Holistic integrity and compliance management system
Integrity and compliance are major priorities in the Volkswagen Group. We firmly believe that, for long-term commercial success, it is important that each and every individual complies with laws, regulations and commitments. Compliant behavior must be a matter of course for all Group employees. This is why integrity and compliance remain key elements of our Group’s NEW AUTO strategy and a focus topic in matters of sustainability.
Our objective is to be a role model and deepen the trust of our employees, customers, shareholders and partners in our Company. Our regulations, processes and corporate culture are designed in such a way that all employees can act with integrity and comply with the rules at all times.
At the same time, we have embedded integrity in our decision-making processes. For example, every resolution proposal submitted to the Board of Management must demonstrate that the intended decision is in line with integrity and compliance, what risks may be associated with it, and how the risks can be reduced. Similar requirements apply to Group brands and companies and to Group bodies to which the Board of Management has delegated decision-making powers.
As performance indicators, integrity and compliance must have the same strategic and operational priority in our Company as sales revenue, profit, product quality and employer attractiveness. We have been building a holistic integrity and compliance management system (ICMS) since 2018. This system was set up in line with the five internationally recognized ECI (Ethics and Compliance Initiative) principles: strategy, risk management, a culture of integrity, a speak-up environment and resolute accountability.
We employ our Together4Integrity (T4I) program as a means of making integrity and compliance a mainstay throughout the Group. This program brings the vast majority of the Group’s integrity and compliance activities together under one roof, applying uniform, robust process and implementation standards.
Thus, we are not only establishing a worldwide ICMS for all Group and brand companies, we are also advancing one of the most extensive change and cultural programs in the history of the Volkswagen Group.
TOGETHER4INTEGRITY
T4I: eleven key initiatives
The rollout of T4I is almost complete, with full implementation scheduled for 2025. The Group is overseeing the program planning and also the rollout of T4I. The managing directors of the individual companies are responsible for implementing the program at a local level. The packages of measures may differ depending on local circumstances. The implementation time will also vary.
The packages of measures are divided into eleven key initiatives:
1. HR (Human Resources) Compliance Policies and Procedures
The aim of this key initiative is the integration of integrity and compliance into the standard HR processes such as recruitment, training, promotion and remuneration (bonus payments). Integrity and compliance are also a compulsory topic in annual employee appraisals and are a component of the training measures for employees across all levels of the Company.
2. Code of Conduct
The Code of Conduct (CoC) is a key instrument for reinforcing employee awareness of responsible action and decision making, creating the basis for compliance within the Company. The CoC serves as an aid, provides support in finding the right contact persons where needed and is binding for all Group employees. We and our employees undergo regular mandatory training in the key contents of the CoC.
3. Integrity Program
The integrity program is designed to reinforce the culture of integrity. Its objective is to communicate to employees the importance of integrity and motivate employees to behave with integrity in their everyday work. We regard integrity as an attitude; it provides an inner compass for correct action and becomes particularly decisive in gray areas, when explicit rules are missing or conflicting goals exist. We place particular emphasis on making decisions with integrity. Appropriate training modules on this topic provide support to all management levels, from foremen up to executives.
4. Risk Management and Internal Controls
Binding structures and processes are designed to help create transparency and manage risk. These include the quarterly risk process, which focuses on acute risks, the standard internal control system (ICS), which is designed to protect key processes, and root cause analysis.
5. Internal Compliance Risk Assessment
The internal compliance risk assessment (ICRA) identifies and addresses compliance risks in the Group, in particular those risks involving corruption, money laundering and embezzlement. In the reporting period, the ICRA process was brought into line with the requirements of the Lieferkettensorgfaltspflichtengesetz (LkSG – German Supply Chain Due Diligence Act). Compliance measures are developed and defined for each company on the basis of the risk profiles derived from the ICRA.
6. Whistleblower System
The whistleblower system is the central point of contact for reporting cases of rule-breaking by Group employees or by direct and indirect suppliers. This includes white collar crimes, acts of corruption, tax offenses, environmental offenses, human rights violations, infringements of antitrust and competition legislation, money laundering and terrorism financing, breaches of product safety and licensing regulations, and serious breaches of privacy. Employees and third parties can report misconduct at any time and in many languages. A wide range of channels is available for this purpose, and the information can be lodged completely anonymously, if preferred. The aim is to use binding principles and a clearly governed process to avert damage to the Company and its employees.
REPORTING CHANNELS OF THE WHISTLEBLOWER SYSTEM
7. M&A and NCS compliance
In the event of planned mergers and acquisitions (M&A transactions), the relevant companies are audited for commercial risks such as corruption, breaches of trust or fraud, and for human rights risks. The analyses provide recommendations for the mitigation of the risks identified. This also applies to joint ventures and to industrialization and cooperation projects with external partners. Furthermore, the Group Compliance organization works to achieve appropriate compliance management at non-controlled shareholdings (NCSs), i.e. companies that are not controlled by a Volkswagen Group company as a majority shareholder.
8. Business Partner Due Diligence
In the business partner due diligence process, the integrity of business partners and suppliers is reviewed, especially with regard to corruption risks and compliance with ethical standards. The aim is to identify these risks at an early stage, to avoid such business partners, and to define measures to minimize risk and implement these with the business partner. If this is not possible, options for terminating the business relationship are explored, or the business relationship is not established in the first place.
9. Product Compliance
The product compliance management system (PCMS) is designed to ensure that our products comply with the legal and regulatory requirements of the exporting and importing country, internal and external standards, contractually agreed customer requirements and externally communicated voluntary commitments over their life cycle.
10. Environmental Compliance
Statutory environmental regulations and voluntary commitments are binding at all locations and in all business fields. The Group’s environmental policy and the environmental compliance management system stipulate the relevant requirements and responsibilities for all strategy, planning and decision-making processes in the Group brands and companies. This includes a system of key indicators to determine progress in meeting environmental targets in the fields of renewable energy, CO2 emissions and resource efficiency.
11. Anti-Corruption
The Volkswagen Group has a zero-tolerance policy on active or passive corruption. This is anchored in both our internal Code of Conduct and our Code of Conduct for Business Partners. Our investigation offices look into and process any reported violations of our principles, and sanctions are imposed on the employees concerned. Tackling corruption also includes the development and implementation of mandatory training for employees in divisions or companies with a high risk exposure.
The aim of T4I is thus not only to strengthen uniform corporate governance throughout the Group in relation to integrity and compliance, but also to advance the culture of integrity. This includes steadfastness in adhering to principles of integrity regardless of economic or social pressures. T4I and the ICMS therefore contribute significantly to increasing sustainability in the Volkswagen Group.
Sustainably measuring success
Methods for monitoring effectiveness and measuring progress are an integral part of the compliance management system. The central planning and reporting system of the T4I program provides continuous transparency on the implementation status of the key initiatives. It is used for internal reporting to the Group Board of Management and the Brand Board of Management, makes project advances known and can provide assistance when countermeasures are being introduced in response to project delays.
In addition to this, the annual opinion survey provides information about the extent to which our culture of integrity has developed. This Group-wide employee survey asks a number of questions, including whether each individual is able to act with integrity. Where a fixed threshold value is not achieved, the relevant manager must identify and remove possible obstacles together with the team.
To measure the level of target achievement in relation to integrity and legal matters, we have defined an indicator for the major brands that manufacture passenger cars: compliance, a culture of dealing openly with mistakes and acting with integrity. This is based on an evaluation of the answers to three questions in the opinion survey that address compliance with regulations and processes, dealing with risks and errors, and the possibility of acting with integrity. In the event of negative deviations, the relevant departments develop and implement measures.
Compliance: clear rules in the Group
Compliance with the rules must be a matter of course for all employees of the Volkswagen Group. The Group compliance organization provides support worldwide in the form of programs, guidelines, processes and practical advice. It helps the Group and brand companies to comply with the rules when carrying out their business activities and to comply with the relevant laws and internal regulations. The compliance work focuses on the anti-corruption measures, and preventing fraudulent breaches of trust and money laundering.
The Compliance Infopoint has established itself as the central help center for compliance questions in the Volkswagen Group. The team either directly issues a recommendation on the matter in question or forwards the query to a competent body. Case studies derived from these consultations are regularly incorporated into communications about compliance. Employees can also contact the Compliance Infopoint directly via the Volkswagen 360° app, an option of particular benefit to employees without a computer workstation of their own.
In addition, the Group Compliance organization offers training and communication formats tailored to specific target groups – management discussions and training courses for key personnel being two of these. Moreover, compliance content is part and parcel of all career development paths from the induction program for trainees to programs for leadership and management development to the senior management program. The measures are supplemented by information and communication activities such as awareness campaigns, film and dialogue formats, newsletters and interactive games for learning about laws and rules.
The Group Compliance organization’s program of activities addresses areas of importance for the future. The activities include projects for cross-Group collaboration in the markets, further development of IT-based compliance tools and exchange formats with internal and external compliance experts.
For more information on integrity and compliance, as well as the topic of business and human rights, please see our 2022 Group Sustainability Report.