Group Management Report

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Do no significant harm (DNSH)

The DNSH criteria were analyzed in the reporting year for economic activities covered by 3.3 Manufacture of low-carbon technologies for transport and 3.2 Manufacture of equipment for the production and use of hydrogen.

In the vehicle-related business, an analysis was performed for each vehicle production site where passenger cars, light commercial vehicles, trucks and buses are or will be produced that meet the screening criteria for the substantial contribution of economic activity 3.3 Manufacture of low-carbon technologies for transport, or that are to meet them in future according to our five-year planning, and based on current regulations. Of the approximately 40 sites included, the majority are located in the EU, with some in the United Kingdom, Türkiye, South Africa, the USA, Mexico, Brazil, Argentina and China. In addition to these, we also included the sites that manufacture specific components for electric vehicles.

For the Power Engineering Business Area, an analysis was performed for each site that produces relevant components for systems or is responsible for supply chains that meet the screening criteria for the substantial contribution of economic activity 3.2 Manufacture of equipment for the production and use of hydrogen, or that are to meet them in future according to our five-year planning. There are three such sites in Germany and one in Sweden.

Below, we set out our interpretation and describe the main analyses we used to examine whether there was any significant harm to the other environmental objectives. The wording and terminology used in the EU Taxonomy are subject to some uncertainty in interpretation and supposedly go beyond the regulations to be applied in regular business operations. In addition, the application of the EU Taxonomy to sites outside the EU leads to particular challenges due to the possibility of diverging legislation. We took applicable laws as well as external and internal regulations and guidelines as the basis for our assessments, which confirm that we meet the requirements of the DNSH criteria in the reporting period for the vehicle-related business and the Power Engineering sites.

Climate change adaptation

We performed a climate risk and vulnerability assessment to identify which production sites may be affected by physical climate risks. The physical climate risks we identified were assessed on the basis of the lifetime of the relevant fixed asset.

Volkswagen’s climate-based DNSH assessment is based on Representative Concentration Pathway (RCP) scenario 8.5 to the year 2050 and thus assumes the highest concentration of CO2 according to the Intergovernmental Panel on Climate Change (IPCC). The relevance of the identified threats was assessed for the local environment and, if appropriate, the measures needed to mitigate the risk were developed.

Sustainable use and protection of water and marine resources

We evaluated our economic activities with respect to the sustainable use and protection of water and marine resources looking at the three following criteria: preserving water quality, avoiding water stress, and an environmental compatibility assessment (EIA or comparable process). Risks identified in an EIA are examined during the approval process and, if relevant, result in measures and regulatory requirements. We based the analysis primarily on ISO 14001 certificates, information from site approvals and other external data sources related to sites with a high risk exposure.

Transition to a circular economy

Environmentally compatible waste management in the manufacturing process, reuse and use of secondary raw materials and a long product lifespan are a major part of Volkswagen’s environmental management system. Volkswagen defines clear and unambiguous guidelines on the circular economy in its environmental principles, in its overall factory white paper and in its goTOzero strategy.

The product-related requirements for passenger cars and light commercial vehicles are taken into account through implementation of the statutory end-of-life vehicle requirements in conjunction with the type approval of the vehicle models. In addition to this, each brand has targets and measures for the use of recycled materials in new vehicles.

For trucks and buses, a review was conducted at the level of each brand to establish the extent to which local legislation or internal rules and regulations cover the specific requirements.

Pollution prevention and control

To be considered environmentally sustainable, an economic activity must not significantly increase air, water or soil pollutant emissions as compared with the situation before the activity started. The DNSH criteria for this environmental objective require that the economic activity in question does not lead to the manufacture, distribution or use of substances listed in a variety of EU chemical regulations and directives or product-specific rules and regulations. In this context, we also consider the use of alternative substances in our analyses and assessments. Overall, the automotive sector is tightly regulated already, as demonstrated, for example, by the publicly accessible Global Automotive Declarable Substance List (GADSL). Approval and monitoring processes have been implemented with the aim of ensuring compliance with the legal requirements and internal rules and regulations applicable to regular business operations. This also ensures compliance with the legislation specified in the DNSH criteria. For this purpose, we applied the requirements applicable to regular business operations in the European Union in 2022. Outside of the EU we applied the regulations specific to the country in question.

Protection and restoration of biodiversity and ecosystems

In order to verify adherence to the requirements on biodiversity and ecosystems, the relevant areas were identified. Where biodiversity-sensitive areas are located close to a production site, we checked whether a nature conservation assessment had been performed and whether nature conservation measures had been defined in the environmental approvals and subsequently implemented. We also checked whether changes had occurred in an area’s conservation status.