Corruption and Bribery

MATERIAL IMPACT AND THEIR INTERACTION WITH STRATEGY AND BUSINESS MODEL

Impact in the area of avoidance of corruption and bribery

The Volkswagen Group identified an actual and potential positive impact through the materiality assessment in the area of avoidance of corruption and bribery in the 2024 fiscal year. The Volkswagen Group already has a positive impact by promoting a culture of integrity and strengthening the trust of stakeholders along the entire value chain through its engagement and an effective compliance management system in the battle against corruption and bribery. This fight will be continued so that the impact can potentially also have an effect in the medium term.

Interaction with strategy and business model

Our impacts identified in the materiality assessment have an effect on the Group’s strategy, business model and value chain. Integrity and compliance are cornerstones of the Group strategy to achieve sustained success as an enterprise. The Code of Conduct forms the ethical and values-based foundation for integrity and compliance in the Volkswagen Group.

The Volkswagen Group uses the instruments of the compliance management system in the battle against corruption to emphasize the influence of its material impacts on the business model, strategy and value chain. Here, particular focus is placed on ethical business practices as well as on anti-corruption and anti-bribery – also along the value chain – with a view to maintaining and reinforcing positive impacts.

Actions to fight corruption and bribery are part of the Group strategy and may in turn have an effect on the value chain.

An in-depth description of all actions in the area of corruption and bribery is provided in “Actions: Corruption and bribery”.

POLICIES: CORRUPTION AND BRIBERY

The Volkswagen Group is fully committed to acting lawfully and responsibly and pursues a strict zero-tolerance policy against corruption. This principle is firmly anchored in the corporate values. This is also reflected in the publicly accessible anti-corruption guideline, the Code of Conduct for Employees and the Code of Conduct for Business Partners, and thus forms the yardstick for the Volkswagen Group’s actions. Further Group policies set out how to deal with conflicts of interest, donations and sponsorship or benefits in the form of gifts or invitations.

The Volkswagen Group follows up on reports of potential violations of its principles to ensure compliant and lawful conduct within the Volkswagen Group. Managers and HR are responsible for investigating the compliance breaches reported. In serious cases, the investigation offices are also consulted. Employees who are involved in unfair business practices are sanctioned.

The Volkswagen Group’s Group Integrity & Compliance department is responsible for the topics of corruption, bribery and prevention of money laundering. It belongs to the Integrity and Legal Affairs function of the Board of Management.

ACTIONS: CORRUPTION AND BRIBERY

Written guidelines

The Code of Conduct is available to all Volkswagen Group employees and third parties on the Group website. In addition, the Integrity & Compliance communication team organizes information and communication activities such as awareness campaigns, film and dialog formats, newsletters and interactive games, with the aim of raising awareness of integrity and compliance topics.

The basis of the activities on the topic of corruption prevention is the Group-wide policy on benefits and gifts, which sets out clear rules for dealing with gifts, invitations, and other benefits. It also helps to avoid conflicts of interest and even the appearance of undue influence. The aim of these activities is to ensure that the Volkswagen Group’s business practices are as transparent as possible and comply with the applicable regulations.

Advice

The integrity & compliance information point has established itself as a central advisory office. The team can be contacted in person, by email or using the Volkswagen 360° app. It answers questions on integrity and compliance, particularly on the Code of Conduct and the topic of anti-corruption, and is in close communication with other advisory bodies in the Group.

Training and certification

In order to avoid corruption risks, communication and training measures on the topic of anti-corruption are implemented regularly on the basis of risk. These measures not only cover the prohibition of corruption and how to deal with officeholders and mandate holders in this regard, but also cover topics related to the prevention of money laundering. A detailed description of the Volkswagen Group’s compliance training is provided in “Training programs”.

Employees from senior management upwards are certified on the Code of Conduct every two years. By signing the certificate, they confirm their knowledge of the Code of conduct, and of their obligation to report potential conflicts of interest and serious breaches of regulations.

Business partner due diligence

As part of business partner due diligence (BPDD), the integrity of sales partners, with a focus on anti-corruption, is reviewed using a risk-based approach. The due diligence is carried out prior to entering into a business relationship and continued for the entire business relationship. Early identification of potential risks enables preventive and reactive mitigating actions to be taken to ensure the reliability and stability of business relationships. Automated daily integrity monitoring of business partners is another key component of this. Sales partners are also subjected to more in-depth risk-based checks, such as audits. Business partners receive support in various formats, such as compliance dialogs, so that they meet the necessary standards. Group Integrity & Compliance supports the sales entities with operational responsibility in conducting the business partner due diligence process. It includes regular media screenings, risk assessments, sanction list checks and the identification of warning signs regarding business partners. The Volkswagen Group checks whether business partners have a compliance management system (CMS) or have implemented any compliance actions. The aim is to identify risks for breaches of the law and disregard of ethical standards at an early stage, avoid high-risk business partners and define actions to minimize risk and implement these with business partners. In individual cases, business partners are contacted directly to resolve potential violations. If this is not possible, the Group refrains from entering the business relationship or terminates it as the law allows. The business partner in question may be blacklisted from doing business with the Volkswagen Group, its brands and its companies.

In addition to automated, continuous integrity monitoring of the business partner in the BPDD tool, the implementation of any mitigation actions agreed with the business partner prior to the conclusion of the contract is also monitored. Furthermore, the business partners are regularly assessed to determine whether further actions such as, in particular, compliance dialog, on-site visits, or external audits are required to ensure a compliant and lawful business relationship. If necessary, these actions are taken in collaboration with the responsible compliance officers as part of a risk-based approach.

Handling violations

In the case of breaches by employees, a systematic investigation is carried out and – if required – sanctions are imposed on the employees in question. Suspected cases can be reported confidentially and also anonymously through the Group-wide whistleblower system at any time. These cases are thoroughly investigated by the responsible investigation offices, which operate independently of management.

The Volkswagen Group conducts investigations with the utmost confidentiality after a thorough review and in the event of firm indications of rule-breaking. There is a presumption of innocence. Those involved are interviewed as soon as possible, and their names are cleared if they have been wrongly accused. Proven misconduct may, depending on its severity, be sanctioned by a warning, a reprimand, or dismissal. Following serious breaches of rules that are sanctioned, structured root cause analyses are conducted in order to prevent similar incidents in the future.

The Group Board of Management and the Audit Committee of the Supervisory Board receive an updated statistical report on the whistleblower system once a quarter at their meetings. This report contains the aggregated figures for the investigation offices and an overview of the serious breaches of rules sanctioned in the respective quarter.

Training programs

The Volkswagen Group offers its employees and suppliers the following training programs on the topic of corruption and bribery:

For employees in the Volkswagen Group

Anti-corruption

The Volkswagen Group has a strict zero-tolerance policy toward any form of active or passive corruption. Companies with high exposure to risk pursuant to the ICRA are obliged to conduct anti-corruption training for their staff. This training includes special modules on dealing with officeholders and mandate holders and on handling benefits.

Within the Volkswagen Group, the functions at increased risk of corruption and bribery as a result of their tasks and responsibilities are defined at company level. In the Group, these functions at increased risk as a result of their tasks and responsibilities comprise the companies to which the ICRA assigns a high risk profile. These companies are deemed to be functions-at-risk in the context of the ESRS. The level of implementation of the training on anti-corruption and the prevention of money laundering in the functions-at-risk defined for the Volkswagen Group is 100%. Within the Porsche AG Group, the functions at increased risk of corruption and bribery as a result of their tasks and responsibilities are defined at company level. As regards anti-corruption, these are the companies that regularly employ indirect workers, among other things. A training program on anti-corruption has rolled out to 97.3% in the risk functions defined for anti-corruption for the Porsche AG Group.

As a rule, members of the Board of Management are part of the target group for the mandatory integrity & compliance training. In addition, after being appointed they receive one-off, in-depth, and personal training on the topics of the Code of Conduct, anti-corruption, and the prevention of money laundering. Carrying out this one-off training is the responsibility of the competent integrity & compliance officer.

A deep-dive training session on corruption prevention was organized for members of the Supervisory Board in the 2024 fiscal year.

Prevention of money laundering

Companies with high risk exposure pursuant to the ICRA have to provide money laundering prevention training with a focus on dealing with money laundering risks. The training format is the responsibility of the respective companies.

For suppliers

Training on the Code of Conduct for Business Partners on the topics of anti-corruption and prevention of money laundering is also made available to business partners from sales and procurement. The Code of Conduct for Business Partners has been a component of agreements with suppliers and service providers since 2020.

TARGETS: CORRUPTION AND BRIBERY

No measurable, outcome-oriented targets within the meaning of the ESRS are defined in relation to corruption and bribery. The effectiveness of the policies and actions in relation to the positive impacts identified through the materiality assessment performed this year for the first time is currently not monitored. An internal compliance risk assessment of the companies in the Volkswagen Group’s own business area (excluding the Porsche AG Group which conducts its own compliance risk analysis) is conducted with the aim of achieving risk-based management of prevention measures. The ICRA serves to systematically identify, assess, and minimize compliance risks – including corruption risks. Risk-based packages of measures for targeted prevention are rolled out to the companies after an analysis of the risks taking account of various factors such as geographic risks, sector specifics, and past incidents. In the case of Group companies with a high level of risk exposure, external audits are conducted on the implementation and effectiveness of the prevention measures.

METRICS: CORRUPTION AND BRIBERY

In 2024, the investigation offices received a total of 3,555 reports, most of which were either not anonymous, or anonymous with the option to contact the whistleblower. The total number and type of identified cases of corruption are also determined by the Volkswagen Group’s investigation offices. The types of cases include corruption, bribery, fraud, extortion, collusion and money laundering. Convictions of Group employees for violations of anti-corruption and anti-bribery laws committed in the course of their work for the Group are taken into account if and to the extent that the Group is aware of the convictions. Fines are reported if they are directly related to the conviction. In fiscal year 2024 the Group became aware that one former Group employee had been convicted of violating anti-corruption and anti-bribery laws. The conviction was based on a breach of the rules that came to light in 2022; the former employee left the company in 2021. The Group is not aware of any fines in connection with a conviction in fiscal year 2024.