Steering metrics
Financial and nonfinancial key performance indicators
DHL Group uses both financial and nonfinancial performance indicators in its management of the Group. The monthly, quarterly and annual changes in these indicators are compared with prior-year data and forecast data to assist in making management decisions. The year-to-year changes in the financial and nonfinancial performance indicators described here also play a role in the calculation of management remuneration. The Group’s financial performance indicators are intended to preserve a balance between profitability, the efficient use of resources and adequate liquidity. How these metrics are computed is illustrated in calculations. The performance of the financial key figures in the reporting year is described in the report on economic position.
To date, the progress of our ESG Roadmap has been measured using six steering-relevant performance indicators: logistics-related greenhouse gas (GHG) emissions, Realized Decarbonization Effects, Employee Engagement, the share of women in middle and upper management, the lost time injury frequency rate (LTIFR) per 200,000 working hours and the share of valid compliance-relevant training certificates in middle and upper management. As planned, a seventh performance indicator – the cybersecurity rating – was introduced in corporate governance during the year under review. In addition, the performance indicators Realized Decarbonization Effects, Employee Engagement and cybersecurity rating are incorporated into – and account for 10%, respectively, of – the target portfolio for annual bonus calculation of the Board of Management. Since this reporting period, these performance indicators have also been included in the bonus calculation for executives in upper management. The targets and results of these key figures can be found in the report on economic position, development is provided in the nonfinancial statement and the outlook for the 2024 fiscal year is provided in the expected developments, opportunities and risks chapter.
EBIT and EAC (EBIT after asset charge)
The profitability of the Group’s operating divisions is measured as profit from operating activities (EBIT).
EBIT after asset charge (EAC) is another key performance indicator used by the Group. EAC is calculated by subtracting the asset charge, a cost-of-capital component, from EBIT. Making the asset charge a part of business decisions encourages the efficient use of resources and ensures that our operational business is geared toward increasing value sustainably while improving cash flow.
The asset charge is calculated on the basis of the weighted average cost of capital, or WACC, which is defined as the weighted average net cost of interest-bearing liabilities and equity, taking into account company-specific risk factors in accordance with the Capital Asset Pricing Model.
A standard WACC of 8.5% is applied across the divisions. That figure also represents the minimum target for projects and investments within the Group. The WACC is generally reviewed once annually on the basis of the current situation on the financial markets. To ensure better comparability of the asset charge with previous figures, in 2023 the WACC used here was maintained at a constant level compared with the previous years.
The asset charge is calculated each month so that fluctuations in the net asset base can also be taken into account during the year. The composition of the net asset base is shown in the calculations.
Free cash flow facilitates liquidity management
Along with EBIT and EAC, cash flow is another key performance metric used by Group management. The goal is to maintain sufficient liquidity to cover all of the Group’s financial obligations from debt repayment and dividends, in addition to meeting payment commitments arising from the Group’s operations and investments. Cash flow is calculated using the cash flow statement.
Operating cash flow (OCF) includes all items that are related directly to operating value creation. Another key parameter impacting OCF is net working capital. Effective management of net working capital is an important way for the Group to improve cash flow in the short to medium term.
Free cash flow (FCF) is a management indicator derived from OCF. It is used as an indicator of how much cash is available to the company for paying out dividends or repaying debt at the end of a reporting period.
CALCULATIONS
1 Includes EBIT-related current assets and liabilities. Not included are assets and liabilities related to taxes, financing and cash and cash equivalents, for example.
2 Includes EBIT-related other noncurrent assets and liabilities. Not included are assets and liabilities related to taxes or bonds, for example.
Steering and reducing greenhouse gas emissions
We aim to reduce the greenhouse gas (GHG) emissions caused by our operations, as well as our dependency on fossil fuels, in order to mitigate the impact of our operations on the global climate.
We use the logistics-related GHG emissions as a medium- and long-term target. We use a second performance indicator – the Realized Decarbonization Effects – to measure the emissions that we were able to avoid through the use of energy from renewable sources and sustainable technologies compared with conventional energy and technologies.
The calculation methodology for GHG emissions is based on recognized international standards such as the Greenhouse Gas Protocol, EN 16258 (replaced by ISO 14083 as of the 2024 fiscal year) and the Global Logistics Emissions Council Framework. To calculate the market-based effects, we use the guidelines of the Voluntary Market Based Measures Framework for Logistics Emissions Accounting and Reporting published by the Smart Freight Centre. Reductions in emissions through offsetting are not factored into our GHG emissions calculation.
As part of our steering, we consider the logistics-related GHG emissions including the upstream chain from fuel production (well-to-wheel) and include the GHG emissions caused or avoided by our transport subcontractors (Scope 3). We record the GHG emissions from categories 3 (“Fuel- and Energy-Related Activities”), 4 (“Upstream Transportation and Distribution”) and 6 (“Business Travel”), which are also included in our targets, in the calculation of Scope 3 emissions. The use of sustainable fuels is a significant focus of our climate protection measures. The savings generated through these measures offer us the opportunity to implement climate protection in our own supply chain in a targeted manner. As part of this, fossil fuels are replaced by either the direct use of certified sustainable fuels or the documented use thereof (book and claim). This makes a positive impact on our target calculation.
Employee engagement as a factor for success
Motivated and committed employees contribute to the success of the company. In the annual Group-wide survey, all employees have the opportunity to anonymously rate the company’s strategy and values as well as their working conditions. The Employee Engagement key performance indicator represents the aggregated and weighted results of five statements in the annual Group-wide survey of employees.
Promote diversity by focusing on share of women
We use the performance indicator of the share of women in middle and upper management to measure the success of our diversity measures. As part of this measurement, executives working part-time are counted on a per-person basis.
Occupational health and safety as a focus
We measure the effect of workplace accidents based on the lost time injury frequency rate (LTIFR), which is determined using the number of work-related accidents per 200,000 working hours that lead to at least one day of missed work for the affected person following the day of the accident. Since the year under review, this has also included accident-related injuries to external employees who are subject to instruction.
Subject cybersecurity to independent external assessment
Our cybersecurity undergoes independent assessment by the external rating agency BitSight. This cybersecurity rating is based on the technical analysis of any weak points and brings potential security risks to the attention of the rated company. Assessment of the security situation is carried out by an automated service on a daily basis. Unlike with a self-assessment, a cybersecurity rating offers greater transparency and enables comparison with other companies thanks to standardization. We compare our performance with DAX 40 companies as well as major customers and logistics companies that are not a part of the DAX. The cybersecurity rating KPI has been steering-relevant since this reporting period and is also included in the calculation of the annual bonus for the Board of Management.
Conduct compliance-relevant training
Our aspiration is to be a reliable and trustworthy partner in all business relationships. When conducting day-to-day business, our managers serve an important function as role models to the employees and business partners, which is why corresponding training is of such importance for executives. We measure success in this area on the basis of the share of valid training certificates in middle and upper management. This performance indicator has been replaced by the cybersecurity rating since this reporting period in the calculation of the annual bonus for the Board of Management.