vSustainability means maintaining intact environmental, social and economic systems with long-term viability at a global, regional and local level. The Volkswagen Group can influence these systems in various ways, and actively takes responsibility to make a contribution to their sustainability. We have thus developed a sustainable style of company management and put in place the necessary management structures.
We have also anchored our goal to sustainably shape mobility for present and future generations in our Group strategy NEW AUTO. Especially the Group’s ESG, Decarbonization and Integrity base initiative will drive this topic further.
The materiality process is used to identify and evaluate the most important sustainability issues for the Group. Based on the business model of Volkswagen AG and its social impacts, the focus is on key ESG requirements, stakeholder expectations and adherence to legal regulations and internationally established reporting standards.
We conducted another materiality analysis in the reporting period. In reviewing potentially material issues, we considered perspectives from within and outside the company and reviewed whether the focus topics of the Group’s NEW AUTO strategy are still in keeping with the times. As a result of this process, the six focus areas already defined – decarbonization, circular economy, supply chain and human rights, people & transformation, diversity, and integrity – were confirmed and classified as material by the Group Sustainability Steering Committee. The six focus areas cover most of the requirements formulated in the ESG ratings for assessment criteria applied. Wherever this is already possible, each focus area is linked to clear goals and milestones, KPIs and appropriate packages of measures. ESG-related KPIs such as the decarbonization index and the diversity index are already today reflected in the remuneration of members of the Board of Management.
The decarbonization of the Group and in particular its portfolio of products is a major part of the NEW AUTO Group strategy, where it has been defined as one of the focus areas in the base initiative. We have established the decarbonization index (DKI) as a key performance indicator: the decarbonization index measures the emissions of CO2 and CO2 equivalents (jointly referred to as CO2e) by the brands that produce passenger cars and light commercial vehicles in the regions of Europe (EU27, United Kingdom, Norway and Iceland), China and the USA over the entire life cycle. In this index, the use phase is calculated over 200,000 km and with reference to region-specific fleet values without statutory flexibilities. The CO2e intensity of the charging current of the electric vehicles is also calculated based on region-specific electricity mixes. Our vehicle life cycle assessments, which are used as the data basis for calculating supply chain and recycling emissions, have been verified externally and independently in accordance with ISO 14040. The DKI gives us an informative measuring tool that makes our progress and interim results public and verifiable. The DKI calculation methodology is regularly adapted according to internal and external requirements, such as new test cycles for fleet emissions. Published DKI values can therefore also be adjusted to the new methodology and thus changed to facilitate the presentation of a time series that is methodologically consistent. In 2021, the methodology was adjusted to the WLTP test cycle for fleet emissions. By 2030, the DKI is to be reduced by 30% compared with the base year 2018, and emissions offsetting will not be included in the figure. In the reporting year, the DKI value averaged 48.0 t CO2e/vehicle. This represents a reduction of 0.4 t CO2e/vehicle compared with the figure adjusted for 2021 due to a change in the assumption on which the calculation is based, for example the first-time inclusion of region-specific life cycle assessments for Chinese models.
The finite nature of natural resources and the social and environmental consequences of mining raw materials make decoupling economic growth from resource consumption and the development of a circular economy key sustainability topics. Policymakers at both international and national level have addressed these challenges and made it their mission to regulate markets more aggressively in the future in an effort to speed up the transformation towards resource efficiency and a circular economy. Recognizing the importance of the topic, Volkswagen anchored the topic of circular economy in the NEW AUTO Group strategy through its ESG, Decarbonization and Integrity base initiative.
The Volkswagen Group created and implemented concepts for the reconditioning and recycling of vehicle components from an early stage. Going forward, we plan to intensify our efforts for a transition to a loop-oriented and resource-conserving approach to doing business by pooling expertise within the Group and working on projects and measures on a cross-brand basis.
We are stepping up efforts to use recyclable materials in our vehicle projects. These currently include raw materials from production residues as well as renewable raw materials or natural fibers such as flax, cotton, wood and cellulose, provided they comply with all the technical requirements. In the future, the use of raw materials from end-of-life vehicles will be increasingly taken into account and simplified.
To preserve circular materials from electric vehicles, Volkswagen Group Components opened the Group’s first pilot facility for recycling high-voltage vehicle batteries at the Salzgitter site in early 2021. The objective is industrialized recovery of valuable raw materials such as lithium, nickel, manganese and cobalt.
More information on the focus areas can be found in the sections on integrity and compliance, procurement and employees, as well as in our Sustainability Report for fiscal year 2022.
Parameters and guiding principles
Our actions are determined by the Volkswagen Group Essentials as the foundation of values and the basis for our shared corporate culture. The Volkswagen Group Essentials support managers and employees in overcoming legal and ethical challenges that arise in their daily work. At the same time, we are guided in our activities by several internal guidelines on sustainability.
On this basis, we seek to align the Volkswagen Group’s actions with international agreements and frameworks such as the Sustainable Development Goals (SDGs) of the United Nations (UN), the declarations of the International Labour Organization (ILO), the principles and conventions of the Organisation for Economic Co-operation and Development (OECD) and the UN covenants on basic rights and freedoms.
UN Global Compact
Since 2021, after a five-year hiatus, the Volkswagen Group has officially been reinstated as a participant of the UN Global Compact (UNGC), the world’s largest corporate sustainability initiative, and participates in national and international initiatives together with Audi, Porsche, TRATON, MAN Truck & Bus and Scania. Investors and asset managers in the capital markets view membership of the UNGC as an important factor when deciding to invest in shares and bonds of Volkswagen AG. ESG funds have become very popular in recent years and indispensable for stakeholders.
Management and coordination
The Volkswagen Group has established a Group-wide sustainability management. The related structures, processes and responsibilities are codified in a specific Group policy. We view sustainability management as a continuous improvement process. The core elements include assumption of cross-functional overall responsibility for sustainability by the Chair of the Board of Management of Volkswagen AG, specification of the competence of the responsible Board members for specific sustainability management concepts and implementation of the Group Sustainability Steering Committee as a top management committee. The members of this steering committee include managers from central Board of Management business areas and Group divisions as well as representatives from the brands and the Group Works Council. The steering committee defines concrete strategic goals and programs, establishes measures for uniform further development of sustainability management across divisions, brands and regions and decides on fundamental sustainability issues. The office of the Group Sustainability Steering Committee is the responsibility of the Group’s Sustainability function.
Strategic stakeholder management
Our stakeholders are individuals, groups, or organizations who have an influence on or are influenced by the course or the result of corporate decisions. Our customers and employees are at the center of our stakeholder network. Based on continuous stakeholder analysis, we have also identified eight more stakeholder groups. The Group’s supervisory and advisory bodies – i.e. the Supervisory Board, the Works Council and the Sustainability Council – act as interfaces between internal and external stakeholder groups.
We understand stakeholder management as systematic interaction with key interest and stakeholder groups in line with our NEW AUTO Group strategy. Our goal is an open, constructive and also critical exchange with the stakeholder groups shown in the following chart. We aim to actively shape and promote implementation of their requirements and expectations, as well as central strategic issues.
To be able to continuously incorporate our stakeholders’ suggestions and recommendations, we have given our stakeholder management an organizational structure that also includes external committees. At Group level, this is the Sustainability Council. In addition, we offer our stakeholders a broad range of opportunities for interaction including regular discussion panels and surveys. Following the pandemic-related interruption, we were able to resume the exchange in the reporting period.
The Sustainability Council provides assistance to the Volkswagen Group with important, strategic sustainability issues and is made up of internationally renowned experts from the academic world, politics and society. This advisory body establishes its own working methods and areas of focus independently, has far-reaching rights for the purposes of exchanging information, consultation and initiating action, and consults regularly with the Board of Management, top management and the employee representatives.
Dialogue between Volkswagen and the Sustainability Council in 2022 focused specifically on the Lieferkettensorgfaltspflichtengesetz (German Supply Chain Due Diligence Act), the use of digital technologies for sustainable development, the Zero Impact Factory concept, promotion of transformation and training, Volkswagen’s further decarbonization, and the future alignment of mobility solutions with the NEW AUTO Group strategy. The Sustainability Council also discussed the impact of the Russia-Ukraine conflict on the Group.
Furthermore, the projects launched by the Council to examine the importance of digitalization for sustainability, the transformative potential of employment and training and the inclusivity and effecttiveness of climate legislation in the transport sector were completed in the reporting period. Further links to the letters of recommendation to the Group Board of Management and the results of the Council projects are provided on the Sustainability Council internet page.
As a good corporate citizen, we aim to be a source of economic impetus for local structural development and equal opportunities. We have always believed in the importance of recognizing our social responsibilities toward our stakeholders. The main focus of our corporate social engagement activities is on supporting future, environmental, educational and community projects at many of our sites across the world. In 2022, the brands and companies supported around 800 projects and initiatives worldwide.
As one of the largest automobile manufacturers, Volkswagen takes responsibility for the environmental impact of its activities. Based on the NEW AUTO Group strategy, we have put greater focus on our ambitious environmental targets. With our environmental mission statement goTOzero, we aspire to reduce environmental impact along the entire life cycle – from raw material extraction until end-of-life – for all our products and mobility solutions in order to keep ecosystems intact. Compliance with environmental regulations, standards and voluntary commitments is a basic prerequisite of our actions.
Our focus is on four prioritized action areas:
- Climate action. We are committed to the Paris Climate Agreement and align our activities with the 1.5 degree goal. We consistently focus on the electrification of our products, decarbonization of our entire value chain and expansion of renewable energy generation to supply our sites and customers. We intend to be a net-carbon-neutral company by 2050 at the latest.
- Conservation of resources. We reduce the volumes of primary raw materials needed by using recycled material and renewable raw materials. We maximize our energy and resource efficiency and establish loops for materials and water. Together with our business partners we cut down on the amount of natural resources utilized throughout our supply chain.
- Conservation of ecosystems. We reduce harmful emissions in air, soil and water. We mitigate the impact of our business operations on biodiversity and ecosystems and support projects to conserve these.
- Environmental compliance. Where integrity and compliance are concerned, we aim to be a role model for a modern, transparent, successful enterprise. With this in mind, we use environmental compliance management systems to identify and manage environmental risks and opportunities throughout the lifetime of our mobility solutions. We conduct open dialog with our stakeholders and incorporate their expectations into our decisions.
Organization of environmental protection
Volkswagen has created an environmental policy that sets out guidelines for environmental decision-making, for the management of projects and for the Group’s environmental stewardship. Thus, parameters are set for the conduct and working methods of management and staff in five areas: management behavior, compliance, environmental protection, collaboration with stakeholders and continuous improvement.
The Board of Management of Volkswagen AG is the highest internal decision-making body for environmental issues. Both it and the brands’ boards of management take not only business, but also social and environmental criteria into account when making key company decisions. The Group-wide management of environmental protection is the responsibility of the Group Steering Committee for the Environment and Energy. Other bodies take responsibility for steering key individual aspects. They include the Group CO2 Steering Committee, the Group Steering Committee for Fleet Compliance and Exhaust Gas, and the Group Sustainability Steering Committee.
The Volkswagen Group coordinates the activities of the brands, which in turn steer the measures in the regions. The brands and companies are responsible for their own environmental organization. They base their own environmental protection activities on the targets, guidelines and principles that apply throughout the Group.
Our declared aim is to comply with legal and regulatory requirements. Furthermore, we are guided by Company standards and targets. The intention of our environmental compliance management systems is to ensure that environmental aspects and obligations are given appropriate consideration in our business operations. Disregard for the rules is treated as a severe compliance violation, as are fraud and deliberate misconduct. Compliance with our Environmental Policy Statement and with other Group environmental requirements is evaluated annually and reported to the Board of Management of Volkswagen AG, and the respective brand boards of management or the managing directors of the companies.