Corporate governance

GOV-1 – The role of the administrative, management and supervisory bodies

Tasks and responsibilities of the members of the management and supervisory bodies of Deutsche Lufthansa AG

Deutsche Lufthansa AG has the management and supervisory structures required for listed companies in Germany. The Executive Board is responsible for managing the Company and defining its strategic direction.

The Executive Board reports regularly to the Supervisory Board. The Executive Board regularly informs the Supervisory Board in both Supervisory Board meetings and between meetings regarding business developments in the Lufthansa Group, as well as on the topics of compliance, risk management, internal control systems and IT security.

The Supervisory Board appoints the Executive Board, advises it on the management of the Company and monitors its activities. Furthermore, it decides on the remuneration system and amounts for the Executive Board. The internal regulations for the Executive Board contain a catalogue of transactions for which the Executive Board requires the prior approval of the Supervisory Board. Every year, the Supervisory Board also approves the Company strategy, the key figures for the following year’s budget and the Group’s medium-term financial planning.

Executive Board and Supervisory Board are responsible for and monitor the sustainability performance of the Lufthansa Group

The Executive Board of Deutsche Lufthansa AG is responsible for preparing the sustainability report in accordance with CSRD and ensures the integration of sustainability-related topics with regard to the environmental, social and governance matters into the Company strategy and guarantees that sustainability-related targets are defined within the Company. This also includes impacts, risks and opportunities, as well as monitoring progress.

The Supervisory Board is responsible for monitoring governance, including sustainable corporate governance. The Executive Board informs the Supervisory Board in the Supervisory Board meetings at least four times a year on the business developments within the Lufthansa Group, including those associated with material impacts, risks and opportunities with regard to sustainability-related issues. The Sustainability division is represented by the Chief Technology Officer on the Executive Board.

The Corporate Responsibility department primarily handles the sustainability strategy, sustainability reporting and sustainability ratings, emissions management and sustainability communication in cooperation with the respective departments of the Lufthansa Group and reports directly to the Chief Technology Officer. In addition, the management of help alliance, the Lufthansa Group’s aid organisation, reports functionally to the Corporate Responsibility department.

The Supervisory Board sets annual targets for the one-year variable remuneration (short-term incentive, STI) and the long-term variable remuneration (long-term incentive, LTI) of the Executive Board. When determining the goals for the STI and LTI, sustainability targets are set with a weighting of 20%. In the event of material changes to the remuneration system, but at least every four years, the remuneration system is presented at the Annual General Meeting for approval.

The Executive Board also provides regular updates to the Supervisory Board’s Audit Committee regarding the reporting on sustainability matters. The Audit Committee monitors the efficacy of internal control and risk management systems, among other things. It is also informed about the content of the audit subject to mandatory reporting, including sustainability reporting.

ESG Committee advises Executive Board and Supervisory Board

Among other things, the Supervisory Board has set up an ESG Committee (Environmental, Social, Governance: ESG). This Committee advises the Supervisory Board, its committees and the Executive Board on environmental, social and governance issues that are essential to the sustainable economic development of the Company. This includes, in particular, risks and opportunities in the areas of ESG. The ESG Committee consists of four equal members: in the 2024 financial year, these were Supervisory Board members Erich Clementi (Chairman), Sara Grubisic, Marvin Reschinsky and Angela Titzrath.

Responsibilities for impacts, risks and opportunities are defined throughout the Group

The responsibilities for impacts, risks and opportunities at the Lufthansa Group are clearly defined in the Executive Board’s division of duties plan, the internal regulations of the Supervisory Board and its committees and the relevant company guidelines. As such, the Chief Technology Officer is explicitly entrusted with monitoring environmental, climate and social impacts. The Corporate Controlling department reports directly to the Chief Financial Officer and is responsible for managing financial and sustainability risks. At the top management level, regulations to this effect are enshrined in the Executive Board’s internal regulations.

The Supervisory Board regularly addresses sustainability-related topics, particularly in the corporate strategy and integrates ESG aspects into its decision-making. The ESG Committee that is rooted in the Supervisory Board advises on sustainable governance and sustainability-related risks and opportunities, reflecting these responsibilities in the Company’s governance processes.

Specific controls and processes are used to manage impacts, risks and opportunities. Together with the Corporate Responsibility department and in consultation with the general risk management of the Company, the Executive Board is responsible for monitoring and managing sustainability matters. The Supervisory Board and, in particular the ESG Committee, advises and supervises the Executive Board. This interplay helps to ensure the consistent monitoring and management of both financial and non-financial risks and opportunities.

Sustainability-related risks are part of the Lufthansa Group’s risk management

Group risk management is responsible for implementing uniform standards and methods, for coordinating and continuously refining the risk management process and for all risk management reporting in the Lufthansa Group. The Corporate Controlling department has functional responsibility for ensuring that the risk management system is standardised across the Group.

The Lufthansa Group Risk Management Committee is intended to ensure that processes, structures and rules are established to identify, manage and assess business risks at an early stage across all functions and processes. This includes risks related to sustainability issues. Sustainability-related risks are monitored through the Lufthansa Group’s risk management system, which is coordinated by Group Risk Management. The risk assessment is carried out once a quarter. The risks are then reported to the Executive Board quarterly and discussed annually in the Supervisory Board’s Audit Committee. The Risk Management Committee acts on behalf of the Executive Board and reports to it. Furthermore, the responsible Head of Corporate Controlling reports risks directly to the CFO.

The managing directors or management boards of all the companies covered by the risk management system also appoint risk managers. They are in regular dialogue with the Lufthansa Group’s Group risk management function. In addition, as part of risk controlling, they ensure that risk-relevant information is agreed with the planning and forecasting processes in their company.

Managers with budgetary and/or disciplinary responsibility are designated as risk owners. The identification, evaluation, monitoring and management of risks are therefore fundamental aspects of every management role. The Group guidelines for risk management stipulate that the occurrence of material predictable risks that have not been reported in the past is considered to be a serious management error.

Composition and diversity of the members of the management and supervisory bodies

Appointment of Executive Board members is partly based on the diversity policy

The Executive Board of Deutsche Lufthansa AG had five members at the end of the 2024 financial year:

• Carsten Spohr, Chairman of the Executive Board
• Michael Niggemann, responsible for Human Resources & Legal, Labour Director
• Till Streichert, responsible for Finance
• Grazia Vittadini, responsible for MRO and IT
• Dieter Vranckx, responsible for Global Markets & Commercial Management Hubs

The Supervisory Board takes the view that the fundamental suitability criteria for Executive Board candidates are, in particular, good character, integrity, outstanding leadership qualities, professional qualifications relevant to the division concerned, and the ability to gear business models and processes towards the needs of a changing world. The Supervisory Board also takes diversity into consideration during the selection process. As a decision-making criterion, the Supervisory Board particularly considers diversity as being displayed by profiles and professional backgrounds that differ yet complement each other, including on an international level, an appropriate representation of both genders and a suitable mix of ages. According to legal requirements, at least one woman and one man should serve on the Executive Board. To this end, the Supervisory Board has adopted a diversity policy for the composition of the Executive Board. This policy is published on the Lufthansa Group website. Filling a particular position on the Executive Board is mainly dependent on the Company’s interests, taking into account all the specific circumstances of the individual case.

As of 31 December 2024, the Supervisory Board is of the opinion that the composition of the five-person Executive Board fulfils the targets set out in the diversity policy. Alongside many years of experience within the Lufthansa Group, the members of the Executive Board contribute extensive knowledge and experience from various roles, including international roles outside the Lufthansa Group. The various career, educational and life experiences of the members of the Executive Board complement one another. The following information provides more details.

Composition of the Supervisory Board is based on an extensive profile of requirements

The Supervisory Board of Deutsche Lufthansa AG comprises 20 people and its members comprise ten shareholder representatives and ten employee representatives, as per the German Co-determination Act. 

The Supervisory Board has adopted an extensive profile of requirements for its composition. This profile covers the skills required by the German Corporate Governance Code (GCGC) and the diversity policy set out in Section 289 f of the German Commercial Code (HGB). As of 31 December 2024, the Supervisory Board is of the opinion that the composition of the Supervisory Board fulfils the relevant targets. As a whole, the Supervisory Board is particularly knowledgeable about the aviation sector. As a whole, its members contribute a broad range of specialist knowledge to the Supervisory Board’s work and possess international experience or specialist knowledge of one or more of the Company’s key markets outside Germany. The status of the implementation of the profile of requirements can be found in detail in the qualification matrix below.

Skills and expertise for overseeing sustainability matters are available

Sustainability is firmly entrenched in Lufthansa Group’s strategic planning. The responsibility for sustainability matters is directly attributed to a member of the Executive Board in the division of duties plan. The Executive Board can consult external experts at any time and may engage in training.

The professional expertise of the Supervisory Board, which also includes sustainability-related expertise, is summarised in the qualification matrix for the Supervisory Board. As such, the members of the Supervisory Board’s ESG Committee on the shareholder side, as well as the Chairman of the Audit Committee, have particular skills and expertise in those ESG topics relevant to the Lufthansa Group. Supervisory Board members have regular opportunities to take part in training. The Company offers Supervisory Board members the opportunity to take part in further education and training events, for example. Some of the further education and training events available in the 2024 financial year included a seminar on the CSRD and other topics, such as IT security.

The sustainability expertise in the Lufthansa Group’s Executive Board and Supervisory Board committees is directly linked to the management of the Company’s material impacts, risks and opportunities. The Executive Board regularly addresses sustainability matters and takes these into account in its strategic and operational decision-making. The Supervisory Board discusses the Lufthansa Group’s sustainability strategy with the Executive Board as part of its strategy discussions. The Supervisory Board’s ESG Committee advises the Executive Board on matters relating to sustainable corporate governance. Furthermore, ESG training for Supervisory Board members strengthens their expertise and helps to ensure that key sustainability matters are reconciled with the strategic goals and risk management strategy of the Lufthansa Group.

GOV-2 – Information provided to and sustainability matters addressed by the undertaking’s administrative, management and supervisory bodies

The company’s administrative, management and supervisory bodies are regularly informed about sustainability aspects

The Lufthansa Group intends to ensure that the management and supervisory bodies, including the responsible committees, are regularly informed about material impacts, risks and opportunities relating to ESG topics. As such, since the 2023 financial year, the Executive Board has been regularly informed through sustainability reporting within the steering committee for the sustainability reporting project. The ESG Committee presented and discussed the latest status of the CSRD implementation in its two meetings in the 2024 financial year. The Chief Technology Officer also presented the results to the Executive Board members for their information. The basis for reporting was a double materiality analysis carried out in the reporting year, which summarises the results on the identified risks, opportunities and impacts. Over the course of the year, regular reports were issued on the implementation of sustainability-related due diligence requirements and as a review of the efficacy of the relevant directives, measures, key indicators and targets.

In monitoring the corporate strategy, the Lufthansa Group’s administrative, management and supervisory bodies take into account key transactions, and systematically address the impacts, risks and opportunities related to ESG topics as part of the risk management process. Continual measurement of these factors is conducted through committee work in order to ensure that they are considered in the Company’s strategic decision-making processes. In doing so, potential compromises between the risks, opportunities and expected impacts are carefully weighed up. These evaluations help to identify risks at an early stage, leverage opportunities and strengthen the long-term resilience of the Company.

As part of the strategic monitoring, the relevant committees regularly evaluate the impacts and risks relating to environment, social and governance issues and strive to integrate sustainability targets such as decarbonisation and compliance with regulatory requirements into the Company’s strategy. The monitoring process for the individual topics is via risk assessments and information sharing by working groups, which then notify the committees if any impacts, risks or opportunities are identified. The committees then perform an evaluation based on the risk factors and empirical values in order to derive the relevant measures.

Material transactions involving the Lufthansa Group are submitted to an extensive evaluation to analyse the risks and opportunities with regard to sustainability-related aspects. In doing so, potential conflicts of objective between financial interests and ESG criteria are explicitly discussed to ensure that long-term value creation and sustainability requirements do not contradict one another.

The Lufthansa Group risk management system integrates ESG risks, including climate-related and compliance risks, into the overarching Group risk management. Regular risk assessments are carried out and the Supervisory Board committees informed in order to facilitate informed decision-making based on the risk assessments and derived recommendations for action.

Furthermore, conflicts of objective are specifically integrated into the consideration of impacts, risks and opportunities. One example of this is the introduction of sustainable aviation fuel (SAF) and the modernisation of the fleet, where higher costs over the short term are weighed up against long-term environmental benefits.

During the reporting year, the Lufthansa Group’s administrative, management and supervisory bodies carefully analysed the material ESG risks, opportunities and impacts. These were presented in the meetings of the Executive Board and Group Executive Committee, in the Supervisory Board’s ESG Committee and Audit Committee and to the Chief Financial Officer. In doing so, core topics with particular strategic relevance that were of key importance to the company’s sustainable development were addressed. Some of these material topics addressed by the decision-making bodies and the relevant committees included climate change and its impact on business activities, compliance with social standards within the supply chain, and issues relating to good corporate governance and compliance. These areas of focus were systematically integrated into the Company’s strategic decision-making processes in order to leverage long-term opportunities and promptly identify and manage potential risks.

GOV-3 – Integration of sustainability-related performance in incentive schemes

Sustainability targets are enshrined in Executive Board remuneration

The remuneration of Executive Board members is made up of a performance-related component and a fixed component. The fixed component takes the form of an annual basic salary. It reflects the responsibility assumed by the members of the Executive Board and the scope of their work. Additionally, the fixed component also includes benefits and an adequate, guaranteed pension. The performance-related remuneration comprises a one-year variable remuneration component and long-term variable remuneration component.

20% of the one-year variable remuneration is based on overall and individual business and sustainability targets, for which the Supervisory Board sets annual areas of focus. In prior years, the Supervisory Board defined targets in the areas of “Customers” and “Employees” as focal points for the business and sustainability targets and thus took the interests of key stakeholders into consideration. As of the 2023 financial year, the “Customers” and “Employees” targets each account for 10% of the one-year variable remuneration. For the sustainability parameter “Customers”, the Net Promoter Score for Lufthansa Group Airlines, i.e. the proportion of customers recommending the Company, was again used in financial year 2024. The Engagement Index is used for the parameter “Employees”. It measures the extent to which employees identify with the Company, as well as their commitment and willingness to recommend the Company to others. ↗ S1-2 – Processes for engaging with own workers and workers’ representatives about impacts

The long-term variable remuneration is designed to promote the long-term, sustainable development of the Company. It is subject to a four-year assessment period and is made up of 20% strategic targets and sustainability targets. The Supervisory Board specifies core areas of focus for these each year. Within the scope of the long-term variable remuneration of the Executive Board, the Supervisory Board regularly defines an environmental target as one of the strategic and sustainability targets. The reduction of specific carbon emissions has been regularly defined as a core focus for the long-term variable remuneration since 2022. This was derived from the current corporate strategy, according to which the reduction targets are based on the indicator grammes CO₂ per tonne-kilometre transported, in line with the target system for the validated SBTi targets. The indicator grammes of CO₂ per revenue tonne-kilometre shows the CO₂-intensity – i.e. the CO₂ emissions per transported tonne-kilometre.

The Supervisory Board as a whole is responsible for the structure of the remuneration system for Executive Board members and for defining the individual benefits. The Steering Committee of the Lufthansa Group Supervisory Board supports the Supervisory Board, monitors the appropriateness of the remuneration system and prepares the Supervisory Board’s resolutions. If so required, the Steering Committee recommends any changes to the Supervisory Board. In the event of material changes to the remuneration system, but at least every four years, the remuneration system is presented at the Annual General Meeting for approval.

The remuneration of Supervisory Board members is designed as a fixed remuneration system, as per the regulation adopted by the Annual General Meeting on 9 May 2023. Members do not receive attendance fees or variable remuneration.

GOV-4 – Statement on due diligence

GOV-5 – Risk management and internal controls over sustainability reporting

Risk management and internal control system regulate processes for sustainability reporting

The Lufthansa Group has an overarching, integrated, non-financial internal control system (N-ICS) and a risk management methodology with standardised processes to define the necessary controls, document them according to uniform rules and test them regularly to ensure that they are effective and appropriate.

The Lufthansa Group N-ICS includes all the principles and processes to ensure that sustainability reporting is conducted correctly, as well as to ensure compliance with the relevant legal requirements. It is based on the framework of the Committee of the Sponsoring Organizations of the Treadway Commission (COSO). The framework defines the elements of a control system and sets the standards for measuring the appropriateness and effectiveness of the N-ICS. In additional to organisational units that form part of the sustainability reporting, the N-ICS also includes IT systems relevant to sustainability reporting, relevant data collection and reporting processes, as well as disclosures relating to the collection of data and reporting for the EU taxonomy.

During the reporting year, the scope of the N-ICS was limited to data points, IT systems and organisational units with a high level of risk. From 2025, the scope of the N-ICS will be gradually expanded in order to attain a level of “reasonable assurance” by 2028.

Each organisational unit covered by the N-ICS is obliged to take part in the N-ICS lifecycle. It comprises the following steps, which are carried out either in sequence or in parallel: definition of scope and limits, determining the target requirements, planning phase, maintenance phase, efficacy review, quality assurance of self-assessments, activity monitoring and N-ICS reporting. The N-ICS lifecycle is fully depicted in a governance risk and compliance IT instrument.

Adapted methods for ESG risks applied in order to facilitate integration into risk management

As part of the double materiality analysis in 2024, ESG risks were identified and evaluated by the Corporate Responsibility department in accordance with ESRS requirements for the first time. The underlying risk methodology was adapted from the Group-wide risk management methodology, including the risk scales and risk types, for example. There were material differences to the existing Group risk management in terms of the dedicated ESRS categories, extended time horizons (short, medium and long term), and a consideration of risk before any remedial action.

An integration process was defined for the years 2024 to 2026 with the aim of integrating further ESG-risks into Group risk management as a whole and into the regular risk management process. The standard methodology and processes are adapted where necessary with CSRD-relevant specifics, as described below:

Impacts and opportunities are included in separate processes that are managed and coordinated by the Corporate Responsibility and Corporate Strategy departments. The Corporate Controlling department is responsible for the Group-wide harmonisation of the risk management system. The responsible unit head reports directly to the Chief Financial Officer. Group Risk Management implements consistent standards and methods, coordinates and continually develops the risk management process, and takes care of all risk management reporting within the Lufthansa Group. The Supervisory Board’s Audit Committee monitors the existence and effectiveness of the Lufthansa Group’s risk management. The Group Risk Management Committee ensures, on behalf of the Executive Board, that processes, structures and rules are established to identify, manage and assess business risks at an early stage across all functions and processes. It also aims to improve the effectiveness and efficiency of risk management. The composition and responsibilities of the committee are set out in the internal guidelines. The Internal Audit department carries out regular independent system audits focusing on the appropriateness and effectiveness of the risk management system practised in the Lufthansa Group.

The Lufthansa Group’s risk management addresses ESG risks at the Group level. For the non-ESG risks that have already been identified in the Company and that have been fully integrated into the ERM process, Group risk management includes all airlines, the Logistics and MRO segments, Lufthansa Aviation Training, Miles & More, Lufthansa Global Business Services, IT companies and the Delvag Group. The senior management or Board members of all companies falling under the risk management system appoint Risk Management Officers, as well as Risk Management Coordinators. They are responsible for implementing the Group guidelines within their own companies and are in regular dialogue with the Lufthansa Group’s risk management function. Furthermore, they ensure that risk-relevant information is coordinated with the planning and forecasting processes in their company through risk controlling.

Managers with budgetary and/or disciplinary responsibilities are named as risk managers. It is their task to implement risk management within their area. For ESG risks, this responsibility is initially assumed by interim topic managers and, from 2025 onwards, will be transferred to the risk managers.

The Lufthansa Group’s risk management process consists of continual risk identification, evaluation and management. These risks are recognised, monitored and evaluated either qualitatively or quantitatively on a net basis, using effective instruments. ESG risks in particular are subject to an adapted methodology, whereby their gross evaluation is also taken into account across short-term, medium-term and long-term time horizons.

For 2024, the risks were initially identified and evaluated within the relevant reporting and data collection processes, and new IT risks were integrated within the scope of the N-ICS.

The Lufthansa Group has established internal control processes in order to strive towards transparency and compliance in the recording and processing of relevant data as part of its sustainability reporting. The preparation of the content is done in an iterative process where the texts and accuracy of the disclosures are reviewed for accuracy. The control processes include agreements with the departments where topic-specific content is developed and coordinated. The results are then consolidated, evaluated and checked for accuracy and compliance in meetings between the committee heads. After various agreements between the committees, heads of corporate functions and iterative adjustment processes, the final sustainability report is accepted by the Executive Board and Supervisory Board. This multi-stage process aims to ensure that the report is complete and meets the Lufthansa Group’s requirements when it is published.

Outlook: sustainability risks become part of the ERM

From 2025, further ESG-risks will become part of the regular ERM risk assessment process. Depending on the risk assessment, these risks will be transferred to the N-ICS and subjected to regular supervisory monitoring. The N-ICS is based on the existing financial ICS and generally follows a lifecycle as described below:

The Lufthansa Group N-ICS lifecycle involves an annual risk assessment to identify relevant risks of material misinformation in the sustainability reporting on the basis of materiality, process complexity and probability of error. The annual risk assessment process focuses in particular on risks within the data collection and reporting processes, as well as risks connected with IT systems relevant to reporting. The N-ICS is adapted based on the results of the annual risk assessment.

The N-ICS lifecycle is fully depicted in the relevant software solution. Material risks were identified through the data collection and reporting processes. Material risks in the reporting relate to incompleteness or inaccuracies in the report, as well as approvals that have not yet been obtained. In terms of data collection, the material risks relate to incomplete or erroneous collection or aggregation of data. In order to reduce these risks, appropriate review and approval control processes have been designed and implemented for the data collection and reporting process.

All components of the N-ICS framework will be subject to regular supervisory checks in the form of an ICS audit. An annual audit plan is established that takes into account the priority and critical nature of the processes or data points. Any instances of limited effectiveness are documented as to-dos with defined responsibilities and deadlines. The companies are responsible for putting this into practice. These activities are monitored at the level of the company and the Group.

For the 2024 reporting year, a report on the efficacy of the ICS was primarily issued for the financial ICS. From 2025, the Corporate Internal Control System department will issue a joint report for the financial ICS and N-ICS in the first quarter of the subsequent year. The report provides information to the Executive Board and the Supervisory Board’s Audit Committee about the results of the effectiveness testing and the activities still to be completed from the previous reporting period. At a local level, the company’s ICS Officer is responsible for internal reporting within the relevant company. The internal reporting provides information to the legal representatives and the local Supervisory Board about the effectiveness of the N-ICS and the activities still to be completed from the previous reporting period. Ideally, this is done in the first quarter of the subsequent year – but this may vary from company to company.