Sustainability

Sustainability 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.

In “The Group Strategy – Mobility for Generations”, new in 2024, we have defined clear Group objectives in the form of nine imperatives assigned to three core topics: excite, unleash and focus. We are focusing on creating a robust company foundation with a reduced cost base and resilient structures, and we see sustainability as a basic maxim for our actions.

Sustainability is deeply rooted in the Volkswagen Group and an integral part of our Group strategy. We are providing new, important and goal-oriented impetus with our regenerate+ Group sustainability strategy presented in fiscal year 2024. Society needs engagement that generates positive added value in order to help our planet to regenerate and shape a future worth living in for current and future generations. We want to contribute to this and take a broad and comprehensive approach to sustainability – environmentally, socially and economically. Our vision is to become a mobility provider with positive added value for nature and society. To this end, we will seek to work in partnership with our stakeholders in order to learn and further improve.

The regenerate+ sustainability strategy applies to the entire Volkswagen Group – i.e. to the Group departments and to all brands and subsidiaries. In so doing, we comprehensively address all of our products, services and stakeholders, who at brand level also include our customers. We want to use regenerate+ to differentiate ourselves as the Volkswagen Group and, at the same time, enable our brands to position themselves in their specific market environment. Together, we follow a vision for the Volkswagen Group and drive sustainable value creation. Transformation is a process, and we are constantly in motion: we regularly review our ambitious targets and continuously adapt them. In systematically implementing our new regenerate+ Group sustainability strategy, we are continuing along this path. The strategy features clear measures in four dimensions:

• Nature, with the focus areas of climate change mitigation, resources and ecosystem
• Our people, with the focus areas of culture, workforce, occupational safety and preventive health care
• Society, with the focus areas of supply chain, customers & stakeholders and social engagement
• Business, with the focus areas of sustainability-related business areas and financing

Wherever this has already been decided, 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 reflected in the remuneration of members of the Board of Management.

Aspects of the nature dimension will be presented in more detail below. As a mobility provider, the Volkswagen Group has an impact on nature and the environment throughout its entire value chain. A core objective of the Group sustainability strategy is therefore to achieve more than simply cutting emissions. Our vision is to have a positive impact on people and the environment, and to contribute to restoration and improvement of ecosystems and living conditions through regenerative practices.

Decarbonization

The decarbonization of the Company and in particular its portfolio of products is a major part of the regenerate+ sustainability strategy, where it has been defined as one of the focus areas in the nature dimension.

In the decarbonization index (DKI), we have a meaningful measuring instrument that makes our progress and interim results in the area of decarbonization transparent and verifiable. 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 (including the Chinese joint ventures) and the USA over the entire life cycle. In this index, the use phase is calculated based on 200,000 km per vehicle and with reference to region-specific fleet values without statutory flexibilities. The intensity of the CO₂e emissions from the electricity used to charge electric vehicles is also calculated on the basis of region-specific energy mixes. Vehicle maintenance is not accounted for in this. Our vehicle life cycle assessments, which are used as the data basis for calculating supply chain and recycling emissions, have been certified externally and independently in accordance with ISO 14040 and ISO 14044.

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. The Greenhouse Gas Protocol (GHG), a series of standards for corporate carbon accounting and reporting coordinated by the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD), likewise requires the recalculation of corporate emissions in the event of material new information or if changes occur. These may include structural changes in the Company, for example. At the Volkswagen Group, changes to the calculation are examined and decided on annually in a set process. Historical emissions needed to be recalculated for the first time in the reporting year because generic emission factors for fossil fuels had been updated, for example.

In the reporting year, the DKI value for the Volkswagen Group averaged 48.0 t CO₂e per vehicle. This represents a reduction of 0.9 tons of CO₂e per vehicle compared with the previous year's recalculated figure.

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 the position of Chief Sustainability Officer for the sustainability strategy as a whole at Group level. Sustainability is enshrined in the Group strategy as a strategic imperative in its own right and forms part of the Top 10 program at the Group level. The content is regularly evaluated and reported to the Board of Management.

UN Global Compact

Volkswagen AG is a participant in the UN Global Compact (UNGC), the world’s largest initiative for sustainable corporate governance, and is involved in national and international initiatives together with other companies from the Group such as AUDI AG, MAN Truck & Bus SE, Porsche AG, Scania AB and TRATON SE. The capital markets view an issuer’s membership of the UNGC as an important factor when deciding to invest in its shares and bonds. ESG funds have become very popular in recent years and have gained in importance as stakeholders. As part of the annual Communication on Progress, the Volkswagen Group and its brands report on their progress in implementing the ten UNGC principles and their activities to support the Sustainable Development Goals (SDGs). AUDI AG took part in the SDG Innovation Accelerator, and MAN Energy Solutions in the Target Gender Accelerator in the reporting year.

Strategic stakeholder engagement

As an international business, our business activities impact the lives of a large number of different people. Appropriately aligned stakeholder engagement is therefore essential so as to determine the Group sustainability strategy’s material areas for action and become aware of stakeholders’ rising and changing expectations at an early stage. The Volkswagen Group understands stakeholder engagement as the obligation to engage in systematic and continuous interaction with the Company’s interest and stakeholder groups, actively listen to them and consider their input when refining our strategies. The goal is an open, constructive and also critical exchange with the stakeholder groups shown in the chart. We endeavor to understand their requirements and expectations of us, to discuss key topics from the regenerate+ Group sustainability strategy with them and to explain how these tie in with the Group strategy and its implementation.

Stakeholders are individuals, groups, or organizations who have an influence on or are influenced by the course or the result of corporate decisions. The Volkswagen Group has identified ten groups as its most important stakeholder groups. Employees and customers are at the center of the stakeholder network. Based on continuous stakeholder analysis, we have also identified eight more groups. Continuous communication between internal and external stakeholder groups is important to the Volkswagen Group. In this context, the Supervisory Board and the Works Council act not only as supervisory and advisory bodies but also as interfaces between internal and external stakeholders. As a supervisory body, the Supervisory Board of the Volkswagen Group is informed about the views and interests of affected stakeholders with regard to sustainability-related impacts within the scope of statutory reporting requirements as well as reporting requirements laid down by the Supervisory Board. Through the requirement for the Supervisory Board to provide consent, it is directly involved, especially in decisions of fundamental importance to the Company. It has equal numbers of shareholder and employee representatives. Interests, views and rights of the Group’s own workforce are thus represented at the highest level in the Group.

VOLKSWAGEN GROUP STAKEHOLDERS

Sustainability Council

As an independent advisory committee, the Sustainability Council supported the Volkswagen Group with important strategic sustainability topics from 2016 to 2022. It functioned as a source of impetus and support, but also as a critic, in order to present various viewpoints to the Company.

The format was realigned in terms of strategy and structure during the reporting year. The new concept now aims to challenge and jointly further develop the relevant topics in the Group sustainability strategy that were identified in the materiality assessment. The new Sustainability Council is comprised of a group of experts for each dimension of regenerate+. In Sustainability Practice Groups three selected independent external experts work together with three internal experts from the Group on further developing strategic topics. This new format helps ensure that feedback and impetus regarding the strategy and initiatives of the Volkswagen Group are incorporated into the continuous further development of this strategy and these initiatives. The new Sustainability Council also has the opportunity to present the results of its work and impetus to the Group Board of Management at regular intervals in discussions and exchange formats.

Further information is available on the Sustainability Council’s website at www.volkswagen-group.com/sustainability-council.

Environmental Strategy

As one of the largest automobile manufacturers, Volkswagen takes responsibility for the environmental impact of its activities. Our goTOzero environmental mission statement serves as the framework for all the Volkswagen Group’s environmental activities. With this mission statement, we aspire to reduce the environmental impact throughout the entire life cycle – from raw material extraction until end-of-life – for all our products and mobility solutions. Compliance with environmental regulations, standards and voluntary commitments is a basic prerequisite of our actions. The mission statement forms the basis for linking our targets, key performance indicators, programs and actions. It places the focus of our activity on four central action areas and their underlying objectives.

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. This policy sets parameters for the conduct and working methods of management and employees 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 and the Group Steering Committee for Fleet Compliance.

The Volkswagen Group coordinates the activities of the brands and companies, 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.

In addition to complying with statutory environmental and energy requirements, we endeavor to adhere to additional voluntary commitments and have tailored our processes and corporate culture to these. We provide the resources necessary to achieve our environmental and energy targets. The intention of our environmental compliance management system is to ensure that environmental aspects and obligations are recognized and given appropriate consideration in decision-making. Environmental misconduct and intentional disregard or fraud are treated as serious rule breaches in accordance with our organizational principles. Compliance with the requirements of our environmental and energy policy is evaluated annually and reported to the Board of Management of Volkswagen AG.