day sus-tainability event at our headquarters in Munichwhich we hope will increase people’s knowledgeof sustainability, raise awareness, and promotesustainable behavior.
Nachhaltige Unternehmensführung • 1.1 Nachhaltigkeitsstrategie und -organisation
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• Product innovation/eco-efficiency • Responsible corporate governance• Human rights• Compliance• Environmental protection• Risk management• Supplier management
• Developing new technologies• Promoting research and teaching• Networking between industry and research• Study of engineering and scientific disciplines• Recruiting
• Innovation and technologies• Aviation sector/eco-efficiency• MTU as employer• Financial• Site development• Compliance
• Social commitment• Environmental protection• MTU as employer• Site development• Compliance
• Developing and promoting technology• Environmental protection, eco-efficiency• Political frameworks and regulations• Mobility concepts• Site development• Demographic change• Globalization• Compliance
• Eco-efficiency• Promoting innovation and technology• Economic and labor policies
• Health and safety• Career and advanced training opportunities• Compensation and Benefits• Work-Life-Balance• Diversity & Equality of opportunities• Co-determiniation
Capital market
Science and research
Media
Region
Politics, public agencies
Associations andorganizations
• Annual General Meeting• Conferences and roadshows• Investor discussions• Trade fairs• Ratings• Financial communications
• Joint research projects• Work in MTU centers of excellence• Trade fairs• Visits from university student groups• Presentations/discussions at universities
• Press releases• Press conferences and briefings• Plant tours• Internet/Social Media• Trade fairs
• Museum open house days• Community partnerships• Internet/Social media• Plant tours
• Parliamentary evening• Plant visits • Trade fairs• Political discussions• Background talks• Visits by political delegations
• Meetings and committees• Participation in forums and events
• Internal media• Employee surveys• HR services• Dialog and information events• Company suggestion scheme
• Product quality and safety• Sustainable technologies• Product fuel efficiency• Human Rights• Compliance
• Voice of the Customer• Trade fairs• Corporate communications
media channels
• Product quality and safety• Sustainable technologies• Product fuel efficiency• Human Rights• Compliance
• Voice of the customer• Trade fairs• Corporate communications
media channels
Stakeholder dialog GRI G4-24, 26
Stakeholder Topics
Employees
Suppliers
Business partners and customers
Forms of dialog
Political dialog (GRI G4-SO6)The aviation sector and aero engine industry are strongly impacted by political decisions atnational, European and international levels—moreso than many other sectors. Key points of con-tact for the company include elected represen-tatives and decision-makers from ministries atstate, federal and EU levels as well as from sub-ordinate authorities and the German ArmedForces. To ensure transparency and adherenceto external and internal regulations, MTU man-ages its political dialog centrally through theGroup Representation Office of the CorporateCommunications department.
Topics of discussion include innovation, technol-ogy development and funding, environmentalprotection and noise reduction, the relevance ofair traffic to society, site development, economicand labor market policy, and support for exports.MTU pursues its industry-specific intereststhrough memberships of various industry asso-ciations (> see memberships in GRI content indexin annex).
All activities are carried out in compliance withthe applicable legal and regulatory requirementsand with MTU’s Code of Conduct. As a matter ofprinciple, MTU maintains a neutral stance in itspolitical dialog by not favoring or promoting anyparticular political party or faction. MTU does notmake any financial donations to political parties.Any lobbying activities by MTU employees arecarried out in compliance with the applicable legalrequirements. The German Federal GovernmentDirective Concerning the Prevention of Corrup-tion in the Federal Administration of July 30,2004 (Federal Gazette no.148) must be respectedat all times. Further mandatory requirements arestipulated in the regulations set out in MTU’scompliance management system—especiallythose relating to donations, sponsorship, cus-tomer events, in-house events, hospitality andcorporate gifts—and in MTU’s Code of Conduct.Compliance with these rules and regulations isthe responsibility of the relevant manager in eachcase and is safeguarded by an internal controlsystem.
Risk managementMTU has established a group-wide integratedrisk management and control system based onthe leading international COSO II ERM Frame-work standard. We describe all the risks andopportunities facing MTU in our annual report(2016 risk and opportunity report included inthe annual report, pp. 113-125). Each quarter, achecklist is used to identify risks throughout thegroup at all our business units and at all oursites. The results are then compiled in a centraldatabase. A total of 15 risk categories cover allthe different areas of our business. The centralrisk management department aggregates andconsolidates the risks reported by the businessunits. A cross-divisional Risk Management Boardacting at group level submits a quarterly reportto the Executive Board and Supervisory Boarddetailing MTU’s current risk situation.
Sustainability aspects are integrated in thisinternal control system, and the risk identificationprocess also includes questions on non-financialrisks. At present, MTU has not identified any significant non-financial risks that could hinderthe evolution of the company’s business or havea negative impact on the environment or society.
Sustainable governance • 1.1 Sustainability strategy and organization
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The stakeholder dialog gives us the opportunity togather suggestions, expectations and feedback.
• We regularly analyze the risks and opportunities of climate change (e.g. workshops run by the German Aviation Association (BDL), studies conducted by Bauhaus Luftfahrt).
• Multi-level technology process that incorporates driving forces for aviation (climate change, scarcity of resources)
• We hold regular discussions with stakeholders about environmental topics (noise, airborne pollutants)
Restrictive environmental protectionpolicies that limit air traffic
Product
• Proof of safe flight operation as per requirements stemming from approval by aviation authorities
• Project to implement REACh regulation to address hazardous substances
Hazards and risks that arise from aproduct during its life cycle
Product
• Code of Conduct for all employees• Group-wide Compliance Board• Compliance audits• Regular anti-corruption and compliance training
Non-compliance with laws and internal guidelines
Compliance
• Code of Conduct for employees including commitment to protect the environment
• Certified environmental management system with annual audits• Project to implement REACh regulation
Non-compliance with laws and internal guidelines
Environmentalprotection
• Code of Conduct for all employees including protection of human rights
• Regular training on Code of Conduct• MTU Principles
Failure to respect human rightsEmployment
• Code of Conduct for Suppliers including commitment to protect human rights and the environment
• Checking for conflict minerals• Requirement to implement REACh regulation
Non-compliance with social and environmental standards
Supply chain
Sustainable governance • 1.1 Sustainability strategy and organization
17
Topic
Overview of potential sustainability risks
Risk Measures
1.2 Ethics and integrity
We firmly believe in the importance of safe-guarding human rights, observing labor laws,maintaining fair working conditions and businessrelationships, enforcing high health and safetystandards in the workplace, refraining from cor-ruption, and ensuring employees have propertraining and qualifications. Managers have a par-ticular responsibility to uphold these standardsand act as role models in regard to compliancewith applicable laws, regulations and internalguidelines.
Code of ConductOur Code of Conduct ensures sustainable andresponsible conduct throughout the MTU Group,both within the company and in its dealings with the outside world. The Code addresses thefollowing basic principles:• Integrity• Conflicts of interest and insider trading• Responsibility in industrial relations• Environmental protection• Fair business practices
These principles apply to all employees through-out the company. New employees receive infor-mation on the Code of Conduct when they startwork at MTU. They are required to sign a state-ment confirming that they have understood itskey principles and agree to abide by them. Wealso present and discuss the Code of Conductduring the induction event for new employees atall our locations. Furthermore, we run regular
Ethical principles form the basis of our work and business relationships andare binding for all employees, managers and Executive Board members.
training sessions on the Code of Conduct forselected business units as part of our compliancemanagement process. In 2016, we organized383 days of training on legal issues for 1,656participations in Germany.
MTU does not tolerate any kind of conduct thatviolates laws or regulations. Any detected viola-tions will be punished. If stakeholders suspectany improper conduct, they can contact an om-budsman confidentially ([email protected]).As in previous years, no violations of the Codeof Conduct were reported by employees orexternal stakeholders in the reporting period.
These internal measures are supplemented bythe Code of Conduct for Suppliers—we apply thesame standards to our supply chain.
One of the main purposes of our Codes ofConduct for Employees and Suppliers is toensure the observance of human rights through-out the entire value chain. They can be down-loaded from the MTU website.
• Code of Conduct for Employeeshttp://www.mtu.de/company/compliance/code-of-conduct/
• Code of Conduct for Suppliershttp://www.mtu.de/company/compliance/code-of-conduct-for-suppliers/
Sustainable governance • 1.2 Ethics and integrity
18
MTU Principles“We shape the future of aviation” is the title ofthe MTU Principles. As an integral part of ourcorporate culture, they help MTU to act in aconsistent and reliable manner by defining thecompany’s future orientation and its basic goalsand values. They are based on five pillars: • Products, technology and growth• Cooperation and conduct• Employees and management• Partners, customers and shareholders• Environment and society
MTU has formulated principles for each of thesepillars that express the associated values andguidelines. The MTU Principles apply to all em-ployees worldwide and are regularly updated toreflect new developments and challenges.
International standardsMTU bases the implementation of its CR pro-gram on internationally recognized conventionssuch as the UN Global Compact, which it joinedin 2011. As a member, we are committed toobserving the ten principles relating to environ-mental protection, respect for human rights andfair labor practices, and the fight against corrup-tion. MTU’s Code of Conduct forms the basis forimplementing these standards in our value chain.
We are guided by the following internationallyrecognized conventions:
• UN Global Compact• United Nations’ Universal Declaration
of Human Rights • The principles set out in the International Labor
Organization’s (ILO) core labor standards• German Corporate Governance Code
Sustainable governance • 1.2 Ethics and integrity
19
As the executive body of MTU, theExecutive Board acts under its owndiscretion to pursue the goal of creating sustainable added value inthe company’s interests while takinginto account the interests of itsstakeholders. In consultation withthe Supervisory Board, the ExecutiveBoard decides on the company’sstrategic direction, sees that this isimplemented, and ensures that thecompany has appropriate risk man-agement and control systems inplace. It delivers regular and timelyreports to the Supervisory Board oncurrent opportunities and risks andhow they are evolving.
The Executive Board is also respon-sible for ensuring compliance withstatutory requirements and the com-pany’s own guidelines. In Germany,where the company has its head-quarters, the rules for responsiblecorporate governance are set outprincipally in the German Stock Cor-poration Act (AktG), the Codetermi-nation Act (MitbG), and the GermanCorporate Governance Code. MTUcomplies with all the recommenda-tions of the German Federal Ministryof Justice’s Corporate GovernanceCode in the version of May 5, 2015(> Statement of compliance, 2016annual report, p. 32). In accordancewith the recommendations providedin the German Corporate GovernanceCode, we have aligned ExecutiveBoard remuneration with the long-term success of the business.
Corporate governance
1.3 Compliance and human rightsThe long-term success of any business is founded on compliance with appli-cable laws and regulations and the company’s own internal guidelines. Weexpect all our employees, partners and suppliers to conduct themselves in alawful manner at all times. In addition, we are firmly committed to respectinghuman rights.
Export complianceAll transactions that involve the purchase or saleof engine components from or by our suppliersand customers in the OEM segment are verifiedin our system before processing (sanction screen-ing in the SAP Global Trade Services (GTS) ap-plication). Our military customers include the
Compliance organizationAn enterprise-wide framework of compliancerules ensures adherence to our Code of Conductand statutory requirements. As the final decision-making authority, the CEO is responsible for thecompany’s business ethics and anti-corruptionpolicy. One of the key tools for ensuring the ethi-cal conduct of business activities is the Compli-ance Board. Created several years ago, this cen-tral body exercises its responsibilities through-out the MTU Group. Its members are the headsof the Legal Affairs, Corporate Audit and Corpo-rate Security departments. The ComplianceBoard holds both regular and ad hoc meetingsand provides quarterly updates on its activitiesto the Executive Board and the SupervisoryBoard’s Audit Committee. MTU has also appointedspecial group-level officers to deal with issuessuch as data protection, environmental protec-tion, and IT security.
We have instituted a confidential global whistle-blower system that allows employees and exter-nal stakeholders to report suspected cases ofcorruption or illegal activities or violations of theCode of Conduct to an ombudsman. The om-budsman can be contacted by email from any-where in the world ([email protected]), or a personal meeting can be arranged.
The possible ways of reporting non-complianceare communicated to employees through internalmedia channels and explained to external stake-holders in writing or on our website. The identityof the whistleblower and the information he orshe imparts are treated as strictly confidential—even if the suspicion turns out to be unfounded.It goes without saying that whistleblowers actingin good faith shall not be penalized or disadvan-
The company acts as a fair employer, businesspartner and customer, and advocates transparentcompetition where all parties are on an equalfooting. Integrity and responsible conduct arecore values of our corporate culture and are em-bedded in our Code of Conduct, which is bindingfor all employees from the boardroom to theshop floor. Compliance strengthens the trust ourstakeholders place in our company and bolstersMTU’s good international reputation. As a sig-natory to the UN Global Compact, we are com-mitted to protecting human rights and preventingcorruption within our company.
MTU condemns corruption of any kind as well asall other forms of white-collar crime. It conductsits business within applicable legal frameworks,paying particular attention to competition, anti-trust and trade law and data protection legis-lation.
Sustainable governance • 1.3 Compliance and human rights
20
“We consider compliance with rules to be a matterof course. We do not tolerate any infringement oflaws or of the company’s internal guidelines, asMTU deems credibility and trust to be indispen-sable values. A transparent approach and fairbusiness practices are the foundation for stable,long-term stakeholder relationships.”
Reiner Winkler Chief Executive Officerof MTU Aero Engines AG
defense ministries of countries whose armedforces deploy aircraft powered by our engines,and companies that work under contract to theseministries. For every product that we deliver toa military customer, we require an export licenseissued by the relevant national authorities. MTUdoes not deliver or export military engines orcomponents of such engines without this officialauthorization.
Compliance and anti-corruption training(GRI G4-SO4)Our goal is to prevent any possible forms of misconduct. One of the main jobs of the Com-pliance Board is therefore to take preventiveaction by raising employees’ awareness. It doesthis first and foremost by organizing complianceand anti-corruption training courses for all em-ployees and special seminars for managers andemployees who hold positions of trust. Thesecourses are repeated at regular intervals. Duringthe reporting period, we ran compliance and anti-corruption training courses for 329 employeesfrom selected business units in Germany andPoland. Attendance is compulsory. Employeesand members of the Executive Board can alsoseek personal advice from the Compliance Boardto clarify matters well before any non-complianceoccurs.
We are guided by international compliance stan-dards such as those set by the Institute of PublicAuditors in Germany (IDW Auditing Standards)and the guidelines issued by the Organizationfor Economic Cooperation and DevelopmentOECD (Good Practice Guidance on Internal Con-trols, Ethics, and Compliance). We are regularlyassessed by Transparency International, a non-governmental organization dedicated to fightingcorruption. In its last assessment, MTU wasplaced in band B, which means that TransparencyInternational considers the company to haveprovided good evidence of an anti-corruption andethics program.
Business partners and compliance(GRI G4-SO3)To ensure sound and reliable business relation-ships, the Compliance Board inspects consultingcontracts for possible corruption risks beforethey are placed or renewed. The potential con-sultants are reviewed by TRACE International, anindependent provider of due diligence services.Contract placement or renewal must be approvedby the CEO. Such approval is granted only if theCompliance Board has issued a positive recom-mendation. In 2016, we submitted all consultingcontracts due to be placed or renewed to theCompliance Board and TRACE for inspection. Nocorruption risks were identified in this process.Compliance management along the supply chainis based on responsible sourcing.
Membership in anti-corruption initiatives• Aerospace and Defense Industries
Association of Europe• UN Global Compact• TRACE International
Sustainable governance • 1.3 Compliance and human rights
21
taged by the company in any way. In addition,employees can confide in their superiors, thelegal department, and their appointed securityrepresentative. Any violations that are provenshall be duly punished. MTU applies a principleof zero tolerance in matters of compliance andaccepts no excuses for infringements of the lawor of the company’s internal guidelines.
A company-wide framework of compliance rules ensures adherence to our internalCode of Conduct and statutory requirements.
Sustainable governance • 1.3 Compliance and human rights
22
Human rightsMTU respects the internationally proclaimedhuman rights set out in the United Nations’ Uni-versal Declaration of Human Rights and enforcesand protects these rights within the companyand in its sphere of influence.
MTU is committed to respecting the individualityand dignity of all, maintaining equality of op-portunity in recruitment and selection, and pre-venting discrimination. The company promotesemployment diversity and the integration of employees with disabilities. As the employer ofapproximately 9,000 employees worldwide (in-cluding Asia), we create fair working conditionsbased on legally binding employment contractswith appropriate remuneration. This includes theright to unionize and to adopt collective agree-ments.
Protecting human rights is firmly embedded inMTU’s business. It is enshrined in the Code ofConduct for employees as a principle of corpo-rate social responsibility. Our commitment torespecting human rights is reinforced by ourstatus as a signatory to the UN Global Compact.In the materiality matrix, human rights are high
Respect for human rights(GRI G4-HR3-6, HR9/12)MTU considers the risk of human rights viola-tions occurring in its business activities to below at all its locations because these activitiesare governed by national legislation that upholdshuman rights. No complaints of human rightsinfringements were made via internal reportingchannels in the MTU Group during the reportingperiod. There were also no indications of anyinfringements at MTU’s suppliers. MTU has takenspecific steps to boost transparency in the sup-ply chain to prevent conflict minerals from beingincluded in MTU products. There were also noindications that any business activity could posea risk of compulsory or forced labor during thereporting period, and no cases of discriminationwere reported.
Employee training is a key preventive measure,especially training for focus groups on the MTUCode of Conduct.
Sustainable governance • 1.3 Compliance and human rights
23
Compliance risks and assessments(GRI G4-SO3/5, SO7/8)Compliance risks arise when managers or em-ployees of the company fail to comply with lawsand regulations or fail to observe internal guide-lines. These risks may occur in any area of thecompany, and they include the risk of corruption.The appointed officers at group level are res-ponsible for ensuring that specific legal require-ments are complied with and that appropriateand uniform standards are established on a com-pany-wide basis. The Corporate Audit departmentconducts regular compliance audits in which itchecks business processes and procedures forconformity to legal requirements and adherenceto internal guidelines. We regularly assess cor-ruption risks as part of our corporate risk man-agement process and review our framework ofcompliance rules. Moreover, MTU is regularlyevaluated by Transparency International.
No violations of MTU’s Code of Conduct wereidentified in the reporting period and, as in pre-vious years, there were no indications of anysuspected cases of corruption. Moreover, thecompany incurred no significant financial penal-ties resulting from violations of applicable lawsand faced no legal action due to anti-competitive,cartel or monopoly practices.
on the agenda for both the company and itsstakeholders. We apply the issue of human rightsto our company’s employment practices. We alsoexpect our business partners to uphold humanrights as a basis for long-term cooperation.
MTU consolidates high standards of social res-ponsibility in the supply chain by making use ofresponsible sourcing. A key instrument is thecommitment our suppliers make to MTU to pro-tect human rights in their own sphere of respon-sibility and to not be complicit in human rightsabuses. This is enshrined in all MTU procurementcontracts as a matter of course (Code of Conductfor Suppliers).
1.4 Sustained value creationAs a listed company, it is our duty to steadily increase the value of our business. By pursuing a business strategy that supports profitable growth,we can be confident of maintaining strong earnings, remaining competitive,and securing our financial assets well into the future.
MTU aims to increase shareholder value overthe long term. Our overriding goal is to achieveprofitable growth across all business units. Tothis end, we pursue a long-term strategy designedto consolidate and expand the company’s marketposition in each of the sectors in which we oper-ate. The resources that underpin this strategyare a future-oriented product portfolio, stableand long-established customer relationships,skilled and motivated employees, and a globalpresence in growth markets. We implement thisstrategy based on a three-pronged approachthat involves building on our already excellenttechnological position, acquiring stakes in newengine programs with potential for growth, andimproving our competitiveness by promoting aculture of continuous improvement. This, in turn,makes MTU an indispensable partner to OEMsthat develop, manufacture and maintain theirengines in international cooperative networks.
Sustainable governance • 1.4 Sustained value creation
24
Long-term value creation has an overriding im-portance for us as a prerequisite for many otherareas. The company’s commercial success notonly has positive effects on MTU in its role asan engine manufacturer and cooperation partner,but also as an employer, customer, local investorand sponsor. In the eyes of shareholders, thismakes MTU’s stocks an attractive capital invest-ment with increasing dividends. The local com-munities in which MTU’s locations are basedbenefit from attractive jobs and a commitmentto social responsibility, for instance in the domainof science and education, where MTU partici-pates in research projects that help to strengthenties between universities and industry. MTU isan important employer for local communities atall its major international locations.
Participation in new programs with high growth potential, such as the propulsion system for the Boeing 777X widebody aircraft, is a key pillar of MTU’s strategy.
Sustainable governance • 1.4 Sustained value creation
Capital expenditureon property, plantand equipment andintangible assets
Key financial data (in EUR m)GRI G4-EC1
20122013201420152016
696.7251.2395.5309.7274.8
250
* Figures have been retroactively adjusted to comply with new accounting standards, but are no longer subjected to additional external audit.
**Reported figures
500
750
1,00
0
1,25
0
1,50
0
1,75
0
2,00
0
2,25
0
2,50
0
2,75
0
3,00
0
3,25
0
3,50
0
3,75
0
4,00
0
4,25
0
4,50
0
4,75
0
5,00
0
Revenues 20122013201420152016
3,242.73,574.13,913.94,435.34,732.7
Earnings before interest and tax(EBIT)**
20122013201420152016
295.4317.3333.5385.6452.8
Income taxes** 20122013201420152016
93.7107.1
83.3103.2103.0
Earnings after tax** 20122013201420152016
174.6166.3195.4217.6312.6
*
*
*
*
*
25
The key indicators of MTU’s economic perform-ance reveal a clear upward trend over the pastfive years. Business has steadily improved fromyear to year, with the company achieving recordresults once again in fiscal 2016. Adjusted earn-ings before interest and tax reached a new highof 503.0 million euros, 14 percent up on the pre-vious year (2015: 440.3 million euros). Adjustedearnings after tax exceeded the previous recordby 13 percent, climbing to 345.4 million euros.The company’s order backlog grew by 13 percentin 2016 to reach 14.2 billion euros (2015: 12.5
billion euros), forming a solid basis for MTU’scontinued growth. MTU expects the 2017 figurefor adjusted earnings before interest and tax tobe higher than the previous year.
Shareholders continue to participate in the com-pany’s success, with MTU paying a dividend of1.90 euros in 2016, an increase of 12 percentover the previous year. In total, MTU paid out97.6 million euros to its shareholders, reaffirmingthe continuity and consistency of its dividendpolicy.
Sustainable governance • 1.4 Sustained value creation
We are continuously adding more value. The netvalue added created by MTU has remained at a consistently high level over the years. In 2016,it increased significantly to reach 1,098.1 millioneuros. At 60.5 percent, the biggest share of thisamount was once again distributed to employeesin the form of wages, salaries and other bene-fits. Payments to lenders and other creditorsaccounted for 1.7 percent, and the proportionutilized to pay taxes levied by public authoritiesfell slightly to 9.4 percent. The amount reservedto pay a dividend to shareholders was 8.9 per-cent, slightly higher than the previous year. Theremaining value added of 215 million euros wasretained by the company to provide adequatefinancial resources and facilitate forward-lookinginvestment as a basis for profitable growth. Thesefigures show that MTU remains very much on asuccessful trajectory.
Sustainable investmentMTU’s performance is also regularly assessed bycapital-market analysts and independent expertswith regard to non-financial indicators. MTU islisted in the following sustainability indexes andrankings:• STOXX ESG Leadership 2016/2017• oekom Prime-Status• CDP• Vigeo Eiris
MTU’s inclusion in these indexes is further proofof our excellent performance in the fields of en-vironmental protection, corporate social respon-sibility, and corporate governance.
In 2016, we also presented our sustainabilitymanagement at an investor conference for thefirst time.
26
MTU’s Center of Competence for titanium compressor blisks in Munich is the most advanced production facility of its kind worldwide.
Comparison of value added, 2016 and 2015GRI G4-EC1
Cost of materials/Other expenses
3,473.473.2%
Depreciation and amortization
Depreciation and amortization
177.53.7%
Net value added
1,098.123.1%
Cost of materials/Other expenses
3,288.674.0%
167.63.8%
Net value added
985.622.2%
4,749.0Gross value added
EUR m
4,441.8Gross value added
EUR m
1,098.1Net value added
EUR m
985.6Net value added
EUR m
100% 100%
23.1% 22.2%
Employees
664.060.5%
Lenders
18.51.7%
Public authorities
103.09.4%
Shareholders
97.68.9%
Group
215.019.6%
Employees
650.866.0%
Lenders
14.01.4%
Public authorities
103.210.5%
Shareholders
86.98.8%
Group
130.713.3%
20152016
Sustainable governance • 1.4 Sustained value creation
27
28
29
2 Responsibility for products and for the supply chain
Resource protection, climate change, sustain-able mobility concepts and complex supplychains are challenges we are facing up to asan aviation company. MTU places very highimportance on the eco-efficiency, safety andquality of our products. In the interests ofsustainable value creation, we take respon-sibility for products and for the supply chain.
Customer health and safetyProduct and service labelingComplianceProducts and servicesSupplier environmental assessmentSupplier assessment for labor practicesSupplier human rights assessmentOrganizational profile (supply chain)
Main aspects covered by this chapter:
30
Responsibility for products and supply chains • 2.1 Management approach: product responsibility
2.1 Management approach: product responsibility
We pursue product responsibility over the entirelifecycle of an engine, from development all theway through to the recycling of engines and com-ponents. Most of the effects our products willhave on safety and the environment are deter-mined at the development stage. Using a mate-riality analysis, we defined the chief aspects ofproduct responsibility for our sustainability stra-tegy (see Chapter 1.1 Sustainability Strategy).They are as follows:• Product quality• Product safety• Fuel efficiency of products• Exhaust emissions of products• Noise emissions of products• Innovations
These areas are of very high priority both forMTU and for its stakeholders. Consequently, thestrategic focus of our corporate responsibility(CR) is on product responsibility. All aspects ofproduct responsibility are relevant within MTUas well as in downstream value creation (materi-ality principle, G4-20-21).
All product-related sustainability topics are en-shrined in our organization: eco-efficiency (whichincludes the topics of fuel efficiency, exhaustemissions and noise emissions) is contained inthe MTU Principles under the maxim of sustain-able product development with reduced fuel con-sumption and noise and pollutant emissions. Wealso set down our high quality expectations there.As innovations are strategically important to MTUas a recognized technology leader, they havebeen incorporated in MTU’s corporate strategyand corporate objectives. Safety plays a criticalrole in aviation. Accordingly, safety and qualityare key principles in MTU’s IMS (integrated man-agement system) policy. IMS is a group-wide,certified set of quality regulations. All of the
MTU Group’s production sites are certified tothe ISO 9001 quality standard.
MTU wants to make aviation as environmentallyfriendly as possible. Helping to achieve this goal isthe company’s Clean Air Engine (Claire) agenda,whose objectives are implemented in stagesand which we launched in 2008. We successfullycompleted the first stage in 2016 and are alreadyworking hard on the second stage. Through CleanAir Engine, we are implementing targets for higherenergy efficiency and lower CO2 emissions andflight noise by 2050. At the same time, the agen-da acts as a long-term technology roadmap forour innovation management. The foundation forthis is the new Geared Turbofan™ engine con-cept, which MTU co-developed.
Via a management system used throughout theMTU Group, we ensure the quality and safeoperation of our products across their entirelifecycle. This is based on statutory regulationsand aviation industry standards, which MTUstrictly observes at every stage of value creation.
We are a premium aviation provider in the fieldof developing, manufacturing and maintainingengine modules and complete engines. Our prod-uct portfolio covers all thrust classes, from en-gines for business jets to engines for widebodyaircraft. MTU has a share in several engine pro-grams by various original equipment manufac-turers (OEMs). Partners and customers value MTUfor the sustainability, quality, reliability, safetyand efficiency of its products.
31
Responsibility for products and supply chains • 2.2 Innovations
2.2 Innovations
The aviation industry is characterized by longproduct cycles and a high degree of innovation,and MTU is no exception: innovation and re-search are cornerstones of the company andpart of our strategy. As one of three main pillars,leading technology helps the company achieveprofitable growth. Moreover, further expandingMTU’s leading technological position is a con-tinuous corporate goal. The focus is on furtherdeveloping the Geared Turbofan™ to create thesecond generation of this groundbreaking tech-nology, with the goal of achieving ten percentreductions in fuel consumption and CO2 emis-sions. MTU’s most innovative engine program, theGeared Turbofan™, is also the most important interms of order backlog (more than 8,000 ordersand options by the end of 2016) and is devel-oping into a driver of growth in new business.Another corporate goal is the greater use of simu-lation techniques in development and manu-facturing. In this reporting year, MTU launchedthe group-wide MTU 4.0 initiative in order toidentify and utilize further potential of digitaliza-tion for engine manufacturing.
MTU is a major technology leader in the aviation industry, and innovationsare an integral part of our strategy. We undertake product and process innovations internally and together with partners, science and research. As a driver of innovation, we offer our customers and partners decisive competitive advantages.
“Innovations are enormously important for MTU.Having top-ranking products helps our customersremain competitive. We use our innovative capac-ity to design tomorrow’s mobility solutions. Ambi-tious goals and a comprehensive developmentprocess will help us meet the future challengesfacing the aviation industry.”
Dr. Rainer Martens Chief Operating Officer at MTU Aero Engines AG
We have implemented a defined company-widetechnology process to develop innovative prod-ucts and methods. The needs of current andplanned engine programs determine the short-to medium-term technology developments, whileall long-term technology developments aregrouped together in the Clean Air Engine agendaand positioned before product developments.
In 2016, 208.6 million euros (2015: 210 millioneuros) were spent on research and development.For years, R&D as a proportion of revenues hasbeen at a constant level, and was 4.4 percent in 2016 (2015: 4.7 percent). A large portion ofresearch and development costs goes towardimproving environmental sustainability, andexpenditure for this purpose amounted to some150 million euros in 2016.
2012 20162013 2014 2015
208.6
241.4
193.2 195.3210.0
150
118 115132
Total research and development costsResearch and development costs relating to eco-efficiency goals
Investment in product and technology development (in EUR m) GRI G4-EN31
The vast majority of MTU’s investment in the development of new technologiesand engines goes toward saving fuel and reducing weight. This directly improvesenvironmental performance, as it reduces emissions of CO2 and other pollutants.Special technology programs and developments focus on reducing noise.
147
32
Responsibility for products and supply chains • 2.2 Innovations
We are currently running 140 technology projects,which we methodically align with our corporateobjectives. In 2016 alone, 20 projects reachedthe status of technological maturity in the areasof development and manufacturing. Our systemof intellectual property management ensuresthat we protect our technological expertise; wefile more than 400 patents each year. At the endof 2016, MTU’s patent portfolio encompassed3,101 property rights, primarily in the technologyareas of manufacturing, compressors and tur-bines. Approximately 1,000 employees work inengineering worldwide. In the form of MTU AeroEngines North America, the company operatesan engineering site in Connecticut, USA, whichhas some 150 employees. In addition, MTUmaintains a central department for technologydevelopment, which works hand in hand withproduct development.
To sustain MTU’s technological expertise, it isimportant to be adequately plugged into the re-search landscape. The company is involved in allmajor national and European research programs.This includes the European Commission’s largestever aviation research program, Clean Sky(http://www.cleansky.eu/), in which MTU playsa major role. Clean Sky will be completed in2017; its successor, Clean Sky 2, was launchedin 2015 and will run until 2020. Clean Sky aimsto validate new technologies to establish theirapplication readiness.
Further EU research programs in which MTUwas involved in 2016 (selection):• ENOVAL• Lemcotec• E-Break (finished in 2016)
www.enoval.euwww.lemcotec.euwww.e-break.eu
In addition, MTU cooperates with 17 universitiesand research institutions in Germany and main-tains centers of excellence devoted to specificpriority research topics at seven selected uni-versities (see 4.6 Corporate Social Responsi-bility).
1.G
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SRIA 2035Vision 2020
Noise Reduction (in EPNdB per operation)
Year
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0En
gine
ENO
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EEFA
E
VITA
L
NEW
AC
DRE
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LEM
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MTU is responsible for SAGE 4 (Sustainable AndGreen Engines 4), one of five Clean Sky enginedemonstrators, which it tested on its test rig inMunich in 2016. 500 test cycles and 30 startsconfirmed the technological maturity of newweight-saving designs and materials under higherloads as well as of advanced aerodynamic de-signs. New simulation techniques and measure-ment methods were also validated. The innova-tions further increase the eco-efficiency of thenext Geared Turbofan™ generation.
CO2 and noise reduction goals of technology programs in which MTU is involved
33
Responsibility for products and supply chains • 2.2 Innovations
The strength of our innovation ismirrored in our often groundbreakingnew developments, such as theGeared Turbofan™, which enable air-lines to obtain decisive advantagesin the growing aviation market.
Examples of product innovations:
• High-speed low-pressure turbine key component in Geared Turbo-fan™; awarded the German Inno-vation Prize
• Titanium aluminide new lightweight and heat-resistant alloy
Examples of process innovations:
• PECM new method for the electro-chemical machining of nickel blisks, blades and disks from a single workpiece
• Additive techniques techniques 3D printing in engine manufacturing
Example of work on future innova-tions:
• Bauhaus Luftfahrtthink tank for questions concerning the future of aviation
Innovation portfolio at MTU
An improved high-pressure compressor for thenext generation of Geared Turbofan™ engines inMTU’s test cell (Rig 268).
34
Responsibility for products and supply chains • 2.3 Fuel efficiency
35
Responsibility for products and supply chains • 2.3 Fuel efficiency
2.3 Fuel efficiency (GRI G4-EN7)
In the development of aircraft engines, thebiggest focus is on energy efficiency; in otherwords, reducing the amount of fuel consumedduring flights. Saving fuel not only minimizesresource consumption, but also reduces airlines’operating costs, of which the fuel kerosene ac-counts for about 30 percent.
In addition, energy efficiency is crucial to theaviation industry’s environmental performancebecause fuel consumption and CO2 emissionsare directly proportional to each other. The lesskerosene that has to be burned in flight, thelower the environmental impact the aircraft. By2050, our Clean Air Engine agenda wants toreduce the fuel consumption of aircraft enginesby 40 percent (compared to levels in the year2000). To this end, we make a decisive contribu-tion to the European industry and research sec-tors’ Strategic Research and Innovation Agenda(SRIA) (http://www.acare4europe.com/) andits fuel reduction goals.
Because of climate change and resource scarcity, it is imperative to consumeless energy. Through various measures, MTU is working to further improvethe fuel efficiency of aircraft engines in order to reduce the overall energyrequirements of the aviation sector.
Today’s aircraft engines consume 45 % less fuel than they
did in the 1960s. Further efficiency increases are planned.
45percent
Greater thrust efficiency, higher thermal effi-ciency and higher component efficiency canresult in greater energy efficiency for the engine.MTU is working on all three of these measures.Introduction of the Geared Turbofan™ is alreadyreducing fuel consumption by 16 percent com-pared to its ungeared predecessor. MTU is real-izing this concept together with Pratt & Whitney.The new engine family reached the followingmilestones in 2016:• A320neo: Start of regular flight service with
Lufthansa • C Series models C100 and C300: Start of
regular flight service with Swiss Air and Air Baltic
• A321neo: Certification by American and European aviation authorities
• Irkut MS-21: Certification by American aviation authority
• Embraer E190-E2: Start of flight testing
Engine manufacturers are introducing upgradesfor existing products to improve their energy foot-print and increase their service lives, even thoughevery change subsequent to type approval hasto be recertified for safety reasons. Examplesfrom the MTU product portfolio include theV2500 SelectOne (1 % reduction in fuel con-sumption/approx. 20 % increase in service life)and the V2500 SelectTwo (1.5 % reduction in fuelconsumption/approx. 20 % increase in servicelife).
Also in 2016, MTU tested an improved high-pressure compressor for the A320neo GearedTurbofan™ on its test rig. In the medium-term,plans are to reduce fuel consumption and CO2
emissions in the second generation engines byten percent by means of higher bypass and over-all pressure ratios along with improved compo-nent efficiencies.
Geared Turbofan™ technology has also been selected to power the new Mitsubishi Regional Jet, A320neo and C Series jets (clockwise).
36
Responsibility for products and supply chains • 2.4 Climate strategy
2.4 Climate strategy (GRI G4-EN27)
Climate change is one of the greatest global chal-lenges of our time. It is generally accepted thatCO2 emissions caused by human activity arelargely responsible for global warming, and thatthe increasing mobility of the human populationis a contributing factor. Global air traffic also con-tributes to CO2 emissions. Aviation changes ourclimate by generating carbon dioxide (CO2) andnitrogen oxide (NOX) emissions and producing cirrus clouds and contrails. CO2 emissions havethe greatest impact on climate. The main lever-age point for MTU is that of reducing CO2 emis-sions through more efficient engines, to whichend MTU helps make compressors and turbinesmore efficient and lightweight and with higherpressure ratios. As the combustor does not formpart of MTU’s standard product portfolio, theemissions of NOX, CO, hydrocarbons and sootduring flights lie outside our sphere of influence.Depending on the weather conditions, contrailsand cirrus clouds are generated at higher flightaltitudes and can be mitigated by means of differ-ent flight paths or flying at lower heights.
We are working on solutions to make flying more environmentally friendly.Through our climate strategy, we are actively helping reduce the carbon foot-print of aviation. By far the biggest volume of our products’ CO2 emissionsare generated during their use, but we are also working to improve the car-bon footprint of our production activities.
The air transport sector will continue to experi-ence strong growth. Experts predict that themarket will grow annually by 4.5 percent. Thismeans that air traffic will double every 16 years.Accordingly, the European aviation industry hasset specific targets to reduce its impact on theenvironment (Strategic Research and InnovationAgenda http://www.acare4europe.com/).
Over the past 50 years, CO2
emissions per passenger kilometer have decreased byabout 70 %. The lion’s share
of these savings—45 percent—was achieved thanks to
modern engines.
About70percent
32
ACARE 2020** SRIA 2020 SRIA 2035 SRIA 2050
CO2 emissions, aviation
CO2 emissions, engine
NOX emissions, mainly engine
* Changes compared to year 2000, per passenger kilometer** By way of comparison: original ACARE 2020 targets (ACARE=Advisory Council for Aviation Research and Innovation in Europe)***Based on same improvement of aircraft and engine
-75%
-43%***
-90%
-60%
-30%
-84%
-50%
-20%
-80%
-43%
-20 %
—
Climate goals* Strategic Research and Innovation Agenda (SRIA)
37
Responsibility for products and supply chains • 2.4 Climate strategy
MTU has committed itself to these goals andwants to contribute to aviation achieving car-bon-neutral growth in the medium term andreducing CO2 emissions in the long term. Ourresponsibility to protect the planet is enshrinedin our MTU Principles, where we state our com-mitment to reducing emissions and limiting con-sumption of natural resources and energy.These Principles apply in equal measure to ourproducts and our production process. In thisvein, we plan to make greater use of simulationtechniques to reduce the construction of proto-types and the number of test runs.
Our climate change strategy will enable us togain a decisive edge over our competitors. Thisis because engines with a smaller carbon foot-print consume less fuel and thus help reducecustomers’ costs (see 2.3 Fuel Efficiency ofProducts). In addition, the strategy will help usmeet the CO2 requirements defined by theInternational Civil Aviation Organization ICAO.The ICAO is successively tightening its environ-mental regulations for aviation. In 2016, the UNcivil aviation organization finalized a new climateagreement on the offsetting of CO2 emissions(see interview). For NOx, unburned hydrocar-bons, carbon oxide and soot, there are alreadylimits in place. Preparations are underway tointroduce special limits for non-volatile particu-late matter.
“We promote greater environmental protectionand our product strategy pursues clear targets foreco-efficient engines. We aim to cut CO2 emissionsby 40 percent by 2050. Our agenda will helpensure a sustainable future for aviation.”
Michael SchreyöggChief Program Officer at MTU Aero Engines AG
What agreement did ICAO, the UN’scivil aviation organization, finalize atthe end of 2016?“The new agreement requires mem-bers to offset growth-related green-house gas emissions caused by inter-national aviation from 2020 onward.Following the 2015 Paris climateagreement, this means that there isnow an industry-specific climate pro-tection mechanism in place for thefirst time.”
What does that mean for aviation?“Aviation is supposed to achieve car-bon-neutral growth from 2020 on-ward. The offsetting of greenhousegases is to take place in stages, ona voluntary basis initially and thenon a compulsory basis for all ICAOmembers from 2027. This is an im-portant step toward decarbonization,as—based on current levels—thiswould mean offsetting 80 percent ofadditional CO2 emissions between2020 and 2035 by means of climateprotection measures.”
What contribution does MTU make?“Through our Clean Air Engine agen-da, we’ve already been pursuing aproduct-related environmental pro-gram for years, and we’ve alreadymade some big initial progress onthis front. Five aircraft families haveadopted the new Geared Turbofan™engine, which produces up to 16 per-cent less CO2. And we’re alreadyworking on new technologies to makethe engine even cleaner.”
www.icao.int
Three questions for Dr. JörgSieber, Head of InnovationManagement at MTU, about thenew ICAO climate agreement.
38
Responsibility for products and supply chains • 2.4 Climate strategy
MTU agenda: Clean Air Engine 2050With Clean Air Engine, MTU has initiated its ownthree-stage model for climate protection, onethat follows the SRIA emissions goals as closelyas possible. According to Clean Air Engine, theengines of future airliners are to cause 40 per-cent fewer CO2 emissions by 2050.
Stage 1: 2020In the first stage, a Geared Turbofan™ will reduceCO2 emissions by about 16 percent. In early2016, the new engine design entered regular ser-vice for Lufthansa as the propulsion system forthe Airbus A320neo (neo stands for new engineoption). According to Lufthansa’s own figures, theairline thereby saves around 5,000 tons of CO2
per aircraft every year, which is the equivalent of485 flights between Berlin and Paris. In addition,Swiss Air has been operating the new C Seriesregional aircraft powered by Geared Turbofan™technology since July 2016. The engine has alsobeen chosen for a further three new aircraftmodels which are due to enter production suc-cessively by 2020 and which will improve envi-ronmental performance in their thrust classes.
Stage 2: 2030Stage 2 of Clean Air Engine will involve refiningthe Geared Turbofan™. Engineers want to furtherincrease the bypass ratio and improve the ther-mal efficiency of the core engine by means ofhigher pressure ratios and temperatures.
As an integral part of our research activities, weregularly compile interim reports in which wecompare our progress to our objectives andmeasure our goal attainment. We are currentlyon schedule with all Clean Air Engine agendaprojects and have achieved the goals for 2016.
Such actions are intended to reduce the carbonfootprint by 25 percent. To that end, MTU willimprove its high-speed low-pressure turbine.Technologies for high-pressure compressors withan extremely high pressure ratio are necessaryto achieve this high overall pressure ratio. Theengine is expected to be ready around 2030 intime for the next generation of aircraft. In initia-tives such as Clean Sky, MTU is already workingon the preliminary design of this engine and onproviding the requisite technologies.
Stage 3: 2050In the third and final stage, entirely new conceptswill be put into practice, such as integrated anddistributed fans to increase thrust efficiency orhighly efficient heat engines. This should enablea 40 percent CO2 reduction. The concepts areexpected to be production ready by 2050. Weare already exploring them in initial studies, andwe plan to intensify this research from 2017.
Stage 1Geared Turbofan
Stage 2Ultra-High Bypass RatioEngine
Stage 3Integrated Ultra EfficientEngine
2015
2030
2050
Geared turbofanbypass ratio ~12
Gas turbineoverall pressure ratio ~ 50
Geared turbofanbypass ratio 15-20
Integrated enginelow specific thrust
Gas turbineoverall pressure ratio up to 70
Highly efficient heat exchanger
CO2 emissions
Clean Air Engine (Claire)
GRI G4-EN27
Entry intoService
Core enginePropulsion component
-15%
-25%
-40%
39
Responsibility for products and supply chains • 2.4 Climate strategy
Alternative fuelsIn addition to increasing the efficiency of engines,using alternative fuels is also an important ap-proach for reducing the CO2 emissions producedby aviation. MTU actively promotes efforts tospread the use of fuels with low carbon content,e.g. through Bauhaus Luftfahrt (www.bauhaus-luftfahrt.net), field tests, or the Aviation Initiativefor Renewable Energy in Germany (aireg e.V.www.aireg.de), which MTU co-founded. The goalof aireg is for bio-kerosene to make up ten per-cent of all aviation fuels used in Germany by2025. MTU supports this undertaking as an activemember of the organization.
The development of cost-effective manufacturingtechniques for sustainable fuels is still in its in-fancy, because—in contrast to road transport—theuse of new fuels in aviation is highly restricted:to factor in range, aviation fuels must have a veryhigh energy density, a very low freezing point (atcruising altitudes, temperatures can be as lowas minus 50 degrees Celsius) and—for safetyreasons—a high flashpoint. The decisive factorsdetermining CO2 reduction are the base sub-stances and the manufacturing processes usedto produce these fuels. Bio-based fuels absorbthe same amount of CO2 from the atmospherewhile the biomass is growing as they releaseagain during combustion, permitting significantCO2 reductions compared to conventional kero-sene. As the crops involved must not have anegative impact on food production or com-promise biodiversity, the selection of suitablespecies is crucially important.
Several second-generation biofuels have beenapproved for flight operations, so-called drop-infuels with the same properties as conventionalkerosene. They can be used in all aircraft and atall airports. Pioneering airports such as Oslo,Amsterdam and Brisbane—bioports as they areknown—offer a regular supply of these fuels on acommercial basis.
Synthetic fuels represent a long-term alternativeto biofuels. MTU took part in the SolarJet project(www.solar-jet.aero), which established the prin-ciples for making solar kerosene. This wouldallow the production of fuel directly from solarenergy in desert areas—without competing withthe food supply. In the successor program SUN-to-Liquid, this approach is being further pursued.
In 2016, MTU was also involved as an industrialcooperation partner in the InnoTreib (InnovativeFuels of the Future) project by the German Fed-eral Ministry for Economic Affairs and Energy.Researchers have developed designer fuels thatare better than today’s kerosene: higher energydensities for greater range or reduced emissionsthrough a lower percentage of aromatic com-pounds. For these “near-drop-in” fuels, the com-bustor and the fuel system of the engine mustgenerally be overhauled. The InnoTreib projectwas completed at the end of 2016 and showedthat significant reductions in pollutants are evenpossible through optimized fuel composition inkeeping with the specifications for kerosene.
A much-discussed topic concerning the future ofaviation is electric flying, and MTU is also lookingat this issue. In our estimation, current technol-ogy is still several decades away from electric-powered passenger aircraft the size of an A320.First, substantial advances are needed in theperformance of batteries and electric motors.Electric drive systems with a battery and electricengine are now available for motor gliders andsmall aircraft. If batteries continue to advanceat the same pace, short-range regional electric-powered aircraft might be possible in 30 years.But at present there are no known battery con-cepts that would be appropriate for medium-haul and long-haul aircraft. Hybrid drive conceptsconsisting of a gas turbine with a generator andelectric fans, by contrast, are opening up com-pletely new possibilities for lowering aircraftresistance. MTU is already testing these drive con-cepts as an integral part of the Clean Air Enginetechnology agenda, stage 3.
40
Responsibility for products and supply chains • 2.5 Flight noise
2.5 Flight noise (GRI G4-EN27)
Flight noise originates from several sources.Engines produce the most noise during takeoff,and most of this comes from the fan and airflow.The aircraft itself also causes noise because ofturbulence generated at the fuselage, wings andlanding gear.
MTU is also pursuing specific flight noise goalsas part of the Clean Air Engine agenda. We areseeking to reduce noise by 50 percent by 2030(stage 2) and 65 percent by 2050 (stage 3).Through Clean Air Engine, we are actively sup-porting the SRIA goals of reducing flight noiseby 55 percent by 2035 and by 65 percent by2050.
Aircraft and their engines must meet noise emis-sions limits (classified into noise standards) setdown by the International Civil Aviation Organi-zation (ICAO) as part of their certification process.A new noise standard (Chapter 14) will apply to all new aircraft models that are certified fromDecember 31, 2017. The new standard is sevenEPNdB (Effective Perceived Noise Decibels) quieter than the current Chapter 4 standard,which means significantly stricter maximum noiselimits. As a result, fewer people will be affectedby flight noise in the future. Furthermore, at al-most every airport in the world, the fees chargedfor landing and takeoff are dependent on thecertified noise standard of the aircraft model.These policies are putting more and more restric-tions on the operation of noisy aircraft.
Engines in which MTU has a workshare are al-ways among the quietest on the market, comingin significantly below the legally prescribed limits.The GP7000 powering the A380, for example,was comfortably quieter than the impendingnew noise standard upon its market launch in2008—and that despite the fact that the aircraftwas very heavy. Noise reduction is an active goalfor MTU engineering. Every time MTU redesignsor optimizes an engine, it incorporates measuresdesigned to reduce noise. Our team of acoustics
We are developing engines that are increasingly quieter. In this way, we wantto help bring about an overall reduction in flight noise. After all, flight noiseis a major concern for airlines and airports. Society’s acceptance of air trans-port is critically dependent on it.
Research programs and collaborations in whichMTU was involved in 2016 and their goals forreducing flight noise (selection):• Clean Sky, Clean Sky 2:
minus 16 to 20 EPNdB • ENOVAL:
minus 9 EPNdB for encased engine• LeiLa:
minus 3 decibels for low-pressure turbine
http://www.cleansky.eu/http://www.enoval.eu/
Around70percent
experts is involved in every stage of productdesign and contributes MTU expertise to collab-orative technology programs and research pro-jects. In 2016, MTU and its research partnerscompleted the LeiLa project for quiet aircraftpropulsion. Since 2012, MTU aeroacousticsexperts had been developing and testing newlow-noise turbine blading as part of the project.
Flight noise has decreased byabout 70 % since the 1960s.
That is equivalent to approximately 17 EPNdB.
41
Responsibility for products and supply chains • 2.5 Flight noise
In 2016, we achieved the first stage of our CleanAir Engine agenda with the Geared Turbofan™.The large, decoupled and therefore slowly turn-ing fan makes the Geared Turbofan substantiallyquieter. MTU’s high-speed low-pressure turbinerotates three times faster than a conventionalturbine. As a result, it does not generate thelow-frequency noise that is so poorly absorbedin the atmosphere. The Geared Turbofan’s noisefootprint (the distribution of aircraft noise in thearea surrounding an airport) is reduced by 75percent and well below the stricter Chapter 14noise standard. Subsequent generations of theGeared Turbofan will be even quieter.
The noise footprint in the areasurrounding an airport
is about 75 % lower with the Geared Turbofan™ co-developed by MTU.
Around75percent
The first generation of Geared Turbofan™ engines, as pic-tured here on the wing of an Airbus A320neo, alreadysignificantly reduces aircraft noise levels.
All manufacturing processes are subject toapproval by the aviation authorities.
Aircraft engine designs must meet strict qualityrequirements.
We work according to the principle that “safetytakes priority in what we do”.
Responsibility for products and supply chains • 2.6 Product quality and safety
42
2.6 Product quality and safety (GRI G4-PR1-3, PR5, PR9)
We examine our engine modules for their im-pact on health and safety throughout their devel-opment, production and operation lifecycles.Accordingly, we cover all major stages of a prod-uct’s service life 100 percent. MTU’s expertsincorporate all safety and environmental require-ments for aviation products as legally mandatedby the industry’s regulatory authorities. Suchregulatory requirements must be met in theearly stages of planning new engines for lateruse, and compliance must be documented. Weemploy a comprehensive testing program involv-ing test builds and series tests to verify the safeflight operation of our products. This includesbeing able to ensure safe operation during abird strike or hailstorm and complying with strictlimits on pollutants and noise emissions. MTUcomponents frequently exceed aviation authori-ty requirements. In addition, the manufacture ofengine parts and modules in production shopsmeets all required standards concerning occu-pational safety and environmental protection.
MTU Safety Management is the name of an inter-nal body of rules defining how to handle safety-related events. Appropriate organizational struc-tures, responsibilities and processes are estab-lished in accordance with an international stan-dard (ICAO SMS Manual).
Quality and safety are of paramount importance in aviation. Safe flight operation is a legal requirement. We ensure the flawless quality and safeoperation of our products over the entire lifecycle. Of course, we also ful-fill all legal regulations and requirements.
CertificationsMTU has all the requisite approvals and certifi-cations from national and international aviationauthorities to develop, manufacture and main-tain flight-ready engine parts and modules(http://www.mtu.de/engines/quality/). A group-wide integrated management system (IMS) certi-fied under EN 9100 and ISO 9001 ensures com-pliance with laws and regulations and clear as-signment of responsibilities within the company.The quality framework is binding for managementand employees. Corporate Quality is a separatedepartment directly subordinate to the ChiefOperating Officer (COO) and reports quarterly tothe Executive Board.
Each and every part in the engine must be ap-proved. Our principle is that “Safety takes priori-ty in what we do,” which is why we use onlyapproved, fault-free and clearly identifiable com-ponents. This refers to parts that have beenapproved by the appropriate aviation authority,are based on approved development documen-tation and have been produced or repaired incompliance with aviation regulatory processesby a certified company.
Moreover, the aviation sector has strict rulesgoverning documentation in order to verify the
Responsibility for products and supply chains • 2.6 Product quality and safety
43
Product compliance (GRI G4-PR2, PR9)We have implemented comprehensive monitoringand testing processes to ensure compliancewith quality and safety requirements. Monitoringtakes place throughout the entire value chain.Stringent audit, review and gating proceduresare well established across all product phases.In addition, the aircraft manufacturer and theairlines, in their capacity as customers, conductfield tests on all specifications independently ofthe engine manufacturer’s own data.
Safety-critical components (engine componentsare categorized into various safety classes) aresubjected to particularly rigorous testing to verifytheir technical quality. Each component goesthrough different testing stations during thecourse of the production process to check thatit is being manufactured in precise accordancewith set tolerances before it is approved. Manu-facturing to the highest quality standards is notmerely enormously important for safety reasons,but also for economic ones. Engine componentsincrease in value throughout the course of theirproduction, which means a lot of capital is tiedup.
Strict requirements also apply to materials. Fail-safe materials are a basic prerequisite for avia-tion safety. All engine components, including allmaterials we use, must be approved by the avia-tion authorities.
We comply with our customers’ requirements,regulations and laws as well as internal stan-dards throughout the entire production process.Aviation authorities conduct compliance auditsto strictly monitor any engine we manufacture,and the customer routinely performs both inter-nal and external audits. Audits at all MTU sitesensure that our standards are upheld worldwide.In 2016, we carried out 443 audits across theMTU Group. In addition, we passed 119 auditsconducted by customers and certification bod-ies with flying colors. In 2016, no breaches ofstatutory regulations were observed in connec-tion with the purchase or operation of our pro-ducts, nor were any fines imposed on MTU.Neither were there any incidents or breaches of
According to the current safetyreport by the International Air Trans-port Association (IATA), the accidentrate for worldwide air traffic has beenfalling for years. In 2016, the figureof 1.61 accidents per million aircraftmovements (takeoffs or landings)was lower than ever before.
One way to measure the reliability ofaircraft engines is their in-flight shut-down (IFSD) rate. Today’s enginesachieve an IFSD rate of below 5x10-6 per flight hour. This meansthat an engine needs to be switchedoff once every 200,000 flight hours.Or to put it another way, the pilot ofa twin-engine aircraft is forced toswitch off an engine once in a hun-dred years.
Flight safetyairworthiness of components and engines. Theremust be no gaps in documentation for the entireproduct lifecycle. We adhere to this principle ateach stage of the production process. We haveadopted internal policies on the handling andstoring of documents, data and records in orderto meet the requirements of regulatory authori-ties, partners and customers.
statutory regulations or internal guidelines inrelation to the health or safety-relevant effects ofour products and services in the reporting year.
We have equally high expectations of the qualityprovided by our suppliers and their vendor-sup-plied parts. Each supplier must be approved byMTU and is routinely audited by MTU’s qualitycontrollers.
44
Responsibility for products and supply chains • 2.6 Product quality and safety
44
Sustainable product lifecycleDuring development, production, use and dis-posal, we test and evaluate the environmentaland safety impact over the entire lifecycle of an aircraft engine. Development is the most im-portant thing. Our mission in any collaborationis to design every new engine so that it is morefuel-efficient, less polluting, and quieter than itspredecessor.
Development: Aircraft engines can spend up to30 years in service. This extremely long servicelife is a design specification, meaning that duringproduct development, the service life of eachcomponent is determined with that of the enginein mind. By developing new technologies andmaterials, MTU has extended—in some cases,doubled—the service life of life-limited parts.Moreover, the subsequent resource consumptionand CO2 emissions of the engines during theirservice life is determined at the developmentstage. For this reason, MTU laid down objectivesfor more sustainable products through its CleanAir Engine technology agenda (> see 2.4 ClimateStrategy).
Service life: Generally, an engine will completebetween 20,000 and 30,000 flight hours beforeit is taken off the wing and has to be given itsfirst overhaul. MTU Maintenance has developedits own innovative repair processes, which givesit capabilities that are unique worldwide andreduce the consumption of resources. MTU isgradually expanding this repair capability bydeveloping new special processes. For example,we made good progress in 2016 with our repairsfor the V2500 fan casing. Previously, the plasticinner paneling of the fan casing had to be re-placed frequently. A unique new MTU repairmethod has reduced the scrap rate and sub-stantially increased the component’s service life.MTU’s ERCoateco erosion protection for com-pressor blades and vanes also extends service
Recycling High prices for titanium and nickel,plus some alloying elements such as platinumand rhenium, make engines very valuable, sothat they are almost fully reused in different waysat the end of their service life. Components thathave not yet reached the end of their maximumservice life are reused as spare parts. Certainmaterials can also be directly employed in non-aviation applications. Recyclers collect the re-maining materials for material manufacturers tomelt down and put back into circulation. As avendor, MTU has no direct influence over thescrapping of engines, which is carried out byspecialist companies. For older engines, we offertailored solutions for disassembling and recyclingcomponents.
Customer satisfaction (GRI G4-PR5)For MTU, high customer satisfaction is a keymetric for product quality. It is enshrined in ourcorporate objectives (“Our customers receiveproducts and services on time and on quality”)and is a crucial factor for the company’s long-term success. Our quality management system,which is certified to ISO 9001, is designed firstand foremost to ensure customer satisfaction,process orientation and continuous improvement.For 2017, we are seeking to make our customerseven happier with our performance. To this end,a systematic customer dialog helps us improvequality further. In our new engines and spareparts business (OEM segment), we achieved anon-time delivery rate of 95 percent in 2016. In2017, we want to increase this rate to 96 per-cent. Our strategic cooperation partner Pratt &Whitney recognized MTU in 2016 by making usthe only supplier to receive a Sustainable Sup-plier Award in the categories Resource Conser-vation, Ethics, Labor Guidelines and Safe Work-place Standards. In order to increase our on-timedelivery rates even further, we have a ShopfloorManagement system in place, whereby workersand managers meet up every day to discuss the current production status and, if there areany problems, to promptly initiate measures toremedy them. We are gradually rolling ShopfloorManagement out across other MTU sites outsideMunich and also in administrative departments.
LifecycleDevelopmentProduction
Service life
Recycling
Sustainable lifecycle
Actions• Clean Air Engine• Environmental management• Additive manufacturing• Sustainability standards for suppliers• MTUPlus Engine Trend Monitoring• MTU-repairs• MTUPlus Mature Engine Solutions
life in desert regions while cutting fuel con-sumption by making these blades wear-resistant.This made it possible to reduce the scrap rateby 30 percent and cut fuel consumption—andtherefore CO2 emissions—by 0.5 percent.
45
Responsibility for products and supply chains • 2.6 Product quality and safety
MTU Maintenance draws on feedback from its customers to continuously improve its repair and service offerings.
MTU Maintenance offers repair and additionalservices for aircraft engines and industrial gasturbines. Most of its customers are airlines, leas-ing companies and energy producers. Directinteraction with customers forms the basis ofcustomer care. For this purpose, customer ad-visers use a customer relationship managementtool (Voice of the Customer module) which regu-larly measures current satisfaction levels. Thesurvey takes place once a quarter for all majorsites, including Hannover, Ludwigsfelde andVancouver, and for all main products. Each cus-tomer has the option of providing feedback aboutproduct quality, service, logistics and commercialterms. We actively use this feedback in order toidentify areas for improvement and to initiatemeasures accordingly. Our goal is to improve ourperformance and continuously increase customer
satisfaction as means of staying competitive. Inaddition, MTU Maintenance Lease Services runsits own measurement system in the area of en-gine leasing and asset management.
46
Responsibility for products and supply chains • 2.7 Responsibility for the supply chain
2.7 Responsibility for the supply chain
Responsible sourcing management approach The value creation of an MTU product containsimportant pre-production stages at external sup-pliers. For this upstream value creation, we seekto ensure sustainable procurement and pay at-tention to the observance of standards within oursphere of influence. We have summarized oursustainability efforts for the supply chain underthe heading Responsible Sourcing, which we taketo encompass environmental and social aspectsas well as transparency in the supply chain. Sus-tainability in the supply chain is very importantboth for MTU and for its stakeholders. The mostimportant instrument is a Code of Conduct forSuppliers, which lays down binding environmen-tal and social standards in the supply chain.Moreover, MTU’s General Terms and Conditions
As a responsible engine manufacturer, we strive also to ensure, insofar as possible, that the parts of the value chains for our products that lie outsideour factory walls are sustainable. Supply chain sustainability is part of our CR strategy, and we practice it through our responsible sourcing approach.
of Purchase also contain environmental, socialand compliance requirements.
We work together with a large number of suppli-ers and subcontractors from different countries.Today’s supply chains are global and have manybranches. This complexity compels us to con-centrate on the supply stage directly upstreamfrom us (Tier 1). In 2016, the MTU Group pur-chased goods and services from 6,249 suppliers(2015: 4,582). The purchasing volume was about2.2 billion euros for production and non-produc-tion material (2015: 1.86 billion euros). Of thistotal amount, 39.9 percent was not subject toany purchasing restrictions, unlike the remaining61.5 percent, where the OEMs impose strictconditions, especially in the repair business. The
990/15.8%New suppliers
6,249 Suppliers
4,189529
5251149
9388
GermanyOther Western European countriesEastern EuropeIsraelAsiaNorth AmericaMexico
6,249 Suppliers
Germany
Israel
Asia
North America
Mexico
0.1%
67.0%
0.8%8.4%
15.0%
MTU suppliers 2016, by regionGRI G4-12
Eastern EuropeOther Western
European countries0.2%
10.3%
Supplier base for production materialand non-production material for OEM(new and spare parts) and MRO(maintenance, repair and overhaul)business units
47
Responsibility for products and supply chains • 2.7 Responsibility for the supply chain
higher procurement volume and the larger sup-plier base compared to the previous year areattributable to two causes: the expanded groupreporting entity of the present report (see Re-porting Principles) and the production ramp-up inthe Geared Turbofan™ programs. In the reportingyear, the MTU Group worked together with 990new suppliers, which corresponds to 15.8 per-cent of all suppliers (2015: 10.6 percent).
Comprising 93.5 percent of purchasing volume,the markets in Western Europe and NorthAmerica, which are so important generally forthe aviation industry, account for the lion’s shareof MTU’s procurement. 90.5 percent of our sup-pliers are based in those countries. In the OEMbusiness for aircraft engines, we procure acrossthe entire breadth of the supply chain, fromblanks to finished parts. We always source cast-ings and forgings externally, and the same goesfor special materials for which MTU has not builtup manufacturing expertise, such as electroniccontrol systems. If possible, we source our sup-plies directly from blanks or finished parts manu-facturers. MTU procures only a small proportionof its raw materials directly. On average, between
53 and 74 percent of the parts required forcommercial engine programs are outsourced.
Local procurement (GRI G4-EC9)MTU does not have any business policy that ex-plicitly defines a purchasing quota giving prefer-ence to local suppliers. We procure materials andservices from vendors all over the world, and thechief criteria are manufacturing expertise, quality,on-time delivery and price. It is nonetheless inMTU’s interests to cultivate and expand its rela-tionship with German industry where appropriate.Local content is particularly important whenpurchasing non-production material and services,and there is a wide variety of goods and servicesavailable locally. We procure non-productionmaterials predominantly in the regions in whichwe operate (see GRI G4-12, Purchasing Volume).For Germany, the local proportion of the pur-chasing budget for production and non-produc-tion material (both business units) was 23.5 per-cent; for Poland, the figure was 21.8 percent(OEM business only). In our MRO business, weare bound by the manufacturer’s specificationsas regards the production material we can use.
Germany
Other Western European countries
Eastern Europe
Israel
Asia
North America
Mexico
178189
112877
1,34913
31515
1500
300
Production material
1,845Non-production
material
375
Purchasing volume by region in 2016 (in EUR m)GRI G4-12
Total purchasing volume of OEM (new and spare parts) and MRO (maintenance, repair and overhaul)business units for production materialand non-production material.
Responsibility for products and supply chains • 2.7 Responsibility for the supply chain
48
Sustainability standards in the supply chainWe have established a binding Code of Conductfor Suppliers that forms an important basis forall our contracts with suppliers(http://www.mtu.de/company/compliance/code-of-conduct-for-suppliers/). It defines the following social and environmentalstandards: respecting internationally recognizedhuman rights, observing the ILO’s (InternationalLabour Organisation’s) core labor standards, pro-tecting the environment and combating corrup-tion. The Code of Conduct for Suppliers is anintegral part of the contract and is based on theten principles of the UN Global Compact. Eachcontract signed by a supplier includes the com-mitment to abide by these principles. We expectour suppliers to communicate MTU’s standardsto their own supply chains and take measures toensure that they are complied with. The Code of Conduct applies to suppliers of the Europeanmanufacturing sites and of MTU MaintenanceCanada and MTU Aero Engines North America,and therefore to 75 percent of the group report-ing entity.
Suspicions that the Code of Conduct may havebeen breached can be reported to MTU’s om-budsman ([email protected]). Should a sup-plier be implicated in charges of corruption, ex-tortion, embezzlement or the utilization of childlabor in the execution of a contract for MTU, thecollaboration agreement will be terminated with-out notice. If other principles of the code areviolated, the supplier must demonstrate thatsuitable corrective measures have been initiatedand implemented and must guarantee this inwriting. No accusations of possible breaches ofthe Code of Conduct were reported during theperiod under review. Neither were there anycomplaints about suppliers. MTU reserves theright to carry out on-the-spot audits to verifycompliance with the Code of Conduct.
In our General Terms and Conditions of Purchasefor our European sites, we also insist on compli-ance with the EU’s REACh chemicals regulation.
A large number of components in MTU’s products are supplied by external vendors. We define strict quality, social and environmental standards for the entire upstream value chain.
Responsibility for products and supply chains • 2.7 Responsibility for the supply chain
49
Risk management and assessment (GRI G4-EN32/33, LA14/15, HR1, HR5/6, HR10/11,SO9/10)We seek out long-term relationships with suppliers.In the OEM business unit for aircraft engines,for example, about 85 percent of the purchasingvolume is based on contracts with a term of twoor more years. All suppliers are vetted beforebeing accepted as a member of MTU’s supplychain. This process includes a binding supplierdisclosure and contractual undertaking to complywith the Code of Conduct. Moreover, MTU’s pur-chasing strategy experts carries out a risk assess-ment for some suppliers. At present, this assess-ment relates to commercial risks for MTU. Tocover environmental aspects, we demand proofof certification to standards such as ISO 14001.In 2015/2016, we revised our guidelines on theapproval of suppliers in order to take greateraccount of environmental aspects, such as haz-ardous materials. Using audits and periodic eval-uations, we regularly review existing suppliers,including with respect to their ISO 14001 certifi-cation. In 2016, we carried out a total of 367audits on all major suppliers, which included on-site inspections and interviews. Once approved,suppliers of production material must regularlydemonstrate their ISO 9001 compliance anewvia re-certifications. In 2016, we also revisedour internal risk survey, adding new elementssuch as sustainability issues in the supply chain.
In the reporting period, our supplier checksshowed up no substantial risks for MTU. If anysuch risks should be discovered, the approval of the supplier in question may be withdrawn.Neither was any cooperation terminated becauseof sustainability deficiencies or other complaints,nor did we discover any risk of compulsory,forced or child labor at any of our suppliers.
In 2016, we held training on CR-oriented suppliermanagement for purchasing staff in Munich forthe first time. These training courses will be con-tinued. In addition, we regularly provide pur-chasers with training on professional compliancebehavior and on the MTU Code of Conduct, whichapplies to all the company’s employees and pro-scribes corruption, bribery, the granting of undueadvantage, and anti-competitive behavior.
Transparency in the supply chain (GRI G4-HR5/6, HR11)MTU’s commitment to sustainability includes atransparent value chain that excludes the use ofconflict minerals. We never deliberately purchaseconflict minerals, but they can find their wayinto our production or pre-production due to thecomplex links at the various levels of our globalsupply chain. Such minerals include tantalum,tin, gold and tungsten, which can be found incertain components of engines manufactured byMTU. These minerals can cause problems for acompany with a responsible procurement policybecause many of them are mined in countries of Central Africa where the profits of the govern-ment-controlled mining industry may be used inconjunction with financing armed conflicts inwhich human rights are not respected. Accordingto the provisions of the Dodd-Frank Act applicableto companies listed on stock exchanges in theUnited States, MTU’s American partners andcustomers require that MTU disclose the originof minerals used and limit its sources to certifiedmining companies and primary-alloy producers(Compliant Smelter List).
In turn, MTU demands that its relevant suppliersshould specify the origin of such minerals, inorder to ensure that the value chain contains onlyconflict-free raw materials. MTU’s procurementguidelines require suppliers to provide informa-tion about the source of minerals in accordancewith the EICC/GeSi Conflict Minerals ReportingStandard. To date, no infractions have come tothe knowledge of MTU that infringe on the prin-ciples of the Dodd-Frank Act. The Code of Con-duct for Suppliers moreover prohibits the use ofchild labor. MTU reserves the right to terminateany contract with a supplier using child labor tomanufacture products supplied to MTU, withoutprior notice.
We are closely following developments in the EUvis-à-vis regulating the use of conflict minerals, sothat we can implement the provisions as required.
50
51
3 Environmental protection
Climate change and the scarcity of resourcesare global challenges we must meet as a manu-facturing company. Our response is based onenergy-efficient production that minimizesemissions and raw material consumption sothat we can make our environmental impact as small as possible. Likewise, our productshelp reduce our clients’ emissions and energyconsumption.
Organizational profile (precautionary approach)MaterialsEnergy WaterEmissions
Effluents and wasteComplianceTransportOverall environmental protectionEnvironmental grievance mechanisms
Main GRI aspects covered by this chapter:
Waste managementWater protectionNoise reductionAir pollution controlNature and landscape conservationSoil remediationClimate protectionTotal
Environmental protection investment and expenditure (in Euros) G4-EN31
Environmental protection • 3.1 Management approach: environmental protection
Environmental protection is an important princi-ple guiding our corporate behavior and, as such,is implemented in our business processes. It isenshrined in our Code of Conduct and in the MTUPrinciples, and it is established in our annual cor-porate objectives and in a dedicated program ofenvironmental measures.
Our sense of environmental responsibility encom-passes product development, manufacturingand repair. For MTU, the following are key focusareas of our environmental protection efforts inmanufacturing and repair:• Energy consumption• Emissions• Water/waste water• Material efficiency and • Waste management
We have summarized these aspects in our sus-tainability strategy under the heading environ-mental management/performance, which is ofgreat importance both to MTU and to its stake-holders. The most significant way we can helpprotect the environment is by means of ecologi-cally efficient products, as the environmentalimpact of our products is greatest during theiruse. Reducing harmful CO2 emissions in flightoperations is thus a top priority. We implementthis through our climate strategy (> see 2.4Climate Strategy).
MTU pursues a policy of integrated environmen-tal protection consisting of:• Making continuous improvements• Taking a precautionary approach• Involving employees• Limiting environmental impact• Carefully complying with statutory limits and
requirements• Using resources and energy sparingly
We use various measures to achieve improve-ments in our energy and carbon footprints. In2016, MTU invested a total of 4.7 million eurosin improving the environmental compatibility ofoperating activities at its sites.
MTU’s energy-efficient approach to manufac-turing and maintenance minimizes emissions andthe consumption of raw materials. Minimumoperating standards for our machines and facili-ties, such as engine test cells, are defined bynational legislation and local specifications. Formachines and facilities with environmental im-plications, this body of rules and regulations issupplemented by approvals and permits fromthe authorities. We conduct measurements, tests
52
3.1 Management approach:environmental protection
All fully consolidated production sites of the MTUGroup worldwide are included in our environ-mental reporting (Munich, Germany; Hannover,Germany; Ludwigsfelde, near Berlin, Germany;Rzeszów, Poland; and Vancouver, Canada). Allother locations are small office facilities andhave no significant impact in terms of the keyaspects, so the effort required to capture andconsolidate data would be disproportionate.
and inspections at regular intervals to ensure ourmachines and facilities are operating invariablyin accordance with these rules and regulations.
We use resources such as raw materials, energyand water sparingly. In this way, we also createadded financial value for the company throughlower energy costs. Consumption, emissions,waste water and waste are dependent on pro-duction capacity. We make every effort to ensurethat these don’t rise disproportionately. We treatwaste and discharge waste water properly andin accordance with the applicable legal require-ments. We apply the precautionary principle inaddressing all key aspects of environmental pro-tection.
Munich2013
619,300681,000
20,00036,000
145,0000
1,650,0003,151,300
728,895572,017
5,78083,69614,000
01,657,340
3,061,728
560,000812,000
097,00034,000
0940,000
2,443,000
634,000841,000
0149,000112,400
01,287,000
3,023,400
225,563372,674
18,000952,888
00
629,5412,198,479
108,980372,487
18,00062,096
00
180,460742,210
164,906678,296
25,00084,917
00
176,3611,129,480
200,076608,518
25,000293,716
00
572.9801,700,290
2014 2015 2016 2013 2014 2015 2016Hannover
Only German locations, listed separately, as there are still no unified definitions for the investment categories. We are currently preparing to issue international reports. The indicator has been recorded in the database since 2013. For Ludwigsfelde, this data is gathered on an ad-hoc basis only (if requested by authorities). In 2014 and 2015, this data was not requested. At the date thisreport went to print, the 2016 data was not available.
Environmental protection • 3.1 Management approach: environmental protection
Certified environmental managementResponsibility for company-wide environmentalprotection is assumed by the Executive Board.Implementation is carried out through a certifiedenvironmental management system with highstandards that apply consistently throughout thecompany. All processes, responsibilities andobjectives are defined in the system. Internalstandards are binding for MTU’s sites and, insome cases, exceed the legal requirements. Thestringent environmental criteria apply to all divi-sions and processes and are laid down in docu-mented process flows and special standards.Dedicated environmental departments have beenset up at all of MTU’s production sites, some of which are certified in accordance with ISO14001, the international standard for environ-mental management systems, or are validatedaccording to the European EMAS regulations(http://www.mtu.de/engines/quality/approvals-certifications/).
Environmental protection management officersat the production sites are responsible for im-plementing the environmental management sys-tem. Individual managers are directly responsiblefor environmental protection. They are advisedand supported in their environmental protectionefforts by the relevant technical departments at their site. The environmental departmentsregularly share their potential solutions and bestpractices across all sites.
53
Measures for energy-efficient production include using buildingautomation systems and new lighting systems such as LED lighting.
Environmental protection • 3.1 Management approach: environmental protection
54
Monitoring and assessments (GRI G4-EN29, 34)Independent external auditors and environmentalconsultants conduct annual reviews to confirmimplementation of and adherence to the appli-cable environmental protection managementrequirements. MTU passes these reviews withflying colors. This monitoring is supplementedby internal inspections and audits. MTU’s man-agement conducts reviews to monitor and steerenvironmental management in the company andto influence its further development.
Emergency management plans have been pre-pared to deal with interruptions to operationswith a negative environmental impact. This in-cludes regular staff drills and instruction on whatto do in the event of an emergency. MTU hascomprehensive fire protection measures in placethat fulfill all legal directives on fire protection.In 2016, there were no incidents with a negativeenvironmental impact, nor were any fines leviedagainst the company for breaches of statutoryrequirements relating to the environment.
Stakeholders can direct complaints and reportabuses to MTU; this applies to employees, sup-pliers, residents and other stakeholders. In thereporting period, two complaints were submittedto the competent environmental authority (De-partment of Health and Environment of the Cityof Munich, RGU) regarding noise pollution at theMunich facility. In both cases, the authoritydropped its investigations against MTU since areview of the test rig operating logs showed thatMTU could not have been the cause.
Discussing environmental protection withstakeholdersWe are in a dialog with our stakeholder groupsabout MTU’s environmental impacts. The com-pany involves its employees in its environmentalprotection endeavors and promotes environmen-tally conscious behavior through action days,information campaigns and training courses. Weinform the public annually about our environ-mental impacts and environmental managementthrough statements issued by MTU for its sitesin Munich and Hannover, and since 2016, forBerlin.
Also in 2016, we took part in the annual ratingof the international non-profit organization CDPto increase the transparency of our company’sclimate data. On a scale of A to F, MTU achieveda climate score of C in the 2016 rating, improv-ing its score over the previous year. In 2015, it was awarded the title of Germany’s Best Im-prover.
We promote greater environmental protection in industry and business through the followinginitiatives: • UN Global Compact• CDP • German Environmental Management
Association (B.A.U.M.)• Bavarian Environmental Pact • Energy Efficiency Network for Munich and
Upper Bavaria• Munich Business Climate Pact
(Klimapakt Münchner Wirtschaft)• YVR Airport Authority environmental initiative
Precautionary principle in environmentalprotection (GRI G4-14)As a principle, MTU acts on a long-term basis in all divisions and areas of the company. Withregard to environmental risks, the company takesa precautionary approach. As part of our riskmanagement, we carry out regular analyses ofenvironmental risks at production sites in orderto record and prevent them. In our environmen-
Umwelterklärung 2016 Ersterstellung über das Berichtsjahr 2015der MTU Maintenance Berlin-Brandenburg GmbH
Umwelterklärung 2017 der MTU Maintenance Hannover GmbH(Daten und Zahlen 2016, aktualisierte Fassung)
Umwelterklärung 2017 Neufassung über das Berichtsjahr 2016für den Standort München der MTU Aero Engines AG
tal management, we have defined structures andprocesses and assigned responsibilities. Impor-tant production and maintenance locations havea certified environmental management systemin place.
2017 in preparation
German versionsonly
MTU relies on a mix of renewable and non-renewable energy sources and chooses energyresources based on security of supply, costeffectiveness and environmental sustainability.As non-renewable primary energy, we use naturalgas, the aviation fuel kerosene, diesel and a smallamount of heating oil. In Munich we operate acogeneration plant (BHKW 1.0) with renewableenergy. We procure the vegetable oil from certi-fied sources. In connection with the Munich Busi-ness Climate Pact, the modernization to BHKW2.0 is planned as a measure for further reducingemissions. The Hannover facility uses solar energywith the aid of a solar thermal power plant. Wealso achieve greater energy efficiency through acombination principle, in which sites use the heatgenerated during production as thermal energy.
Measures for energy-efficient production(GRI G4-EN6)• Using well water for cooling purposes• Modernizing the district heating network• Improving thermal insulation• Using building automation systems• Using heat recovery systems• Using renewable energy• Using energy-efficient compressed air supply• Using energy-efficient lighting systems• Using waste heat from compressed air
generation• Using electric in-plant transportation
3.2 Energy management (GRI G4 DMA Energy, G4-EN3, 6)
We are committed to the principle of efficient energy supply and, in view ofgrowing resource scarcity, to reducing the raw materials and energy we needto manufacture and maintain our engine products. An energy managementprogram ensures continuous improvements.
Environmental protection • 3.2 Energy management
We have implemented a comprehensive energymanagement system with which we manage andimplement above all the consumption of ourmain energy sources electricity and natural gas.Together, these energy sources supplied 69 per-cent of the required energy in 2016. Energy de-mand in 2016 was at a similar level as in 2015,but it includes the entire MTU Group with theadditional production site in Canada. 2.8 percentof the energy consumed came from regenerativesources.
55
Energy sources used in 2016, Scope 1 and 2 (consumption in MWh and as a % share)GRI G4-EN3
Fossil fuels MWh %Natural gas
Kerosene
DieselHeating oil
86,84186,693
14974,00853,97120,037
596145
29.099.8
0.224.772.927.1
0.20.0
Scope 1: Non-fossil fuels
Scope 2: Purchased energyElectricity (external)
Vegetable oil Heating/hot water
Production/developmentHeating/hot water
Totalof which production relatedof which development
8,312 2.8
120,6708,584
40.32.9
100.093.3
6.7
District heating
Energy consumption299,158278,971
20,187
Totalof which production relatedof which developmentTest beds, totalof which production relatedof which developmentEmergency power, plant filling stationsHeating/hot water
Progress in energy management in 2016(selection)GRI G4-EN6
• Reduction of compressed air leaks through use of ultrasound technology (Hannover)
• LED lighting in production areas (Hannover, Berlin, Rzeszów)
• More energy-efficient lighting (Vancouver)• Improved thermal insulation of test-rig
prefitting facility (Berlin) • Replacement of six building ventilation
systems with a more efficient central system (Hannover)
• More energy-efficient storage systems (Munich)
Environmental protection • 3.2 Energy management
56
Because of new Geared Turbofan™ programs inthe product portfolio (PW1000G engine family),MTU is currently ramping up production, whichcontinues to result in higher energy demand. Ofthe total energy demand, 93.3 percent was pro-duction related. Kerosene is used as fuel forengine tests on test rigs, and consumption isdependent on the scope of the test run and thesize of the engine. The amount of fuel used in2016 dropped 11 percent to 74,008 MWh dueto the use of a different range of tests (2015:82,703 MWh). MTU has no influence on the typeand duration of test runs. We aim to minimizeengine development testing by using state-of-the-art computer-aided simulation techniques.
Our digitalization campaign is making stridestoward increasing the use of simulations in devel-opment and manufacturing. However, all researchand development processes still require a proto-type that is tested under real conditions in atest cell. For reasons of know-how and costeffectiveness, MTU strives to carry out as manyof these test runs in its own test cells as possible.In repair, all engines must complete a test runfor safety reasons and to demonstrate perform-ance. Overall, energy consumption from non-regenerative sources dropped to 161,592 MWhin the reporting period (2015: 164,022), which
is due primarily to the lower kerosene consump-tion.
In 2016, we procured a total of 129,254 MWhof external energy (Scope 2). The increase overthe previous year (122,289 MWh) is largely dueto the expanded group reporting entity. Our useof green electricity is determined by the extentto which our suppliers feed it into the grid. Theproportion of green electricity lies between 14.7(Rzeszów) and 56.5 percent (Hannover) for Euro-pean production sites. All electricity for MTUMaintenance Canada is produced by hydro dams.
Fossil fuels*(natural gas, diesel,heating oil, kerosene)
Energy supply Scope 1 and 2 (in MWh) GRI G4-EN3
20122013201420152016
127,848146,893125,593164,022161,592
Non-fossil fuels (vegetable oil)
20122013201420152016
13,7019,886
10,13411,291
8,312
Electricity, districtheating** (external)
20122013201420152016
107,554116,945117,524122,289129,254
10,0
00
Production sites only, 2012: Germany, 2013-2015: Europe, 2016: fully consolidated MTU Group The vegetable-oil-operated BHKW had a shorter running time than in the previous year.* Adjusted figures following standardization of calculation factors ** from 2013 with district heating
20,0
00
30,0
00
40,0
00
50,0
00
60,0
00
70,0
00
80,0
00
90,0
00
100,
000
110,
000
120,
000
130,
000
140,
000
150,
000
160,
000
We measure emissions at our production sitesin accordance with the international standard of the Greenhouse Gas (GHG) Protocol. MTUemits greenhouse gases that have an effect onthe climate as defined by the Kyoto Protocol.The following gases come under this definition:carbon dioxide (CO2), methane (CH4), nitrousoxide (N2O), partially fluorinated hydrocarbons,perfluorinated hydrocarbons and sulfur hexaflu-oride (SF6).
The only one of these relevant to MTU’s emis-sions is CO2. Our carbon footprint is made up ofdirect greenhouse gas emissions (Scope 1) fromsources owned by the company and of indirectgreenhouse gas emissions (Scope 2) that comefrom the consumption of bought-in electricity and
3.3 Emissions (GRI G4 DMA Emissions, G4-EN15-17, 19, 21)
We want to continuously reduce the greenhouse gas emissions and airbornepollutants produced by manufacturing and repair work in our plants to protectthe climate. That’s why we design our processes to be energy efficient.
district heating. CO2 emissions from businesstrips and transports in the logistics chain fallunder Scope 3. We recorded these emissions inpart for the first time in 2016.
In the reporting year, MTU emitted a total of81,418 tons of production-related CO2. In 2016,natural gas accounted for the lion’s share ofScope 1 CO2 emissions with 17,507 tons (22 per-cent). The aviation fuel kerosene (19,049 tons)was responsible for 23 percent of CO2 emissions.The main energy source, electricity (43,707 tons),caused the most greenhouse gases, with a shareof 54 percent. Demand for electricity and naturalgas is dependent on production volume; theamount of kerosene, on the type and duration oftest runs.
Scope 1
CO2 emissions (in t)GRI G4-EN15, 16
20122013201420152016
28,34132,66827,96237,64136,788
Scope 1, additional biogenicemissions
20122013201420152016
5439404533
Scope 2 20122013201420152016
54,44061,73044,00645,748 44,630
10,0
00
Production sites only, 2012: Germany, 2013-2015: Germany and Poland, 2016: fully consolidated MTU Group(source of emission factor: ProBas)*excluding district heating ** not including additional biogenic CO2 emissionsAdjusted figures following standardization of emission factors for the MTU Group
Total** 20122013201420152016
82,78194,39771,96883,390 81,418
20,0
00
30,0
00
40,0
00
50,0
00
60,0
00
70,0
00
80,0
00
90,0
00
100,
000
Environmental protection • 3.3 Emissions
57
*
Environmental protection • 3.3 Emissions
58
Examples of annual CO2 savings GRI G4-EN19
• Use of well water for cooling purposes: roughly 3,000 tons of CO2
• Climate-neutral cogeneration plant (BHKW 1.0): roughly 7,400 tons of CO2
• Electric cars in fleet: 330 tons of CO2
Transport and logisticsWe also involve our transport and logistics chainin climate protection. Measures include optimiz-ing logistics routes for in-plant transport andusing vehicles with better environmental perfor-mance or electric motors to reduce fleet con-sumption. In Munich, for instance, we plan toreduce CO2 emissions from company vehicles,and in the reporting period, we paved the way tointroduce a maximum emissions limit.
Furthermore, MTU promotes sustainable com-muting practices among its workforce, for exam-ple through a special discounted “job ticket” forthe local public transportation network. In 2016we developed a concept to promote e-mobilityamong employees at our Hannover site.
Emissions from the transport and logistics chain(excluding owned company vehicles) fall underScope 3, for which we do not have comprehen-sive data.
Upgrading the building automation systems hasalready led to a savings of 70,000 tons of CO2.
In 2016, MTU joined the Munich Business Cli-mate Pact, through which major businesses inthe city have committed to reducing CO2 emis-sions by a total of 40,000 tons per year by 2018.This will be done through climate protectionmeasures in production, building management,infrastructure and mobility solutions. MTU willfocus on solutions for more energy-efficient equip-ment in production ramp-up, and will modernizeits BHKW.
What is the Climate Pact?The Climate Pact is a voluntary com-mitment by companies in the greaterMunich region to step up the effec-tiveness of their climate protectionefforts.
Why did MTU join?Effective climate protection requirespioneers. We see ourselves in thatrole. For a major corporation likeMTU, the focus is not only on theenvironmental impact of our pro-ducts, but also on the energy foot-print of our production sites. Andbecause our headquarters is locatedin Munich, the city is of particularsignificance to us as a company.
What is MTU’s contribution?With CLAIR-IS (Clean Air-IndustrialSite), we have already set a fixedgoal to reduce CO2 emissions at ourMunich site by 25 percent over 1990levels by the year 2020. Under theClimate Pact, we plan to pursueadditional measures to achieve fur-ther CO2 savings. We already madegood progress in 2016 by introducingenergy-saving solutions during peri-ods of low production, optimizing theuse of well water, replacing ventila-tion systems and by modernizinglighting and windows. We have evenmore planned for 2017 to save afurther 5,500 metric tons of CO2.
Three questions for Lars Wagner,Executive Vice President, OEMOperations at Munich MTU AeroEngines, on the Munich BusinessClimate Pact
The Clean Air Industrial Site (CLAIR-IS) programoperates at MTU’s headquarters in Munich. Withthe help of this program, we are engaged inreducing the CO2 emissions at the company’slargest plant by 25 percent by 2020 (baselineyear: 1990). In total, we have already savedroughly 330,000 tons of CO2. The program alsoserves as an example of best practice for otherMTU sites.
Environmental protection • 3.3 Emissions
Train travelAir travelCars (rental cars)Total
CO2 emissions (in t),Scope 3, 2016GRI G4-EN17
4310,929
16811,140
1,00
0
Data can currently be gathered only for Germany and Canada.
2,00
0
3,00
0
4,00
0
5,00
0
6,00
0
7,00
0
8,00
0
9,00
0
10,0
00
11,0
00
12,0
00
Carbon monoxide(CO)
Airborne emissions (in t),Scope 1 and 2GRI G4-EN21
20122013201420152016
4347455154
Nitric oxide (NOX)
20122013201420152016
107125115153148
Sulfur dioxide (SO2)
20122013201420152016
2943435151
10
Production sites only2012: Germany, 2013-2015: Germany and Poland, 2016: fully consolidated MTU Group Adjusted figures following standarization of emission factors for the MTU GroupEmission factors may vary significantly from one location to another, especially in regard to electricity and district heating. We therefore use reliable estimations: see explanation in the GRI Index in the annex.
Fine particles (dust)
20122013201420152016
2.02.62.62.93.1
20 30 40 50 60 70 80 90 100
110
120
130
140
150
160
Airborne emissions (GRI G4-EN21)
The use of energy is responsible for not only CO2
emissions but also further airborne emissions. Theuse of kerosene, natural gas, electricity and dis-trict heating from fossil fuels causes the emissionof carbon monoxide, nitric oxide, sulfur dioxideand dust, which we also determine. In 2016, ab-
solute emissions of air pollutants in the atmos-phere totaled 256 tons. We aim to reduce theseemissions, too, for example by using new filtersfor plasma spraying (dust emissions).
59
3.4 Water (GRI G4 DMA Water and DMA Effluents and Waste, G4-EN8-9, 22, 24)
Water is a vital natural resource for industry and society in general.Accordingly, we protect water sources and use water efficiently in the manufacture and repair of our products. We also strive to minimize our consumption of water.
Environmental protection • 3.4 Water
60
We use drinking water for production and repairprocesses and in sanitary facilities and in thecafeteria. We use well water for cooling processes.In 2016, the production sites of the MTU Grouprequired a total of 7.1 million cubic meters of water (2015: 7.4). Of this, 2.2 percent wasdrinking water, compared with 97.8 percentgroundwater. MTU increasingly uses Quaternarygroundwater extracted from its own on-site wellsin Munich. The higher consumption of drinkingwater of 153,343 cubic meters in 2016 (2015:147,555) is a result of the expanded group re-porting entity including the additional productionsite in Vancouver, Canada.
We have effective water management systemsin place at all production sites. The productionsites in Europe and Canada are not located inwater-stressed regions, which are regions inwhich water is a scarce resource.
We use recirculated water as much as possiblein chemical process baths for applying protectivecoatings to blades and also for the process waterin installations for testing component damage.In this way, we are able to reuse large volumesof water and have to treat only a small amountof waste water before discharging it into themunicipal sewers. This enabled us to save around644,620 m3 of water in 2016. Our sustainablewater management also includes a systematicinspection and renovation of the well water andsewer canal networks.
Water quality (GRI G4-EN9, 24)
MTU treats waste water in suitable sewage sys-tems according to the type and extent of pollu-tion. The quality of the discharged waste watercomplies with the official permits issued for therespective location. Strict monitoring at the sitesensures that legal limits are observed. Neitherwater sources nor water surfaces are negativelyimpacted or polluted by our operating activities.This also applies to our site in Canada, which islocated directly on the Fraser River in Richmond,British Columbia.
The concentration of VHH (volatile halogenatedhydrocarbons) in the groundwater at the Munichsite in 2016 was well below the limit of ten micro-grams per liter, coming in at 1.2.
In its production processes that use water, MTU iscareful to ensure efficient consumption.
IntakeDrinking water
Water consumption and intake (in m3) GRI G4-EN8, EN22
20122013201420152016
123,752129,822147,611147,555153,343
IntakeGroundwater
20122013201420152016
5,652,4996,243,7416,956,1487,245,6456,925,390
Total 20122013201420152016
5,776,2516,373,5637,103,7597,393,2007,079,733
500,
000
production sites only, estimated value for Canada for discharge of waste water into municipal sewers 20162012: only Germany, 2013-2015: Germany and Poland, 2016: fully consolidated MTU Group
DischargeSewer system
20122013201420152016
190,443216,721150,768133,489145,471
DischargeSurface water
20122013201420152016
984,4931,319,4821,442,3971,563,7581,095,519
DischargeGroundwater
20122013201420152016
4,329,6314,631,5105,401,0005,807,6056,130,456
Total 20122013201420152016
5,504,5676,167,7136,994,1657,504,8527,371,446
1,00
0,00
0
1,50
0,00
0
2,00
0,00
0
2,50
0,00
0
3,00
0,00
0
3,50
0,00
0
4,00
0,00
0
4,50
0,00
0
5,00
0,00
0
5,50
0,00
0
6,00
0,00
0
6,50
0,00
0
7,00
0,00
0
7,50
0,00
0
8,00
0,00
0
Environmental protection • 3.4 Water
61
1 Using a water jet to remove coat-ings is a stripping process that offersparticularly high material efficiency.
2 Inductive high-frequency pressurewelding involves joining airfoils to thedisk by welding rather than millingblisks from the solid.
3 Additive manufacturing is a com-pletely new technique that enablesthe fast production of componentswith no excess material.
1
3
2
Environmental protection • 3.5 Material efficiency and waste
62
3.5 Material efficiency and waste (GRI G4-DMA Materials and DMA Effluents and Waste, EN1, 23-25, 28)
MTU uses raw materials and other materials sparingly in production andmaintenance. In all of our methods, we pay attention to efficiency and seekto avoid waste.
MTU develops its own production and repairmethods that are characterized by their highmaterial efficiency, such as:• Stripping coatings by means of water jet• Laser and electron beam melting• Inductive high-frequency pressure welding
Additive manufacturingMTU has exploited the new 3D printing technol-ogy in a way that shows great promise for engineconstruction. This additive manufacturing methodpermits the rapid 3D production of highly com-plex components. Components are laser-melted
Nickel-base alloys*(t)
Material consumptionGRI G4-EN1, EN28
20122013201420152016
1,7321,7032,0612,0201,904
Titanium-base alloys*(t)
20122013201420152016
99128255192222
Consumables and supplies**(t)
20122013201420152016
5,6395,4744,232
11,4178,435
1,00
0
Production sites only, 2012-2014 German sites only; 2015: Germany and Poland, 2016: fully consolidated MTU Group, non-renewable materials only; bought in* Nickel and titanium materials are purchased only in Munich and processed to make new parts.** Consumables and supplies include oils, cooling lubricants, fuels, paper, packaging and chemicals.
Increase in 2015 due to an endurance test of the GP7000 at the Munich site.For engine parts, MTU uses returnable packaging that can be reused several times.
2,00
0
3,00
0
4,00
0
5,00
0
6,00
0
7,00
0
8,00
0
9,00
0
10,0
00
11,0
00
12,0
00
directly from a powder bed according to CADdata—with no excess material. This significantlyreduces the amount of resources used. MTU isalready producing its first production componentsusing additive methods for the new Geared Tur-bofan™ programs and is continuously refiningthe method to gradually expand the range ofcomponents.
Environmental protection • 3.5 Material efficiency and waste
63
REAChWherever possible, we avoid using environmen-tally hazardous materials in our manufacturingprocesses and products. According to the Euro-pean REACh (Registration, Evaluation, Authori-sation and Restriction of Chemicals) regulation,certain substances of very high concern (SVHCs)containing chromium6+ are subject to authori-zation from September 2017. MTU uses chromi-um trioxide, ammonium dichromate, sodiumdichromate and potassium chromate in its pro-
duction processes and has obtained the requi-site authorization in line with the 2016 ECHA(European Chemicals Agency) regulations. In aproject to implement the REACh regulation, weare pushing ahead with the long-term eliminationof SVHCs that require authorization, insofar aspossible, either by replacing them or by rejectingnew authorizations. MTU is duly implementingall provisions of the EU regulation for protectingemployees and the environment. We communi-cate the REACh requirements to the suppliers of
Environmental protection • 3.5 Material efficiency and waste
64
Total waste produced
Waste footprint (in t)GRI G4-EN23
20122013201420152016
4,4374,6404,6115,0725,656
Of which recycled 20122013201420152016
3,8714,0803,8994,3625,008
Of which disposed of 20122013201420152016
566560712709648
500
German sites only (not including construction waste), we are currently preparing to issue international reportsbased on uniform waste categories (total waste Canada in 2016 = 299 t; total waste Poland in 2016 = 1,228 t)
Total hazardouswaste
20122013201420152016
1,4281,3531,4071,3541,512
Of which recycled 20122013201420152016
902837737691906
Of which dsiposed of 20122013201420152016
526516670663605
1,00
0
1,50
0
2,00
0
2,50
0
3,00
0
3,50
0
4,00
0
4,50
0
5,00
0
5,50
0
6,00
0
We separate waste, as seen here in production at MTU Aero Engines Polska, and dispose of it appropriately.
With its “repair beats replacement”philosophy, MTU Maintenanceachieves a truly impressive depth inaircraft engine repair. Using specialtechniques the company has devel-oped in-house, we repair enginecomponents that in other mainte-nance shops would have to bereplaced with new parts. Our highlevels of material efficiency meanthat we conserve resources. Around70 percent of all engine blades canbe given a second, third or evenfourth lease on life. We are con-stantly adding new product recyclingtechniques to our repertoire (> see2.6 product quality and safety).
Product recycling
Environmental protection • 3.5 Material efficiency and waste
65
Waste management/recycling (GRI G4-EN23-25)MTU practices sustainable waste managementwith the safe disposal waste sorted according towaste type and recycling process. As our chiefpriority, we try to avoid waste in the first place.Leftover materials are reused, while waste isused either for its materials or as energy; if re-cycling is not possible, waste is properly disposedof. In this way, we seek to minimize material consumption and waste disposal volumes. Weachieve a high recycling rate.
The total amount of waste produced in the re-porting period was 5,656 tons. Of this, we recy-cled 88.5 percent and disposed of only 11.5 per-cent. The amount of waste produced and recy-cling routes are dependent on production capa-city utilization and on building activities. Theshare of hazardous waste in the reporting periodwas 26.7 percent (2015: 26.7 percent).
No soil contamination was found to result fromMTU operating activities in 2016.
our various sites in our General Terms andConditions of Purchase (> see 2.7 Responsibilityfor the supply chain).
66
4 Employees and Society
MTU’s employees drive the company’s success,providing the ideas, skills and motivationthat keep us moving forward. As a high-techmanufacturer and a long-established playerin the industry, we are committed to offeringlong-term, sustainable employment in anattractive working environment. We give ouremployees the opportunity to develop them-selves personally and professionally and pro-vide them with the skills they need to dealwith the changing world of work. We fullyacknowledge our social responsibility to ouremployees and to society as a whole.
Organizational profile (total workforce)EmploymentLabor/management relationsOccupational health and safetyTraining and educationDiversity and equal opportunity
67
Equal renumeration for women and menLabor practices grievance mechanismsNon-discriminationFreedom of association and collective bargainingHuman rights grievance mechanisms
Main GRI aspects covered by this chapter:
We prioritize the issues that both the companyand the stakeholders consider to be the mostimportant (> see 1.1 Materiality matrix andanalysis), namely human rights, attractiveness asan employer, and occupational safety. Employee-focused issues boost our added value almostexclusively within the group, though they alsoplay a key role outside the group in terms of theirimpact on MTU as an employer brand.
Responsibility for employment issues lies with theExecutive Board. The CEO is also the Director ofLabor Relations. MTU’s human resources centersets policy in line with the annual and long-termgrowth targets laid down in our corporate strat-egy. It also assists in efforts to achieve thesetargets. All members of the Executive Board re-ceive regular reports on human resources policy.Responsibility for successful implementation lieswith local human resources departments andthe respective technical departments and man-agers. Our human resources policy takes intoaccount cultural differences at our various sites.We integrate all our employees in day-to-dayworking life at MTU, regardless of culture, gen-der, physical abilities or age group. This sustain-ability report marks the first time that we have
Employees and Society • 4.1 Management approach: employment
68
4.1 Management approach:employmentAs of the end of fiscal 2016, MTU had 8,368employees (without Asia) on its books, with thevast majority (93 percent) employed in Europe,85.8 percent of whom work in Germany. Sevenpercent of the company’s workforce is employedin North America. The company’s headcount wasslightly up on the previous year, rising by 0.4 per-cent (2015: 8,334). Viewed over a five-year peri-od, MTU’s headcount has remained steady atover 8,300 employees.
7,248 467505321
8,334employees
8,333employees
8,695**employees
8,541**employees
8,368employees
7,278 487578352
7.227 532574
7,172 570592
7,182 599587
2012 2013 2014 2015 2016
GermanyRest of EuropeNorth AmericaMTU Maintenance Zhuhai
MTU Group employees by region* GRI G4-10
* Reporting date: December 31 each year. Total workforce including apprentices, interns, thesis students and doctoral candidates, students on work experience and holiday staff, temporary part-time employees on parental leave, and marginal workers, but excluding temporary agency workers and inactive employment contracts.
** includes MTU Maintenance Zhuhai (50 %) in line with consolidated group reporting for 2012 and 2013
Based on a materiality analysis, we have identi-fied the following points as our primary focalpoints in terms of our responsibilities as an em-ployer:• Human rights• Attractiveness as an employer• Occupational safety• Employee training and development• Health management• Diversity• Work-life balance• Demographic change
2012 2013 2014 2015 2016
Employee structure by regionGRI G4-10
Information on the proportion of women by employment type and employment contract is treated as confiden-tial at MTU. 2012: Germany only, 2013-2015: Germany and Poland, 2016: fully consolidated MTU Group
Blue collar workersGermanyRest of EuropeNorth America
White collar workersGermanyRest of EuropeNorth America
47.5%----
52.5%----
48.5%51.8%
--
51.5%48.2%
--
49.4%51.4%
--
50.6%48.6%
--
49.7%49.9%
--
50.3%50.1%
--
49.2%46.5%52.5%
50.8%53.5%47.5%
MTU operates internationally, with subsidiaries in Rocky Hill (1), Connecticut, U.S.;Amsterdam (2), the Netherlands; Vancouver, Canada (3); and Rzeszów, Poland (4).
provided an overview of all MTU’s fully consoli-dated sites worldwide, and it allows us to dem-onstrate what makes MTU so diverse.
We regularly adapt our human resources policyto reflect changes in the underlying parametersand are constantly developing and enhancingthe measures and initiatives derived from thispolicy. We respond in a timely and appropriatemanner to the challenges posed by digitalization,globalization, flexibilization, and the increasingmedian age of the population in Western indus-trialized nations (> see interview in the sectionon our attractiveness as an employer). We arefully engaged with the key topics of digitalization,leadership and health. In 2017, we incorporateddigitalization as one of our corporate objectives,reflecting the fact that we are expanding ourskills and platforms in a number of interdiscipli-nary projects in order to meet the latest require-ments.
Employees and Society • 4.1 Management approach: employment
69
1 2
4 3
Social and labor standardsMTU creates fair working conditions throughoutthe organization by laying down clear standards.A group-wide Code of Conduct(http://www.mtu.de/company/compliance/code-of-conduct/) defines the benchmarks of ourresponsibility as an employer:• Observance of human rights• Equal opportunities in the workplace• No discrimination in industrial relations• Constructive cooperation with employees,
employee representatives and labor unions• Entitlement to equitable pay• Protection of occupational health and safety • Employee training and development
Above all else, we believe that fair working con-ditions include the absolute rejection of forcedor child labor and the protection of human rights.We are a participant in the UN Global Compact(https://www.unglobalcompact.org), and weare committed to observing its principles ofrespect for human rights and the implementationof fair working conditions in accordance with theInternational Labor Organization’s (ILO’s) corelabor standards. (> Code of Conduct, Chapter 1.2,Ethics and integrity)
Employees and Society • 4.1 Management approach: employment
70
2012 2013 2014 2015 2016
8,541 8,695 8,333 8,334 8,368
Employee structure GRI G4-10, LA12
The employee survey provides important impetusfor the company’s ongoing development. It givesemployees the opportunity to play an active rolein shaping their working environment. We carryout surveys at regular intervals at our Germansites, in Poland, in Canada and in the US. Theresults are analyzed in workshops, enablingteams to develop measures to implement in theirspecific areas. A monitoring system is in placeto ensure the sustainability of this process. In2016, our German sites worked on faster deci-sion-making processes, higher quality leadership,and improved collaboration between differentteams and locations. These were the key topicsthat emerged from our analysis of the surveytoward the end of 2015. To ensure changes are firmly embedded during follow-up work onthe survey results, a team consisting of uppermanagement from the three German locationsanalyses priority areas for action at a corporatelevel and offers recommendations on how toimprove MTU in the future.
Of which employees on temporary contractsGermanyRest of EuropeNorth AmericaOf which apprenticesGermanyOf which students on work experience/holiday staff GermanyRest of EuropeNorth AmericaOf which internships*GermanyRest of EuropeNorth AmericaSupervised workersGermanyRest of EuropeNorth America
Total workforce
254----
328
178----
243----
------
249
--
343
17249
--
247----
------
19830
--
381
16428
--
237----
------
16445
--
345
18119
--
218----
3320--
17747
9
311
20025
6
20510
39570
2012: Germany only, 2013-2015: Germany and Poland, 2016: fully consolidated MTU group. We have been collecting data on supervised workers since 2015. Information on the proportion of women by employmenttype and employment contract is treated as confidential at MTU.*Internships: interns, thesis students and doctoral candidates
Dialog with our employeesWe take into account our employees’ concernsby consistently fostering an atmosphere of trustand respectful collaboration. In accordance withthe German Works Constitution Act (Betriebs-verfassungsgesetz), MTU’s sites in Germany haveworks councils that maintain regular, open andtrust-based dialog with management. The Germansites have a group works council that handlesgroup-related issues. At the company’s interna-tional sites in Poland and Canada, elected em-ployee representatives support the interests ofthe workforce in dealings with management. Inaddition, the interests of employees are repre-sented on the supervisory board, where seatsare filled on the basis of parity.
Furthermore, there are well-established forumsfor promoting the involvement of specific groupsof employees. These include information eventsfor managers and for employees not covered by collective agreements, as well as employeemeetings in Germany and town hall sessions withemployees in the US. The company also employsspecialist feedback tools in the form of leader-ship feedback and the Team Barometer, whichgauges the mood within a team and helps todevelop the way teams and managers work to-gether. Our ideas management system takes upsuggestions for improvement made by the work-force and coordinates the evaluation and imple-mentation of these suggestions.
In Germany, the General Act on Equal Treatment(German abbreviation: AGG) prohibits discrimi-nation against employees. In line with the provi-sions of this Act, every site in Germany has adesignated contact person who is appropriatelytrained. For employees in Germany there arealso internal guidelines on fair and cooperativeconduct that are designed to prevent bullying,sexual harassment and discrimination. In theseguidelines, MTU undertakes to punish violationswith appropriate measures.
Defined processes have been established to dealwith reported breaches of the Code of Conduct,the General Act on Equal Treatment, or internalguidelines. Employees who suspect illegal activi-ties can contact an ombudsman confidentially.Managers, the works council, and members ofthe human resources department are also des-ignated as contact persons in this context. Weuse internal communications to provide informa-tion on reporting channels. When they join thecompany, new employees are informed aboutthe regulations laid down in the Code of Conductand—in Germany—in the General Act on EqualTreatment, and they undertake to comply withthese requirements. In addition, we provide regular training on the Code of Conduct at allthe company’s sites and across all hierarchicallevels. During the reporting period we ran 383days of training on legal issues for 1,656 partici-pations in Germany.
Once again, there were no breaches of the Codeof Conduct in 2016 and no cases of discrimina-tion were encountered. There were also no com-plaints under the General Act on Equal Treatmentat our German sites.
We are committed to respecting employees’ rightsand safeguarding their freedom of associationthrough the Code of Conduct. When drafting em-ployment contracts, we observe national statu-tory requirements as well as internal companyagreements and notice periods as laid down bylaw. It is the duty of managers to ensure thatcompany agreements are properly observed ona day-to-day basis in their areas of responsibility.In 2016, 98 percent of the people employed in Germany were by the company were coveredby collective agreements, a figure that stood at85.8 percent world-wide in the same year.
We believe in offering secure, long-term formsof employment. The rate of staff turnover stoodat 4.3 percent for the group as a whole in the
Germany Rest ofEurope
NorthAmerica
Staff turnover 2016 GRI G4-LA1
* New external entries, not yet adopted ** as a proportion of core workforce (Germany) and core workforce
plus temporary (US)
reporting year, a figure that indicates long-termemployee loyalty and satisfaction with MTU asan employer.
New employees, total*of which temporaryof which maleof which femaleof which younger than 30* of which aged between 30 and 50*of which older than 50*No. of employees that left the companyTurnover rate (%)**
19379
133606150
32534.1
59404217
911
118
3.2
523
448
2124
748
8.4
Employees and Society • 4.1 Management approach: employment
71
Reportable workplace accidentsGermanyRest of EuropeNorth America
Fatal industrial accidents
Days lost as a result of reportable accidentGermanyRest of EuropeNorth America
Accident rate per 1,000 employeesGermanyRest of EuropeNorth America
24--
0
807--
3.9--
130-
0
2730-
1.90-
261-
0
54221
-
2.12-
311-
0
55122
-
5.01.8
-
3517
0
5501838
5.61.8
12.2
2012 2013 2014 2015 2016Occupational safety GRI G4-LA6
2013-2015: rest of Europe not fully consolidated (only Poland), 2016: fully consolidated MTU GroupWorkplace accidents do not include any commuting accidents, nor accidents that entail more than three dayslost (not counting the day of the accident). In order to protect personal data, no further statistical analysis iscarried out concerning accidents and days lost. Further distinctions based on gender are therefore neither possible nor intended. MTU has no figures on the number of illnesses that were accepted as being work-relatedfollowing the application process. Accident statistics are based on Book VII of the German Social Code. Accidents involving temporary agency workers in 2016: 2 (MTU Group excluding Hannover)
Employees and Society • 4.2 Occupational health and safety
72
Worldwide, we place a great deal of importanceon the safety and health of our employees. Occu-pational safety and employee health are enshrinedin our Code of Conduct, the MTU Principles, andour business processes. High standards in occu-pational safety are also one of our annual cor-porate objectives. Compliance with national sta-tutory regulations on occupational safety is amandatory minimum standard for all internationalMTU subsidiaries. Occupational safety officersare appointed at management level for each ofthe company’s production sites. Local technicaldepartments take action on occupational safetyissues on site. Our occupational safety systemsare regularly reviewed and improved, and a num-ber of them are certified externally in accordancewith international standards such as Occupation-al Health and Safety Assessment Series (OHSAS)18001 (http://www.mtu.de/engines/quality/approvals-certifications/). 97.5 percent of theMTU Group’s total workforce was representedon local health and safety committees in 2016(> GRI G4 index in annex).
4.2 Occupational health and safetyWe have comprehensive measures in place to promote occupational safetyand employee health. These measures help us maintain the long-term productivity of our employees, an issue that is of particular significance forour German sites in the face of demographic change.
Our occupational safety systems include advisingand supporting managers and employees, safetytraining, first aid training, workplace risk assess-ments, ergonomic assessments, and the provi-sion of safety equipment in the workplace. Theyalso include assessments for planning new work-places, measurements and advice regardingnoise problems in the workplace, evaluations ofhazardous materials, and advice on compliancewith the REACh regulation. Managers are ex-pected to provide a positive role model for occu-pational safety, and employees are encouragedto play an active role.
We aim to permanently reduce the number ofaccidents and reach a level of safety that aspiresto prevent any accidents whatsoever (zero-acci-dent vision). In 2016, the group-wide accidentrate was 5.8 per 1,000 employees. All accidentswere recorded, evaluated and investigated. Ouranalysis did not reveal any accident hotspots. Inaddition, the company has a system in place torecord near-misses at all production sites. Since
We are continually carrying out prevention workat our sites. The local technical departmentsregularly report on important occupational safe-ty issues and promote safe behavior throughcampaigns to raise awareness. These includemonthly safety training sessions for shop-flooremployees in Hannover, Berlin and Vancouver.
Occupational safety initiatives in 2016• HSE (Health/Safety/Environmental) Day, Berlin• Case of the Month, Munich• Walks of Safety, Rzeszów• Prevention of back injuries, Vancouver
Health managementWe systematically promote the health of ourworkforce with a clear emphasis on prevention.If we can keep our health rate stable despite anaging workforce, then we can consider our ap-proach to have been successful. In 2016, ourhealth rate in Germany was 94.4 percent.
Maintaining people’s employability and ability toperform is crucial during periods of demographicchange. For this reason we have launched a corporate health management system and devel-oped a series of key internal performance indi-cators, initially for Germany. These indicators aredesigned to help us develop health promotionprojects and tools in a timely manner. The focusof health management is increasingly shiftingtoward mental health and the conditions requiredto promote healthy lifestyles.
We take a continuous improvement approachtoward health management. Our health index forGermany, which was derived for the first timefrom the 2015 employee survey, offers insightsinto how well employees cope with their workwithin the framework of their working environ-ment. It also gives an indication of whether ateam’s working environment is conducive to goodhealth or whether it could cause psychologicalstress. Every manager receives recommendationsfor targeted measures that can be taken togetherwith the team to maintain people’s ability towork. Pilot projects have also been launched tocarry out enhanced risk assessments with a
focus on physical health in the workplace. Inaddition, we support managers through our specially developed “Health-Oriented Leadership”training program. This was carried out in a se-lected area of the company in Munich in 2016and is now being offered to all managers at thesite.
Health services at the German sites cover occu-pational and emergency medicine as well asgeneral preventive medicine. Counseling servicesoffer employees support with performance andwork-related issues as well as mental healthissues. Additional benefits offered by MTU includefitness studios at our German sites, which are runeither in-house or by external partners, as wellas physiotherapy, training in ergonomic seating,health days for different divisions/departments,and on-site vibration training. All our Germanlocations provide employees and managers withaccess to occupational health professionals (in-house and external) as well as social counselorsand supplementary in-house and external serv-ices. Our sites outside of Germany offer a rangeof health-related services. In Canada and inRocky Hill (USA), for example, employees haveaccess to an “Employee Assistance Program”that offers a wide variety of health and coun-selling options on topics such as financial plan-ning, mental health, and personal or family coun-selling, as well as advice on equipping work-places in a way that promotes good health.
Germany stipulates legal requirements for Work-place Reintegration Management (BetrieblichesEingliederungsmanagement, BEM). Within thiscontext, we aim to help employees overcomewhatever difficulties may prevent them fromworking in order to help them retain their job. In2016 we launched a pilot project on the shopfloor of our Munich headquarters focusing onsystematic ergonomics management. The goalis to adapt workplaces to Germany’s ageingworkforce, primarily by reducing strain on themusculoskeletal system.
2014 we have unfortunately seen an increase inaccidents in Germany, particularly at our head-quarters in Munich. We therefore intend to launcha comprehensive occupational safety initiativeat the site. We will be running a similar campaignat MTU Maintenance Canada in Vancouver wherethe EHS statistic in 2016 did not achieve expectedtargets. All accidents and their causes werethoroughly investigated and appropriate stepswere taken to prevent their recurrence.
Selected health initiatives and services in2016• Skin cancer screening (Munich)• Awareness-raising event aimed at developing
inner strength (Munich)• Vaccination check-up (Hannover)• Hearing campaign (Rzeszów)• Hearing tests and flu shots (Vancouver)• Monthly health tips based on the season
(Rocky Hill)
Employees and Society • 4.2 Occupational health and safety
73
4.3 Attractiveness as an employerBeing perceived as an attractive employer by existing and potential employees is one of the key ways in which MTU bolsters its innovative capabilities and competitiveness. We have a variety of offers designed to help our employees achieve a healthy work-life balance, and we are responding to their changed expectations about having personal control over the way their work is structured.
Like so many other companies, we are competingfor the best employees. This competitive environ-ment is just as evident at our international sitesin Canada and the U.S. Being perceived as anattractive and future-oriented employer is there-fore important for all international MTU sub-sidiaries. Internal employee surveys and externalrankings offer valuable pointers as to whetherour recruiting and HR processes are heading inthe right direction. In comparative analyses withother companies, MTU has received consistentlypositive ratings. This is reinforced by the factthat MTU regularly receives awards ranking it asa top employer in Germany, Poland and BritishColumbia, Canada (http://www.mtu.de/careers/work-at-mtu/awards/). We also regardour low staff turnover rate of just 4.3 percent inthis reporting year as yet another sign of highemployee satisfaction.
Certifications and rankings in 2016• TOP Employer Germany• TOP Employer Poland• TOP Employer British Columbia (Canada)• trendence Graduate Barometer Engineering
(33rd place)• Universum Ranking (29th place)• Chief Learning Officer• Top Company on Kununu
Remuneration and additional benefits (GRI G4-LA2, LA11)The right to appropriate remuneration is one ofthe pillars of MTU’s Code of Conduct. A stan-dardized, transparent compensation structureensures that employees receive competitiveremuneration that reflects their performance.The remuneration of pay-scale employees inGermany is based on collective bargaining agree-
Employees and Society • 4.3 Attractiveness as an employer
74
Representatives from MTU Aero Engines’ Polish site attend the TOP Employer Polska 2016 award ceremony.
How is the world of work changing?“The world of work is currentlyundergoing a fundamental trans-formation. The key issues are demographic change, digitalization,globalization, and a shift in societalvalues concerning career aspira-tions, identities and attachments.”
What does that mean for employers?“As an employer, we need to res-pond to those changes. Our strategyfor human resources management isto address these developments in atimely manner. To do that, we havedefined five key spheres of activitybased on our operating environment,which comprises the markets, societyas a whole and our internal require-ments. The five areas we have cho-sen to tackle are flexible work sys-tems, establishing a clearer definitionof management behavior includingfor virtual teams, building on ourstrong position as an employer, opti-mizing our workforce for the future,and expanding digital processes.”
What concrete steps is MTU taking toprepare for this transformation?“Let’s take the example of digitaliza-tion. We are pursuing a group-widedigitalization strategy that encom-passes each and every area of MTU.One of our key tasks is to empowerour employees, and that’s where our“Work 4.0” digitalization initiative ismaking great strides. We are bringingthe concept of lifelong learning up-to-date, making it more effective and,above all, more personalized. Thevirtualization of work is on the rise,and that means we need to createthe right framework of IT and com-munication platforms and, even moreimportantly, adapt managementbehavior to meet this challenge.”
Hans-Peter Kleitsch, Senior VicePresident, Human Resources atMTU Aero Engines, responds tothree questions on the changingworld of work
ments. Compensation for senior managers istied to the company’s long-term performanceand was converted to the same system as theExecutive Board compensation structure at thebeginning of this reporting year.
MTU applies a consistent methodology for eval-uating performance at all levels of the hierarchy.The performance criteria are based on corpo-rate, center or departmental objectives and aredesigned to measure how employees and man-agers contribute to reaching these objectives.All managers undergo performance reviews toevaluate achievement of their personal targets.96.7 percent of MTU employees worldwide reg-ularly receive an evaluation of their performance(at least once a year).
MTU offers a broad range of additional perqui-sites. One example is the range of social benefitsthe company offers in Germany in addition to itsstatutory obligations. These include accidentinsurance, profit-sharing, family-related andmobility benefits, a healthcare service and dis-ability cover. The company has a pension schemefor all its employees. At our international loca-tions we offer a range of additional benefits suchas private life insurance and health insurance or retirement saving accounts. In fiscal 2016,the company made social contributions totaling102.6 million euros.
MTU enables its employees to share in the com-pany’s success. This profit-sharing scheme ismade available in Germany and is defined inspecial rules for each employment group. Weoffer an employee stock option program at ourlocations in Germany. In 2016, the take-up ratewas 27 percent and 145 million euros wereinvested. Some of our international locationsoffer their own long-term bonus schemes, suchas Rzeszów in Poland.
Employees and Society • 4.3 Attractiveness as an employer
75
2012 2013 2014 2015 2016Alternative working arrangementsGRI G4-10
* Not comparable with previous year’s figures due to changes in workforce reference values2013-2015: rest of Europe not fully consolidated (only Poland)
Employees and Society • 4.3 Attractiveness as an employer
76
Achieving a better work-life balance (GRI G4-LA3)
MTU promotes initiatives to improve employees’work-life balance and is placing an increasingemphasis on responding to their specific needsand various life phases. These initiativesinclude:• Flexible working hours and flextime accounts• Over 50 models of part-time employment• Educational leave • Teleworking• Sabbaticals• Phased retirement• Parental leave• Job sharing• Services to assist families
(e.g. childcare, nursing services)• Mobile working
We are continuously improving these initiativesto give people more job flexibility and meet theexpectations of our stakeholders, especially ouremployees and job applicants. Alternative work-ing arrangements are already a reality at ourcompany. In 2015 and 2016, we ran a pilot project in selected departments at our Munich
location to gain practical experience with mobileworking. Our goal was to lay solid foundationsfor greater autonomy and personal responsibilityamong MTU employees. In 2017, we made thismodel available to all our employees at theMunich location through a corresponding worksagreement.
In 2016, part-time work accounted for 5.4 per-cent of employment throughout the MTU Group(6.4 percent in Germany). 3.9 percent of em-ployees in Germany were on parental leave in2016; as a proportion of the overall workforce,these were predominantly men. The return rateand number of people remaining in their postsafter parental leave is very high for both mothersand fathers. In 2016, the return rates were 91.7percent for mothers and 99.4 percent for fathers.The number of people remaining in their postsat MTU twelve months after returning fromparental leave stood at 86.8 percent for mothersand 98.6 percent for fathers.
Part-time employees (in %)GermanyRest of EuropeNorth America
6.2----
6.10--
6.80--
7.50--
6.40
0.5
2015 2016Parental leaveGRI G4-LA3
We have been collecting these figures for Germany since 2015. The right to parental leave applies to theentire workforce in Germany and is governed by the German Parental Allowances and Parental Leave Act. Thisstipulates that anyone employed in Germany has a right to time-off, regardless of their gender.
Employees on parental leave (male)Employees on parental leave (female)Employees returning from parental leave in reporting year (male)Employees returning from parental leave in reporting year (female)Employees who returned from parental leave in previous year and arestill employed 12 months later (male)Employees who returned from parental leave in previous year and arestill employed 12 months later (female)
15992
14638
125
36
18497
17744
144
33
*
2012 2013 2014 2015 2016Employee trainingGRI G4-LA9
Investment in training does not include travel costs, 2012: Germany only, 2013-2015: Germany and Poland,2016: fully consolidated MTU Group MTU assumes the costs of training and development programs.* Employees who participated in training schemes (includes multiple counts), compiled from 2015 using the
sustainability database, Germany only
Training days (total)Training days per employeeProportion of men on training schemes*Proportion of women on training schemes* Investment in training (EUR million)
23,8013.4
4.2
21,5072.7
3.3
20,0122.5
2.4
18,8892.3
85 %15 %2.8
22,3242.7
85%15%3.7
4.4 Employee development (GRI G4-LA9-11)
Qualified and motivated employees are indispensable in our technicallydemanding and innovation-driven industry. That’s why we make it a priorityto offer our employees a wide range of opportunities and avenues for person-al development, as well as offering comprehensive support. This starts withthe training of our own recruits.
One of the key principles of corporate socialresponsibility defined in our Code of Conduct is to provide our employees with appropriatetraining for the jobs they do. In 2016, we appliedthis principle by investing a total of 3.7 millioneuros (2015: 2.8 million euros) and 22,324 train-ing days (2015: 18,889) in employee training.The increase over previous years is due to theexpanded scope of consolidated group reporting.On average, employees took part in about threedays of training and development in 2016. Thesenior vice president of human resources isresponsible for the training and development ofemployees group-wide, and reports directly tothe CEO. We consider qualified and motivatedemployees to be the basis for long-term businesssuccess. For this reason we facilitate high-qualitytraining and development opportunities through-out an employee’s entire career as part of aframework of life-long learning. For example,MTU Maintenance Canada offers an innovativerange of training and development programsthat clearly sets it apart from its competitors(TOP Employer British Columbia). As part of ourdigitalization campaign, we aim to provide ouremployees with the development opportunitiesthey need to meet new standards and take ad-vantage of new opportunities. The Collaboration& Communication project is working on incorpo-rating new tools in an integrated IT platform inorder to improve digital collaboration and com-
All employees have access to employee trainingand career development programs. In Germanythese are provided through the fixed frameworkof our “campus” training scheme. Employees canaccess the campus course schedule through thecentral platform of the intranet. Management isrequired to conduct an interview with each em-ployee once a year to discuss their training anddevelopment.
munication. The company is also developing anew online learning portal.
Competent and motivated employees are the key to our success, which is why we facili-tate high-quality training and development opportunities.
Employees and Society • 4.4 Employee development
77
2012 2013 2014 2015 2016
4.5% 4.4% 4.9% 4.7%* 4.8%
LeadershipMeeting the challenges that lie ahead requiresstrong leadership. Developing leadership skills istherefore one of the key priorities of our humanresources policy. We help managers improve theirleadership skills through a variety of managementtraining programs and communication forums.Leadership style is governed by the leadershipguidelines laid down in the MTU Competences,which are derived from the MTU Principles. Aleadership guide for managers in Germany servesas an in-house knowledge database.
We place a major emphasis on achieving a con-sistent understanding of leadership and ensuringthat leadership is effective. This reporting yearsaw the continuation of our 2014 BusinessChallenge training program in the form of the“MTU Business Challenge II Leadership” initia-tive, which involved all MTU managers worldwide.Its goal is to promote consistent leadershippractices and a culture of feedback and dialog,as well as making leadership more efficient.
In addition, individual locations have launchedleadership initiatives tailored to their specificon-site requirements (e.g. the Future Dialog discussions as part of the RESPONSE programin Hannover, the management development pro-gram in Berlin, and Management Growth inRzeszów).
Management training• Business Challenge• Building on Talent• International Building on Talent• International Leadership Program• MTU Management Growth (Rzeszów, Poland)• RESPONSE Future Dialog
(Hannover, Germany)
The increasing digitalization of our economiesand societies is transforming what we expectfrom managers. We need to be prepared for thechallenges that lie ahead and help managersexploit the opportunities that digitalization offersfor our company. The “Business Challenge IILeadership” initiative that came to an end inlate 2016 helped managers get to grips with keydigitalization issues and created an opportunityto discuss them with colleagues. Towards theend of 2016, the Executive Board and uppermanagement also participated in an in-housedigitalization summit.
Concepts are currently being developed for a“Business Challenge III Leadership” initiativewhich is due to take place in 2018.
Employees and Society • 4.4 Employee development
78
Apprentices at MTUGRI G4-LA9
Number of apprentices at year end, Percentage of apprentices in relation to permanent staff* adjusted; we classify apprenticeships based on the German understanding of a dual vocational training program lasting for two or more years.
MTU is actively involved in numerous local edu-cational projects and initiatives that aim toattract potential recruits early on and introducethem to science and technology professions.These initiatives include:• Training Night• IdeenExpo science exhibition in Hannover• Nature and Technology Days• Long Night of Museums• Teachers in Industry• Work placements for high school students,
taster weeks• Patronage of selected schools• Special events for future female talent
(Girls’ Day, etc.)• EUROTECH
Talent ManagementThe age structure of MTU’s workforce in Germanyreflects demographic changes in the overallpopulation. We need to prepare to fill a largenumber of skilled and managerial positions overthe coming decade. Since 2016, our talent management process has been identifying peoplewith the potential to assume key roles and sup-porting them through personalized developmentprograms. The primary focus is on successionplanning for positions that are critical to ourcompany’s success.
The company has also introduced other initiativesaimed at preserving valuable expertise and ex-perience. These include:• a know-how buddy system• exchange of expertise with the aid of
knowledge maps• wikis
The challenge we face at our U.S. engineeringfacility in Rocky Hill is how to retain talentedemployees and help them grow.
Training and apprenticeshipsWe offer young people in Germany a solidgrounding in eleven trades. In addition to provid-ing professional qualifications, their training alsoencompasses methodological, social and envi-ronmental issues. Apprentices have made up alarge percentage of MTU’s workforce for manyyears. In 2016 they accounted for 4.8 percentof the total workforce in Germany, where ourapprenticeship schemes are run. There were311 apprentices employed at the company atthe end of 2016.
Employees from the Engineering Rotation Program at MTU Aero Engines North America. Over a period of 18 months, they rotate through avariety of departments focusing on a different area of aerospace engineering.
We believe in fostering personal as well as vo-cational development, which is why we alsoorganize annual environmental and health pro-motion days for apprentices and encourage themto get involved in local community programs.
Employees and Society • 4.4 Employee development
79
Employees and Society • 4.5 Diversity and equal opportunities
80
4.5 Diversity and equal opportunitiesAt MTU, we give all our employees an equal opportunity to get involved inour work. We also promote diversity in the workforce to give MTU the bestprospects for the future.
Demographic change, globalization and a shift invalues are making diversity more important thanever. MTU deploys and supports all employeesin accordance with their skills, abilities and per-formance. Everyone has the same opportunitiesregardless of their gender, age, ethnic origin,religion, disability, or sexual orientation. To pro-mote even greater diversity in its workforce, MTUactively encourages collaboration between em-ployees of different generations, genders, cul-tures and countries, including employees withdisabilities. Diversity enhances our capacity forinnovation and contributes to the competitive-ness and long-term success of our business.
MTU’s Code of Conduct explicitly commits thecompany to equality of opportunity and equaltreatment of all employees. The ComplianceBoard monitors adherence to these principles ona group level. No cases of discrimination werereported during the reporting period (see sectionon social and labor standards in this chapter).Promoting diversity is a key component of ourcorporate culture that is enshrined in our MTUPrinciples. Moreover, promoting a diverse andinternational workforce has been one of ourannual corporate objectives since 2016.
We regard the promotion of each individual’semployability as a key tool for dealing with demo-graphic change. This includes the integration ofemployees with disabilities. In 2016, disabledemployees represented an average of 5.1 per-cent of the workforce at MTU’s German locations,which are subject to statutory requirements.
Our commitments• Charter of Diversity• UN Global Compact• Munich Memorandum for Women in
Management
Managers have a key role to play in recognizingthe value of diversity and incorporating it intoeveryday working life at MTU. We help themspearhead effective changes in their own sphereof responsibility in order to reinforce diversityand exploit its benefits to the full.
32.6% 13.8%
53.6%
31.5% 12.7%
55.7%
31.5% 12.7 %
55.7%
34.2% 12.7%
54.0%
33.8% 13.7 %
52.5%
2012 2013 2014 2015 2016
Age< 30 30-50 > 50
Age groups GRI G4-LA12
2012: German sites only, 2013-2015: Germany and Poland, 2016: fully consolidated MTU Group
(> detailed information on diversity in our Exe-cutive Board and Supervisory Board can be foundin our 2016 annual report, p. 34f.).
Cultural diversityOur international orientation is not only an ex-pression of diversity, but also an inherent trait ofthe global engine business. People from 48nations work together at MTU’s German loca-tions. In line with our corporate objective, weare taking various steps to enhance the inter-national nature of our business (InternationalLeadership Program, International Building onTalent). And by employing local employees atour worldwide locations, we add to the culturaldiversity of the group as a whole. We employpredominantly local staff and managers at oursites in Rzeszów (Poland), Rocky Hill (USA),Alpharetta (USA) and Vancouver (Canada).
As a global company, we encourage new recruitsto spend time working abroad even before theyfinish their apprenticeship, traineeship or dualvocational training program. They are given theopportunity to take part in international exchangeprograms with partners or work on internationalproject assignments within the MTU Group.
2012 2013 2014 2015
NationalitiesGRI G4-LA12
Foreign staff as a percentage of the workforce, 2012: Germany, 2013-2015: Germany and Poland, 2016: German locations only, it is currently not possible to consolidate figures for the entire MTU Group due to legal restrictions in other countries.
Total workforce Managers
2016
6.0%
4.7%
5.4%
4.8%
5.1%
4.2%
5.0%
3.7%
5.4%
3.0%
As a globally operating company, we promote a diverse and international workforce.Pictured here is our site in Vancouver.
Employees and Society • 4.5 Diversity and equal opportunities
81
82
Gender diversity (GRI G4-LA12/13)We consider the notion of equal opportunitiesfor men and women to be self-evident. We firmlybelieve in the principle that people should receiveequal pay for equal work. Remuneration levelsand promotion prospects are determined solelyby the job to be performed and the employee’sskills and abilities. Under no circumstances dothey depend on the employee’s gender. We carryout regular studies to review people’s remunera-tion at virtually all the MTU Group’s internationalsubsidiaries. In some countries, such as Canadaand the U.S., we are legally required to produceannual reports on the company’s salary struc-tures.
MTU has committed itself to increasing the pro-portion of female employees at all levels of thecompany in order to make better use of talent andinnovation potential in the face of demographicchange and other developments. 1,070 womenwere in active employment at MTU at the end of2016, representing 14 percent of the total work-force. The company had 89 female managersout of a total of 833 at the end of the year. Theproportion of female apprentices was 15 percent.
2012 2013 2014 2015
Proportion of womenGRI G4-10, LA12
Figures recorded at the end of each year. No figures are available on the number of women in specific employee groups. 2016 not comparable with previous year’s figures due to changes in workforce reference values2012: German sites only, 2013-2015: Germany and Poland, 2016: fully consolidated MTU GroupFor more information on quotas for women and target agreements for the Executive Board and Supervisory Board, please consult our 2016 annual report, p. 34f.
Proportion of women Proportion of women in management positions
13.7%
8.0%
13.9%
8.1%
14.2%
9.2%
14.4%
9.1%
2016
14.0%
10.7%
.
Bereits seit vielen Jahren fördert die MTU Studien-Stiftungtalentierte Studentinnen aus den Bereichen Luft- undRaumfahrttechnik, Maschinenbau, Wirtschaftsingenieur-wesen, Elektrotechnik, Informatik und Mathematik. DieStudentinnen verbindet dabei einiges: Alle bringen heraus-ragende fachliche Leistungen mit, sind aufgeschlossenfür Neues und haben den Anspruch, Dinge zu bewegen.
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Employees and Society • 4.5 Diversity and equal opportunities
The principal focus of our initiatives and employerbranding is to secure more female talent for thecompany and offer female employees greatersupport throughout their careers through men-toring programs and career advice. For example,
MTU’s talent management program focuses onwomen in management. We also run an internalmentoring program.
In 2016, MTU participated in the Women’sCareer Index for the first time, taking secondplace in the “Newcomer of the Year” category.
83
We want to increase the percentage of our workforce that is female. In 2016, women accounted for 14 percent of employees.
Our programs and initiatives• Munich Memorandum for Women in
Management• Cross-Mentoring Munich
(a program organized by the city of Munich)• Internal mentoring program• Talent Management• The MTU “Studienstiftung” foundation for
female students in scientific and technical fields
• Girls’ Day• Research Camp for Girls• The Lower Saxony Technical Internship
(“Niedersachsen Technikum”)
We actively support gender equality through pro-grams to promote a healthy work-life balance,which are constantly being reviewed and im-proved.
Employees and Society • 4.5 Diversity and equal opportunities
Corporate social responsibility is an integral partof the MTU Principles. We contribute to socialdevelopment as a major regional employer andtraining provider, offering a wide variety of jobsand apprenticeships in an attractive, high-techenvironment. Long-term employment is our pri-ority. In addition to training and developing ouremployees, we invest in the ongoing develop-ment of our plants. We also strive to strengthenMTU’s image as a responsible corporate citizen.
We are committed to two key aspects of corpo-rate social responsibility:
• Corporate citizenship• Donations/sponsorship
MTU regards corporate citizenship as a socialresponsibility with a clear focus on education,science and research. In terms of donations and sponsorship, we support local and regionalprojects near our sites as a promoter, sponsorand network participant.
4.6 Corporate Social ResponsibilityOur commitment to society focuses on research and education, an approachthat reflects our reliance on new generations of well-trained employees andan innovation-friendly business environment in our quest to drive forwardaviation technology. We support the social fabric of the places in which weoperate through a combination of donations and sponsorship.
Corporate citizenshipAs a research-focused company, our concept ofcorporate citizenship revolves around scienceand engineering initiatives. We seek out interac-tion and collaboration with the world of scienceand research and foster dialog with young peopleand new talent.
Education is hugely important for a society’sprosperity and its ability to meet future chal-lenges. We are committed to providing openaccess to training opportunities, which we believeshould first and foremost provide our own youngemployees with a solid grounding in their chosenprofession. In 2016, there were 311 young peo-ple enrolled on apprenticeship schemes at MTU.We provide training where it is needed most,pursuing a holistic approach that includes theacquisition of professional qualifications as wellas methodological competence and social skills.We involve our apprentices in all aspects of com-
Integration of refugees We took steps to assist with the integration ofrefugees during the reporting period. This is atask that confronts society as a whole, and werecognized that the best way for us to start wasto provide our in-house training staff with theskills they need to address this issue. Since May2016, we have been accepting refugees on workplacements where we help prepare them to meetthe challenges of day-to-day working life. Wealso support refugee centers through donations.
Research cooperationsCollaborating with universities and researchinstitutes is a mainstay of our research and devel-opment work and a key part of fulfilling ourresponsibilities to society. We have built strategicalliances with research partners to foster linksbetween universities and industry and safeguardMTU’s capacity for innovation. MTU runs sixcenters of competence in collaboration with uni-versities across Germany, each with its ownresearch focus. In 2005, MTU and its partnersfounded Bauhaus Luftfahrt e.V., an interdiscipli-nary aerospace research institute. We run aseries of sponsorship schemes at the Universityof Stuttgart and the German Aerospace Centerwhich support young researchers for a numberof years after they finish university, and we pro-vide financial backing for a Deutschlandstipen-dium, or “Germany Scholarship”, at the LeibnizUniversity of Hannover. Our international loca-tions also work together with selected universi-ties and colleges in their communities.
Employees and Society • 4.6 Corporate Social Responsibility
84
pany life including health, environmental pro-tection, social values and our no-blame cultureas well as organizing special open-door andawareness events. In addition, MTU participatesin numerous educational projects and initiativesfor children and young people, striving to en-hance people’s understanding of technology andsustainability in society as a whole.
We run a company-affiliated foundation to sup-port highly talented young women studying sci-entific and technical disciplines in Germany. Aswell as providing financial grants, the MTU“Studien-Stiftung” offers personal advice andmentoring to help students get started on theircareers.
MTU research experts give regular presentationsand guest lectures at universities, and we pro-vide a significant proportion of the lectures forthe engine technology course at Cottbus. MTUhas endowed a chair for aircraft engine structuralmechanics at the University of Stuttgart. Wealso give national and international universitygroups an insight into how an industrial companyworks. Students can write dissertations at MTU
as well as bachelor's, master’s and doctoral theses. They can also work at the company in apart-time or intern role during their studies. At theend of 2016, there were 437 students workingat the company as part of their undergraduateor postgraduate program, on work experience oras holiday staff.
Each year, the company confers the WolfgangHeilmann science award for outstanding achieve-ments by talented young students in the field ofaircraft engines. We are also an industry sponsorof a prestigious German award for aerospacejournalism which is awarded annually to non-specialist journalists for outstanding articles onaerospace trends and issues.
Bauhaus Luftfahrt, a think tank co-founded by MTU, presents its vision of how mobility might look in the future.
Employees and Society • 4.6 Corporate Social Responsibility
85
Employees and Society • 4.6 Corporate Social Responsibility
86
Donations/sponsorship (GRI G4-EC1)MTU supports various social institutions. Theseare generally charitable organizations, preferablywith a social focus, to which we provide assis-tance in the form of financial or in-kind dona-tions. A key factor in selecting recipients is alocal/regional connection or a thematic link toour business. We prioritize specific projects overgeneral institutional funding. These are selectedand implemented independently by the MTUsubsidiaries concerned on the basis of carefulresearch. The granting of donations and sponsor-ship is governed by internal guidelines. A cen-trally managed clearance and approval processensures that the rules are adhered to.
In 2016 we dedicated resources to almost 70projects and institutions in local communitiesclose to our locations
Examples of our social commitment in 2016• Funding of the parent-run daycare initiative
TurBienchen e.V., Munich• Sponsorship of childcare during school
vacations, Munich• Off-site deployment of MTU’s company fire
department and doctor, Munich• “Die Arche” (The Ark)—a project devoted to
improving the lives of children in Potsdam, near Berlin
• Fun run for the Healthy Children network, Berlin
• Clinic Clowns, Hannover• Irene children’s home, Hannover• Children’s Day, Rzeszów• Kidney Foundation of Canada, Vancouver
Toy aircraft model destined for the play area in the newrecreational and training center in Rzeszów.
Volunteers at MTU Aero Engines Polska: In 2016, 38 employees in total helped build a public recreational and trainingcenter for children.
We welcome efforts on the part of our employeesto take part in voluntary social events such ascharity runs and to support the preservation orimprovement of social institutions. In Rzeszów,Poland, 38 employees volunteered to assist withthe construction of a public educational andleisure center for children in this reporting year.In addition, MTU allows staff to undertake proj-ects with the German Federal Agency for Tech-nical Relief during their paid working day, andoffers the services of lay justices for labor tri-bunals and social justice courts and examinersfor the Chambers of Industry and Commerce.
Donations and Sponsoring in 2016GRI G4-EC1
Community
61.8 %
Research/Training
26.5 %
Technology/Environment
10.3 %
Arts and Culture
1.5 %
Employees and Society • 4.6 Corporate Social Responsibility
87
Strategy/Economy
Ongoing
Ongoing
Fiscal 2017
2017
Ongoing
Ongoing
Achieved
Ongoing
Feedback from the stakeholdersurvey is incorporated in ourannual materiality analysis
Fiscal 2017 is the first year inwhich the company is required toprepare a non-financial statement.Preparations began in late 2016 onvarious issues.Sustainability action day at theMunich site, more articles on thetopic in em-ployee media
Goals set and achieved in 2016 (relating to the reporting period)
Dialog with stakeholders
Goal Status/Deadline Comments
Ongoing
Ongoing
2017
Annual
Achieved
2017
Not achieved
OngoingAchieved
2017
2017
2017
2017
We carried out relevant trainingcourses in Germany and Polandduring the reporting year. A newround of Code of Conduct trainingis scheduled for 2020.
Focused on the whole MTU groupfor the first time in the 2016reporting periodTraining events were held for employees from the purchasingdepartments and at CampusTraining is to be continued as partof the Campus training schemeWe will make another attempt tojoin the DJSI in 2018
All the fully consolidated sites ofthe MTU Group have now beenintegrated
Focus on data collection and documentationMTU will submit a non-financialstatement for fiscal 2017 by thestatutory deadlineRelating to non-financial state-ment
Compliance � Conduct regular compliance audits to ensure business processes comply with statutory requirements and guidelines
� Carry out employee training
� Carry out review of compliance system
� Conduct materiality analysis to determine the most important sustainability topics
� Launch CR training for employees
� Consolidate CR training for employees
� Achieve inclusion in the Dow Jones Sustainability Index
� Participate in sustainability ratings� Expand to include additional locations
outside Europe
� Consolidate sustainability topics in the risk management process
� Review CR management processes
� Approve key reporting topics of non-financial statement
� Tailor reporting to the materiality concept of the CSR directive
Sustainability management
88
� Direct contact by email for questions on sustainability
� Conduct stakeholder survey on relevant topics and on MTU’s achievements and communication strategies in regard to sustainability
� Prepare non-financial reporting in accor-dance with the German CSR Directive Implementation Act
� Boost dialog with employees about sustainability
� Evaluate and enhance the stakeholder survey on the MTU website
� Reinforce sustainability aspects of stake-holder dialogs on established platforms (see report, p.15)
� Participate in an investor conference with a focus on sustainability
� Exchange more information with partners on sustainability issues
Product Responsibility
2017
Ongoing
Ongoing
Ongoing
2017
2017
Starting in fiscal 2017, the Supervisory Board is responsible for approving the non-financial statement as per statutoryrequirementsUN Global Compact conferences,round table discussions, MunichBusiness Climate Pact
For 75% of the consolidated group
For 75% of the consolidated group
Sustainability management
➔ Involve the Supervisory Board
➔ Expand knowledge sharing between different regions
➔ Conduct annual survey of all relevant sup-pliers on compliance with Dodd-Frank Act
➔ Require new suppliers to commit to the Code of Conduct
➔ Place greater emphasis on environmental aspects in supplier approval process
➔ Standardized assessment of risks in the supply chain
Supplier management
89
Goal Status/Deadline Comments
2015-2020
2030
2050
Stage 1 of our climate strategyconcluded with the entry intoservice of the first generation ofthe Geared Turbofan™ (Claire 1).All the engine models will be rolledout into large-scale production by2020. Implementation of the secondstage (Claire 2)
Implementation of the third stage(Claire 3)
Climate strategy ➔ Achieve a 15% reduction in CO2 emissions with first generation of Geared Turbofan™ (as compared to the year 2000 engine)
➔ Achieve a 25% reduction in CO2 emissions with the second generation of the Geared Turbofan™ (as compared to the year 2000 engine)
➔ Achieve a 40% reduction in CO2 emissions with an integrated ultra-efficient engine concept
2035
2050
As per requirements stipulated inthe European Strategic Researchand Innovation Agenda (SRIA)
➔ Achieve an 11-decibel reduction in noise emissions (per aircraft movement, corres-ponds to a drop of 55 % compared to the year 2000) with the second-generation Geared Turbofan™
➔ Achieve a 15-decibel reduction in noise emissions (per aircraft movement, corres-ponds to a drop of 65% compared to the year 2000) with the third-generation Geared Turbofan™
Ongoing
As per requirements stipulated inthe European Strategic Researchand Innovation Agenda (SRIA)
➔ Support the introduction of sustainable fuels with MTU engine expertise through participation in research projects, studies and practical tests
Aircraft noise
Alternative fuels
Ongoing➔ Successfully complete monitoring and recertification audits for quality management systems
Product quality and safety
Goal Status/Deadline Comments
Environmental protection
2020
By 2017
2017
Ongoing
2017Ongoing
Ongoing
MTU will take various measures tohelp large companies in Munichachieve the goal of reducing CO2
emissions
A concept has been developed to promote e-mobility amongemployees in Hannover. MTU isplanning to participate in the Cityof Munich initiative to promote e-mobility in 2017Munich
Reduced consumption ofenergy and resources
Goal Status/Deadline Comments
➔ Reduce CO2 emissions by 25 % at the Munich site as part of Clean Air Industrial Site (benchmark year:1990)
➔ Participate in the Munich Business Climate Pact
➔ Participate in the City of Munich’s energy-saving initiative
➔ Promote sustainable mobility
➔ Launch a zero emission campaign➔ Carry of employee training courses on
sustainable resource consumption and the company’s environmental activities
➔ Reduce the environmental footprint and CO2 emissions of business travel by making increased use of modern commu-nication technologies such as phone and video conferencing
Ongoing
OngoingOngoing
OngoingOngoing Munich
Measures to save energy ➔ Reduce the amount of energy required to power buildings
➔ Upgrade to LED lighting➔ Switch off machines and systems during
extended interruptions to operations➔ Improve the efficiency of compressing air➔ Use groundwater for cooling
Ongoing
Ongoing
2017
Ongoing
Achieved
Ongoing
The range of parts is continuouslybeing expanded. New parts weresuccessfully introduced in 2016.
We are on target to meet thedeadline.
Hannover and Berlin sites are certified to ISO 14001; Munich,Hannover and Berlin sites are validated under EMAS
Since 2016, for MTU MaintenanceBerlin-Brandenburg
Material efficiency
Use of materials
Environmental certifica-tion
➔ Sustainable manufacturing concepts: apply new laser-based additive manufacturing techniques to build production parts straight from the powder bed based on CAD data
➔ Material development: improve materials by making them lighter and more resistant to extreme temperatures, resulting in lower fuel consumption and pollutant emissions
➔ Implement the EU REACh regulation
➔ Certification to ISO 14001 and validation under the Eco-Management and AuditScheme (EMAS)
➔ Extend EMAS validation to all German sites
➔ Annual environmental statements for the German sites to document compliance with EMAS requirements in accordance with Regulation (EC) No.1221/2009 of the European Parliament.
90
Employees
Not achieved
Achieved
Ongoing
Annual
Goal not attained due to an unfor-tunate trend of accidents espe-cially at the Munich location
Plans are underway to launch“mission zero” campaign (zeroworkplace accidents) in Munichand a similar campaign on occu-pational safety in Vancouver in2017; assessment launched todetermine where we stand in termsof enhancing the safety culture inHannover
Occupational safety
Goal Status/Deadline Comments
➔ Limit reportable workplace accidents to a maximum of 18 within the MTU Group (production sites)
➔ Extend expanded risk assessment to all German sites
➔ Run a safety at work campaign with key topics
➔ Run surveillance and recertification audits in the MTU Group in accordance with OHSAS 18001 for sites that are already certified
Ongoing
Ongoing
Annual
Ongoing
Ongoing
Ongoing
Achieved
Ongoing
Ongoing
Munich, Hannover
The services offered are reviewedand enhanced on a regular basisCharging infrastructure tests cur-rently underway for employee e-mobility initiative (Hannover)Launched in Munich in 2017
Attractiveness as anemployer
Diversity
➔ Strengthen international focus of employer branding
➔ Continue developing offers to improve people’s work-life balance
➔ Receive “Top Employer” status in Germany, Poland and British Columbia, Canada
➔ Initiatives for company-sponsored childcare during summer vacation
➔ Provide independent advice and facilita-tion services for family-related matters
➔ Develop new offers to promote employee mobility
➔ Successfully complete Mobile Working pilot project
➔ Increase percentage of female employees and women in management positions
➔ Participate in initiatives designed to promote young female talent, such as Girls’ Day and the Research Camp for Girls
Ongoing
Ongoing 2017
From 2017
2016 to 2017
To be extended to the MTU Groupfrom 2017 onwards
Pilot project launched in Hannoverin 2016 with systematic involve-ment of managers in the process.MTU has set up an internal inte-gration committee that includesmanagers. The company physicianservice has been expanded tocover workplace inspections,health consultations and net-working with external health pro-fessionals
Munich
Health protection ➔ Introduce systemic ergonomics management
➔ Promote a healthy diet➔ Continue developing workplace
reintegration management (BEM) at German sites
➔ Health days replaced by the new active days concept as a health management training initiative
➔ Renovation and re-opening of the company health studio
91
Employees
Partly achieved
Achieved
2018
Currently ex-pected to becompleted by theend of 2017Achieved
Strengthening of international co-operation thanks to the Internatio-nal Leadership Program (ILP) in2015, English version of BusinessChallenge in Hannover in 2016MTU Business Challenge II Leader-ship completed in late 2016The team is currently working onthe main focus of the follow-upprogram
Training and development
Goal Status/Deadline Comments
� New training opportunities to promote greater internationalization
� Continue with Business Challenge training and qualification program
� Launch MTU Business Challenge III
� Introduce a new online learning portal for employees to make it easier for staff to update their knowledge in line with their individual learning requirements.
� Introduce a talent management process
Ongoing
2017
2016/2017
Every two years
Various measures including infor-mation events to communicateMTU goals/strategy, and specialissues of employee magazinedevoted to key topics
Employer/employee dialog
� Company suggestion scheme for putting employees’ ideas for improvement into practice
� MTU Award to honor outstanding performance
� Implement measures based on feedback from the employee survey at the end of 2015
92
Society
Achieved
Ongoing
By 2018
Ongoing
Ongoing
Annual
Annual
Since May 2016, we have beenaccepting refugees on work place-ments at our Munich headquarterswhere we help prepare them tomeet the challenges of day-to-dayworking lifeIn 2016 the company started pro-viding support for the constructionof a public educational and recre-ational center for children inRzeszów; social day scheduled formanagers in Munich in 2017MTU has signed three sponsor-ship agreements with theUniversity of Stuttgart and theGerman Aerospace Center.The successful candidate took upthis post in 2016.
Integration of refugees
Corporate volunteering
Investing in young talent
Promote science journalism
Goal Status/Deadline Comments
➔ Support integration of refugees in the workplace
➔ Support employee volunteer work
➔ Sponsorship schemes for the further training of young scientists after they finish university
➔ Endowed Chair in Structural Mechanics of Aircraft Engines at the University of Stuttgart’s Institute of Aircraft Propulsion Systems
➔ MTU foundation with the goal of actively supporting development of female students in STEM disciplines
➔ Award Wolfgang Heilmann Prize for young scientists
➔ Sponsor the German award for aerospace journalism
93
94
Strategy and Analysis
Organizational Profile
Foreword by the Chief Executive Officer
GRI-Index – General Standard Disclosures
G4-1
UNGC-PrincipleGRI-Indicator
Reference/Comment
Statement from the Board of Management p. 5
Company profileCompany profileCompany profileAnnual Report 2016
Company profileAnnual Report 2016Annual Report 2016Company profile4.1 Management approach: employment4.1 Management approach: employment
2.7 Responsibility for the supply chainnone
3.1 Management approach: environmental protection1.2 Ethics and integrity1.3 Compliance and human rights2.2 Innovations2.4 Climate strategy2.5 Flight noise3.1 Management approach: environmental
protection4.5 Equal opportunity and diversitySelection• Association of German Engineers (VDI)• Aviation Initiative for Renewable Energy in Germany e.V.
(aireg)• Bauhaus Luftfahrt e.V.• bavAIRia e.V.• Chamber of Commerce and Industry for Munich
and Upper Bavaria (IHK)• Deutsches Verkehrsforum e.V.
(industry association for all modes of transport)• Employers’ Associations for the Bavarian Metal-
working and Electrical Industries (bayme and vbm)• Enterprise for Health• European Aerospace Quality Group• Federation of German Security & Defence Industries (BDSV)• Forum Luft- and Raumfahrt e.V.
(forum for the aerospace industry)• Friends and Sponsors of the Deutsches Museum• German Aerospace Center (DLR)• German Aerospace Industries Association (BDLI)• German Association of Environmental Management e.V.• German Society for Aeronautics and Astronautics (DGLR)• IATA Strategic Partnerships• Münchener Bildungsforum gem. n.e.V.
(Munich-based network for employee training and HR development)
• Stifterverband für die Deutsche Wissenschaft (sponsors’ association for German science)
• Trace International, Inc.• UN Global Compact• Vereinigung der Bayerischen Wirtschaft e.V.
(Bavarian business association)
G4-3G4-4G4-5G4-6
G4-7
G4-8G4-9G4-10G4-11
G4-12G4-13
G4-14
G4-15
G4-16
63
UNGC-PrincipleGRI-Indicator
Reference/Comment
Name of the organizationPrimary brands, products, and servicesOrganization’s headquartersCountries where the organization operatesNature of ownership and legal form
Markets servedScale of organizationTotal workforcePercentage of total employees coveredby collective bargaining agreementsDescription of supply chainSignificant changes regarding size,structure, ownershipPrecautionary approach
External charters, principles, or otherinitiatives
Memberships
p. 8-9p. 8-9p. 8-9p. 61
p. 8p. 28p. 146p. 8-9p. 68p. 71
p. 46-47
p. 54
p. 19p. 21p. 32p. 36p. 40p. 54
p. 80
Material Aspects and Boundaries
About this report1.1 Sustainability strategy and organisation,
Materiality analysisMateriality matrixMateriality principleMTU determines the relevance of the major topicsalong the entire value chain as follows: the rele-vance of upstream and downstream activities isbased on information supplied to MTU by businesscontacts. We deem any topic to be relevant thatplays a significant role in the industry and thathas a bearing on MTU’s business activities.Materiality principle
About this reportExtension to all the fully consolidated locationsof MTU Group. About this report.
G4-17G4-18
G4-19G4-20
G4-21
G4-22G4-23
UNGC-PrincipleGRI-Indicator
Reference/Comment
Basis of consolidationProcess for defining report content
Material aspects identifiedMaterial aspects within the organization
Material aspects outside the organizationRe-statements of informationChanges from previous reports
p. 6-7p. 12-13
p. 13p. 101
p. 101
p. 6-7p. 6-7
Stakeholder Engagement
1.1 Sustainability strategy and organisation, Dialog with stakeholders
1.1 Sustainability strategy and organisation, Dialog with stakeholders
1.1 Sustainability strategy and organisation, Dialog with stakeholders
1.1 Sustainability strategy and organisation, Dialog with stakeholders
G4-24
G4-25
G4-26
G4-27
UNGC-PrincipleGRI-Indicator
Reference/Comment
Stakeholder groups engaged
Basis for selection of stakeholders
Approaches to stakeholder engagement
Key topics and concerns raised throughstakeholder engagement
p. 14-16
p. 14-16
p. 14-16
p. 14-16
Reporting Profile
About this reportAbout this reportAbout this reportAbout this report
About this reportAbout this report
G4-28G4-29G4-30G4-31
G4-32G4-33
UNGC-PrincipleGRI-Indicator
Reference/Comment
Reporting periodDate of previous reportReporting cycleContact point for questions regardingthe reportGRI Content Index and chosen optionExternal assurance
p. 6-7p. 6-7p. 6-7p. 6-7
p. 6-7p. 6-7
Governance
Annual report 2016G4-34
UNGC-PrincipleGRI-Indicator
Reference/Comment
Governance structure p. 24-25p. 56-57
Ethics und Integrity
1.2 Ethics and integrityG4-56 10
UNGC-PrincipleGRI-Indicator
Reference/Comment
Values, principles, codes of conduct p. 18-19
95
Economics
1.4 Sustained value creation
1.4 Sustained value creation4.6 Corporate social responsibilityIndicator is not reported by market or region.1.1 Sustainability strategy and organization, Risk management2.7 Responsibility for the supply chain
2.7 Responsibility for the supply chain
G4-EC1
G4-EC2
G4-EC9
7
UNGC-PrincipleGRI-Indicator
Reference/Comments
Economic PerformanceManagement approachEconomic value generated
Financial implications of climate change
Procurement PracticesManagement approachProportion on spending on local suppliers
p. 24-27
p. 27p. 87
p. 17
p. 46-49
p. 47
Environment
3.5 Material efficiency and waste3.5 Material efficiency and waste3.3 Energy management3.3 Energy management
3.3 Energy management2.3 Product fuel efficiency
3.4 Water3.4 Water3.4 Water3.4 Water3.3 Emissions3.3 Emissions3.3 Emissions
3.3 Emissions
3.3 Emissions3.3 EmissionsOur assumptions for electricity are based on thefollowing:Munich (headquarters): local emission factors(source: Munich municipal utility). Hannover/Ludwigsfelde (maintenance): nationalemission factors (source: German Federal Environ-mental Agency). Rzeszów (Aero Engines): national emission factors(Poland).Vancouver (maintenance): 100% hydroelectricpower, therefore no emissions.For district heating, separate emissions factorsmust be determined for and applied to each facility; for Vancouver we estimate them. For theremaining energy sources (primarily natural gasand kerosene), we use the standard values issuedby the German Environment Agency for all loca-tions. Possible deviations due to the differentcomposition of natural gas in Canada are veryslight in relation to the overall emissions fromthis energy source (Canada <5 % of MTU Grouptotal natural gas consumption).
G4-EN1
G4-EN3
G4-EN6G4-EN7
G4-EN8G4-EN9G4-EN10
G4-EN15G4-EN16
G4-EN17
G4-EN 19G4-EN21
7, 8
7, 8
8, 98, 9
7, 888
7, 87, 87, 88, 97, 8
UNGC-PrincipleGRI-Indicator
Reference/Comments
Materials Management approachMaterials used by weight or volumeEnergy Management approachEnergy consumption within the organizationReduction of energy consumption Reductions in energy requirements ofproducts and services WaterManagement approachTotal water withdrawl by sourceWater sources affectedWater recycled and reusedEmissionsManagement approachDirect greenhouse gas emissions Scope 1Indirect greenhouse gas emissions Scope 2Other indirect greenhouse gas emissionsScope 3Reduction of greenhouse gas emissionsSignificant air emissions
p. 63-65p. 63p. 55-56p. 56
p. 56p. 35
p. 60-61p. 61p. 60p. 60p. 57-59p. 57p. 57
p. 59
p. 58p. 59
96
GRI-Index – Specific Standard Disclosures
Environment
G4-EN22
G4-EN23
G4-EN24
G4-EN27
G4-EN29
G4-EN30
G4-EN31
G4-EN33
G4-EN34
88
8
7-9
8
8
7-9
8
8
UNGC-PrincipleGRI-Indicator
Reference/Comments
Effluents and wasteManagement approachTotal water discharge by quality anddestinationTotal weight of waste by type and dis-posal methodSignificant spills
Products and servicesManagement approachExtent of impact mitigation of environ-mental impact of product and services Compliance Management approach
Monetary value or non-monetary sanc-tions for non-compliance with environ-mental laws and regulationsTransport Management approachEnvironmental impacts of transportingproducts and other goods and materialsOverall Management approach
Total environmental protection expenditures and investmentsSupplier environmental assessmentManagement approachNegative environmental impact in thesupply chainEnvironmental grievance mechanismManagement approachNumber of grievances about environ-mental impacts
p. 60-61p. 63-65p. 61
p. 63-65
p. 54
p. 60p. 65p. 30
p. 36-39p. 40-41p. 52-54
p. 54
p. 58p. 58
p. 52-54
p. 52-53
p. 48-49
p. 48-49
p. 54
p. 54
97
3.4 Water3.5 Material efficiency and waste3.4 Water
3.5 Material efficiency and waste
3.1 Management approach: environmental protection3.4 Water3.5 Material efficiency and waste3.1 Management approach: environmentalpro-tection2.3 Climate strategy3.4 Aircraft noise3.1 Management approach: environmental
protection3.1 Management approach: environmental
protection
3.3 Emissions3.3 Emissions3.3 Emissions3.1 Management approach: environmental
protection3.1 Management approach: environmental
protection2.7 Responsibility for the supply chain
2.7 Responsibility for the supply chain
3.1 Management approach: environmental protection
3.1 Management approach: environmental protection
Labor practices and decent work
4.1 Management approach: employment4.1 Management approach: employment4.3 Attractiveness as an employerOur benefits apply to all employees. There is nodistinction between full-time and part-timeemployees. For part-time employees, the principleof proportionate remuneration is applied.4.3 Attractiveness as an employer4.1 Management approach: employment
Agreements made between the employer and theworks council that are governed by collectiveagreements can be terminated with three months’notice under Section 77 of the German WorksCouncil Constitution Act (Betriebsverfassungsge-setz). This is generally also the case for the collec-tive agreements. In cases in which the arbitrationbody’s decision overrules an agreement betweenthe works council and employer, the regulationsregarding notice remain valid until replaced withothers. Notice periods for the assertion of claimsby employers or the employer are also firmly laiddown in collective agreements. In accordancewith Polish law, in Poland this period is two weeksfor temporary contracts and one to three monthsfor permanent contracts, dependent on the lengthof the term of employment.Canada: 60 days; U.S.according to WARN Act.4.2 Occupational health and safety
The entire workforce of all our production sites is fully represented at the locally organized occu-pational safety committees, the composition ofwhich reflects the legal requirements in therespective countries. 4.2 Occupational health and safety
4.3 Employee development
4.3 Employee development4.3 Employee development4.3 Attractiveness as an employer
4.5 Diversity & Equal opportunity
4.5 Diversity & Equal opportunityAnnual Report 20164.5 Diversity & Equal opportunity
4.5 Diversity & Equal opportunity
2.7 Responsibility for the supply chain
2.7 Responsibility for the supply chain
G4-LA1
G4-LA2
G4-LA3
G4-LA4
G4-LA5
G4-LA6
G4-LA9G4-LA10G4-LA11
G4-LA12
G4-LA13
G4-LA15
6
6
3
6
6
6
UNGC-PrincipleGRI-Indicator
Reference/Comment
Employment Management approachStaff turnover
Benefits provided to full-time employees
Return to work after parental leaveLabor/Management relationsManagement approachMinimum notice periods
Occupational health and safetyManagement approachPercentage of total workforce repre-sented in formal joint management-worker health and safety committees
Injuries, occupational diseases, lostdays and work-related fatalitiesTraining and educationManagement approachAverage hours of training per employeePrograms for lifelong learningPercentage of employees receiving regular performance and career devel-opment reviesDiversity and equal opportunityManagement approachComposition of governance bodies andemployeesEqual remuneration for women andmen Management approachRatio of basic salary and remunerationof women to menSupplier assement for labor practices Management approachNegative impacts for labor practices inthe supply chain
98
GRI-Index – Specific Standard Disclosures
p. 68-71p. 71
p. 74-75
p. 76p. 68-71
p. 72-73
p. 72
p. 77-79
p. 77p. 77-79p. 77
p. 80-83
p. 80-83p. 34f.p. 82
p. 82
p. 48-49
p. 48-49
Labor practices and decent work
4.1 Management approach: employment
4.1 Management approach: employmentG4-LA16
UNGC-PrincipleGRI-Indicator
Reference/Comment
Labor practices grievance mechanismManagement approachNumber of grievances about labor practices
p. 70-71
p. 71
Human Rights
2.7 Responsibility for the supply chain2.7 Responsibility for the supply chain
1.3 Compliance and human rights4.1 Management approach: employment, 4.5 Diversity & equal opportunity1.3 Compliance and human rights4.1 Management approach: employment1.3 Compliance and human rights
1.3 Compliance and human rights4.1 Management approach: employment
1.3 Compliance and human rights1.3 Compliance and human rights2.7 Responsibility for the supply chain1.3 Compliance and human rights
1.3 Compliance and human rights2.7 Responsibility for the supply chain
1.3 Compliance and human rights1.3 Compliance and human rights
2.7 Responsibility for the supply chain
2.7 Responsibility for the supply chainAll new suppliers are contractually obligatedto uphold MTU’s Code of Conduct, whichmakes protection of human rights compul-sory.1.3 Compliance and human rights4.1 Management approach: employment1.3 Compliance and human rights4.1 Management approach: employment
G4-HR1
G4-HR3
G4-HR4
G4-HR5
G4-HR6
G4-HR9
G4-HR10
G4-HR12
2
6
3
5
4
1
2
1
UNGC-PrincipleGRI-Indicator
Reference/Comment
InvestmentSignificant investment agreements andcontracts including human right clausesNon-discriminationManagement approach
Total number of incidents of discrimination
Freedom of association and collectivebargaining Management approachOperations and suppliers identified in whichthe right to exercise freedom of associationand collective bargaining may be violatedChild labor Management approachOperations and suppliers with significantrisk for incidents of child laborForced and compulsory laborManagement approachOperations and suppliers with significantrisk for incidents of forced and com-pulsory laborAssessment Management approachOperations that have been subject tohuman rights reviewsSupplier human rights assessmentManagement approachPercentage of new suppliers that werescreened using human rights criteria
Human rights grievance mechanismsManagement approachNumber of grievance about human rights
p. 46-49p. 48-49
p. 23p. 70-71p. 80-82p. 23p. 71p. 23
p. 23p. 70-71
p. 23p. 23p. 49p. 23
p. 23p. 49
p. 23p. 23
p. 48-49
p. 48-49
p. 23p. 70-71p. 23p. 70-71
99
Product Responsibility
2.6 Product quality and safety
2.6 Product quality and safety
2.6 Product quality and safety
2.6 Product quality and safety
2.6 Product quality and safety
2.6 Product quality and safety
1.3 Compliance and human rights2.6 Product quality and safety2.6 Product quality and safety
G4-PR1
G4-PR2
G4-PR3
G4-PR5
G4-PR9
UNGC-PrincipleGRI-Indicator
Reference/Comment
Customer health and safetyManagement approachProducts and services for which healthand safety impacts are assessedNumber of incidents of non-compliancewith regulations concerning health andsafety impactsProducts and service labelingManagement approachProduct and service information proce-dures and percentage of product andservices subject to such requirementsResults of surveys measuring customersatisfactionCompliance Management approach
Monetary value of significant fines fornon-compliance with laws concerningthe use of products and services
p. 42-43
p. 42-43
p. 42-43
p. 42-45
p. 43
p. 44-45
p. 20-23p. 42-43p. 43
Society
1.3 Compliance and human rights
1.3 Compliance and human rights
1.3 Compliance and human rights
1.3 Compliance and human rights
1.1 Sustainability strategy and organization1.1 Sustainability strategy and organization1.3 Compliance and human rights
1.3 Compliance and human rights
1.3 Compliance and human rights1.3 Compliance and human rights
2.7 Responsibility for the supply chain
2.7 Responsibility for the supply chainAll new suppliers are contractually bound to comply with MTU`s Code of Conduct, which isinformed by the ten principles of the UN GlobalCompact.2.7 Responsibility for the supply chain
1.3 Compliance and human rights3.1 Management approach: environmental
protection3.1 Management approach: environmental
protection
G4-SO3
G4-SO4
G4-SO5
G4-SO6
G4-SO7
G4-SO8
G4-SO9
G4-SO10
G4-SO11
10
10
10
10
UNGC-PrincipleGRI-Indicator
Reference/Comment
Anti-corruptionManagement approachOperations assessed for risks related to corruptionInformation and training on anti-corrup-tionConfirmed incidents of corruption andcorrective actions takenPublic policy Management approachTotal value of political contributionAnti-competitive behaviourManagement approachLegal actions for anti-competitivebehaviour and anti-trust and monopolypracticesCompliance Management approachMonetary values of significant fines andnon-monetary sanctions for non-com-pliance with laws Supplier assessment for impacts onsociety Management approachPercentage of new suppliers that werescreened using criteria for impacts onsociety
Negative impacts on society in the supply chainGrievance mechanisms for impactson society Management approach
Number of grievances about impacts onsociety
p. 20-23
p. 21, 23
p. 21
p. 23
p. 16p. 16p. 20-23
p. 23
p. 20-23p. 23
p. 48-49
p. 48-49
p. 48-49
p. 20-23p. 54
p. 54
100
GRI-Index – Specific Standard Disclosures
Materiality principle GRI G4-20-21
Material Topics
Upstream activities (e.g. supply chain)
Activities within the MTU Group
Downstream activities (e.g. flights operated by airlines)
Relevance along the value chain
101
Long-term value creationComplianceStakeholder dialogProduct qualityProduct safetyProduct fuel efficiencyProduct exhaust fumes*Product noise emissions*InnovationResponsible sourcingEnvironmental management/performanceHuman rightsAttractiveness as an employerOccupational safetyEmployee training and developmentHealth managementDiversityWork-life balanceDemographic changeCorporate citizenshipDonations/sponsorship
*material topic for commercial aircraft engines due to inclusion in certification specifications
significantsignificant
significantsignificant
significantsignificantsignificantsignificant
significant
significantsignificantsignificantsignificantsignificantsignificantsignificantsignificantsignificantsignificantsignificantsignificantsignificantsignificantsignificantsignificantsignificantsignificantsignificantsignificantsignificant
significantsignificantsignificantsignificantsignificantsignificantsignificantsignificantsignificantsignificantsignificantsignificant
significantsignificantsignificant
MTU Aero Engines AGDachauer Straße 66580995 Munich • GermanyTel. +49 89 1489-0Fax +49 89 [email protected]
GER
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