Climate change

MATERIAL IMPACTS AND RISKS AND THEIR INTERACTION WITH STRATEGY AND BUSINESS MODEL

Impacts relating to climate change mitigation and energy

The positive and negative impacts described below, relating to climate change mitigation and energy were assessed as material actual and potential impacts in the double materiality assessment. It is to be expected that both the positive and the negative impacts will continue over a long-term time horizon.

Greenhouse gas (GHG) emissions are generated along the Volkswagen Group value chain, primarily in the use phase of our products, and it contributes to climate change. GHG emissions are also caused through the mining and processing of raw materials, the manufacture of components in the supply chain, and the company’s own operations.

Negative impacts also arise in this context through energy consumption along the value chain. A decisive factor is the continued significant reliance on fossil energy sources, the production and use of which are associated with GHG and other emissions. The focal points in this regard are also the use phase of the products, the production processes in the upstream value chain and the company’s own production processes.

The Volkswagen Group also contributes to positive impacts on climate change mitigation and energy along the value chain by reducing GHG emissions and promoting the use of renewable energy. The greatest effects can be found in the downstream value chain in the use of the vehicles: The transition to e-mobility, which enables the widespread use of renewable energy in the transportation sector, serves to reduce primary energy requirements and GHG emissions compared to vehicles with internal combustion engines.

The processes for identifying possible impacts as part of GHG accounting or energy management are described in the “Metrics: Climate change” section regarding compiling the relevant metrics.

Process description and results of the climate risk analysis

Transition risks

Possible transition risks and opportunities were identified using a scenario analysis and on the basis of additional in-house sources within the double materiality assessment (see the “Procedure for identifying material information” section of the “General information” chapter for further information).

The time horizons of the analysis correspond to the general definitions in this report. The connections between the service lives of the capital goods and the time horizons from strategic planning are set out in the “Procedure for identifying material information” section of the “General information” chapter.

The scenario used in the scenario analysis was Net Zero by 2050 from the International Energy Agency (IEA). The main sources used were the IEA report “Net Zero Roadmap: A Global Pathway to Keep the 1.5°C Goal in Reach −2023 Update”, and the “Global EV Outlook 2024”. The reports take into account the latest progress reports of the Intergovernmental Panel for Climate Change (IPCC) at the time of preparation, and therefore the current state of climate science. The IEA’s Global Energy and Climate Model on which it is based models not only the necessary transformation of the transportation sector, but also of additional sectors relevant for the Group’s value chain and business model, such as energy and raw materials production.

The ambition level of the scenario is aimed at the ideal goal of the Paris Climate Agreement of limiting global warming to 1.5°C; the scenario provides for a limited overshoot of the 1.5°C target, with a decline in the global temperature rise to around 1.4°C by 2100.

This makes it suitable for estimating a maximum expected intensity and speed of the transition events, and thus the maximum risk exposure. The Group also investigated processes with lower intensity and speed, particularly in the regulatory environment, as part of strategy development, to address uncertainties regarding the forms of risk driver (see the “Strategy: Climate change resilience” section for further information). This did not reveal any additional risks.

The IEA’s “Net Zero by 2050” scenario requires proactive alignment by automotive producers with stricter regulations, technological disruptions and the change in the energy mix. The focus on battery-electric vehicles, innovative business models and sustainable value chains is defined as crucial to ensure long-term competitiveness and satisfy the requirements for the net-zero targets.

The scenario considers various time horizons. Specific statements relating to the transportation sector in particular are made for 2030, 2035 and 2050. The focus of the analysis was on development until 2030 for the medium-term time horizon and until 2035 for the long-term time horizon.

Several relevant transition events were identified based on the scenario. The scenario is based on the assumption that governments around the world will be implementing ambitious climate policies, including carbon pricing, stricter fleet emission standards, and bans on new registrations of internal combustion engine vehicles in key markets. The expansion of incentive schemes to promote battery-electric vehicles is also anticipated.

In terms of the market, the scenario assumes that increasing availability and decreasing costs will be additional factors in driving the demand for battery-electric vehicles – provided that the charging infrastructure is expanded quickly. Based on these assumptions, the percentage of battery-electric vehicles among passenger cars sold worldwide will increase to 67% by 2030, and among heavy trucks to 37%. However, this development may vary widely between regions.

It would cause increased demand for battery raw materials, and sustainably produced and recycled materials in the medium to long term, which may result in limited availability and price increases.

From a technological perspective, the scenario assumes that current battery technology will continue to develop and that energy efficiency will significantly improve across all sectors. This could reduce emissions from the upstream value chain considerably.

The transition events were located along the value chain and were analyzed qualitatively in terms of impacts on strategy and business model in the form of potential risks and opportunities. These were compared with the risks and opportunities formulated in the double materiality assessment.

The evaluation was performed in the double materiality assessment by the relevant departments in consultation with Group risk management and sustainability management (see the “Procedure for and results of the double materiality assessment” section of the “General information” chapter).

The risk of failing to meet the statutory worldwide fleet emission targets, for example, due to insufficient transition to electric drivetrains or lack of market resonance – was defined as material for the company. Financial effects would result primarily from the charges payable in such case. In this context, an amount in the mid-three-digit-million euro range was added to provisions in the reporting year. Financial effects are also expected to be associated with this risk in 2025. This risk was classed as material for all time horizons.

Material risks resulting from the need for sustainable raw materials are described in the chapter “Resource use and circular economy”.

Physical risks

The assessment of climate-related risks for the Group’s own sites involved examining climate-related hazards for the 200 most important sites. These included all production sites along with key sales, administration and development sites.

The investigation was conducted with a software tool that uses the geo-coordinates of the sites. Both chronic hazards such as heat and cold stress, and acute physical hazards such as river floods and storm floods, were analyzed.

The periods examined were based on those of the software tools employed and were largely in line with the periods used in this report. The short term corresponds to the status quo view in the tool. The medium term refers to development until 2030 and corresponds to the Group’s strategic planning period, including capital allocation planning. The long-term time horizon refers to development until 2050, to reflect the potential service lives of the assets.

The IPCC Shared Socioeconomic Pathway (SSP5-8.5) scenario was used for the forecast. This represents a high emission scenario based on the current state of climate science, and therefore plausibly reflects the maximum expected risk exposure in terms of severity and likelihood of occurrence. It predicts global warming of 3.3°C to 5.7°C by the end of the 21st century and is based on intensive use of fossil fuels, economic growth, and energy-intensive lifestyles.

As regards our own operations, it was determined that some of the sites investigated are already exposed to relevant climate hazards, such as river flooding or storm surges. Additional stress factors (for example heat stress, cold stress, precipitation, etc.) were also investigated as part of the risk analysis. These risks are less relevant in terms of negative impacts on production activities.

However, the risk of direct damage and a resulting production outage was deemed not material in the materiality assessment based on the expected financial implications at Group level over all time horizons considered.

The upstream value chain is monitored and examined based on processes and data for both the short-term and the long-term. Based on current climate change predictions, the Volkswagen Group’s upstream value chain will also be more exposed to climate-related hazards in the future. Consequently, there may be supply disruptions and adjustments to production programs at the Group’s production sites. This was identified as a material risk over all time horizons in the double materiality assessment.

Interaction with strategy and business model

The material impacts and risks identified with respect to climate change mitigation and energy have an effect on the Group’s business model and strategy. The topics of climate change mitigation and energy are key elements of the Group strategy relating to the decarbonization of the Group’s business activities. Climate change mitigation is also an important aspect of the Group sustainability strategy regenerate+. A detailed strategic classification of material impacts and risks is provided in the “Strategy: Climate change and transition plan” section.

Information on the future adaptability of the strategy and business model with a view to material transition risks is provided in the “Strategy: Climate change resilience” section.

The material impacts and risks are addressed through policies, actions and targets at various levels. The focus is on mitigating negative impacts, reinforcing positive impacts, and avoiding or mitigating material risks.

The policies and overarching actions regarding the material positive and negative impacts described in the areas of climate change mitigation and energy are presented in the “Climate change mitigation and energy efficiency” section. The section on “Use of renewable energies” describes additional actions relating to the impacts from the company’s own operations and the upstream and downstream value chain, including the use phase of products.

Further details and examples of implementation of the actions can be found in the “Actions and resources: Climate change” section. The actions set out in the “No decarbonization without e-mobility”, “Increasing vehicle efficiency”, “Net CO₂e-neutral use phase” and “Contribution to climate-friendly logistics and hard-to-abate sectors” sections are aimed at the impacts in the use phase of the products. The actions set out in the “Climate change mitigation in manufacturing”, “Zero Impact Logistics”, and “Decarbonization of the dealership networks” sections relate to impacts in own operations and sections of the downstream value chain. The actions relating to the upstream supply chain are presented in the “Requirements for decarbonization in the supply chain” section.

Policies and actions to manage material risks are presented in the “Strategy: Climate change resilience” section. The target set out in the “Reduction of Scope 3 GHG emissions in the use phase” section also contributes to the identified material transition risk. The same applies to the actions presented in the section “No decarbonization without e-mobility” and “Increasing vehicle efficiency”.

STRATEGY: CLIMATE CHANGE AND TRANSITION PLAN

Climate change strategy

Sustainability will remain a significant topic in the business world and will continue to gain in importance, being driven by the increasingly apparent consequences of climate change, greater awareness of sustainable lifestyles among customers and not least conditions such as the Paris Climate Agreement.

Decarbonization is a core component of Group activity and plays a key role in the Volkswagen Group strategy. Our decarbonization strategy applies to the entire Group. We do not yet have a Group-wide decarbonization plan within the meaning of ESRS E1 paragraph 16 is not yet in place, and the TRATON GROUP and MAN Energy Solutions do not have a transition plan. The TRATON GROUP and MAN Energy Solutions are developing independent transition plans, which are to be integrated in subsequent reporting cycles. The following actions and metrics on implementing the decarbonization program focus on the passenger cars and light commercial vehicles area of vehicle-related business. The transformation driven by digitalization and electrification requires extensive investment, which is incorporated in the Group strategy and included in medium-term planning.

Operationalizing the decarbonization program

Our decarbonization program for our passenger cars and light commercial vehicles business area covers the entire life cycle of our products. It is being put into operation via a clear hierarchy of actions, which is configured as follows for the passenger cars and light commercial vehicles business area: The top priority is to take action to avoid CO₂e emissions. In second place are actions with which the Group aims to gradually shift the energy supply to renewable energy across the entire value chain and in all phases of a vehicle’s life. Finally, unavoidable CO₂e emissions are offset in selected cases through climate action projects that meet the highest international standards. Further information is provided in the “GHG removals and GHG mitigation projects” section.

In the hierarchy of actions, the Volkswagen Group includes definitions of four decarbonization levers to be used to achieve the emission reduction targets: (1) e-mobility, (2) conversion of energy supply, (3) energy efficiency and (4) decarbonization in the value chain. The decarbonization levers are explained in more detail in the “Actions and resources: Climate change” section. With respect to our production sites (Scope 1 and 2), we pursue the goal of reducing emissions by 90% in absolute terms between 2018 and 2040 and neutralizing the remaining emissions to achieve net CO₂e neutrality at our production sites. We aim to reduce Scope 3 CO₂e emissions in the use phase by 30% between 2018 and 2030. Specific actions for target achievement, such as climate change mitigation in manufacturing and no decarbonization without e-mobility are described in the “Actions and resources: Climate change” section.

Commitment to the Paris Climate Agreement and our climate targets

We are committed to the Paris Climate Agreement and align our own activities with the 1.5°C goal. It is our aim to be a net carbon-neutral company by 2050. We plan to achieve this through the hierarchy of actions described above, with clear priority placed on first reducing and avoiding emissions, and only applying offsetting actions for emissions that are difficult to avoid or completely unavoidable. We have set an intermediate goal for ourselves during our journey to net carbon neutrality: to reduce production-related CO₂e emissions by 50.4% by 2030 compared with the base year 2018. The renowned Science Based Targets initiative (SBTi) confirmed that our Group meets the requirements for contributing to limiting global warming to 1.5°C with this objective for the production phase (Scope 1 and 2). The Volkswagen Group also aims to reduce CO₂e emissions in passenger cars and light commercial vehicles’ use phase (Scope 3 category 11) by 30% by 2030 (compared with 2018). This target has also been independently certified by the SBTi as 2°C aligned.

Strategic implementation through Group-wide sustainability management

A Group-wide sustainability management system that includes the issue of climate change mitigation has also been established in the Volkswagen Group. The related structures, processes and responsibilities are documented in an internal Group policy.

The progress of the transition plan is measured through the strategic metrics, which include Scope 1 and 2 emissions and the proportion of battery-electric vehicles (see the “GHG emissions” section as well as the “General information” chapter for further information). These also measure the progress of regenerate+.

Activities with respect to the EU Taxonomy

Detailed information on the EU Taxonomy is provided in the “EU Taxonomy” chapter.

Production capacity and technical equipment

Production capacity and technical equipment that focus on the manufacture of vehicles with internal combustion engines run the risk of losing value and potentially becoming “stranded assets” during the transition to a decarbonized business approach. The share of these investments is secondary compared to the company’s (total) GHG emissions, as it is largely limited to the production of vehicles. The Group counters this risk by focusing its investment program on capacity that serves the transformation of the Group.

Exposure to coal, and oil and gas-related activities

The Volkswagen Group focuses on the manufacture, sale and marketing of motor vehicles and mobility solutions. The company’s main area of economic activity is the manufacture of motor vehicles. The investments in this sector are the only ones classified as material. The analysis of economic activities revealed that activities involving coal, oil, and gas primarily take place in the context of vehicle-related business and are to be attributed to this.

Disclosure on EU Paris-aligned Benchmarks

The exclusion criteria for EU Paris-aligned Benchmarks were reviewed in the context of the Climate Benchmark Regulation, and it was determined that Annex 12.1 does not apply. EU Paris-aligned Benchmarks are indices subject to specific criteria and compiled by providers in line with such criteria in addition to their own. Nor are any exclusions by administrators of EU Paris-aligned Benchmarks pursuant to Annex 12.2 known.

Responsibilities for sustainable implementation

In-depth information on responsibilities is provided in the “Sustainability management” section of the “General information” chapter.

STRATEGY: CLIMATE CHANGE RESILIENCE

The resilience analysis was performed in the reporting year and is based on the results of the climate risk analysis (see the “Process description and results of the climate risk analysis” section) and the materiality assessment (see the “Procedure for identifying material information” section of the “General information” chapter). The critical assumptions made regarding the development of the sector derived from the scenario analysis are also included. The analysis covers the key elements of the business model and focuses on impacts, risks and opportunities identified as material and their main drivers along the value chain. Several aspects were included in the assessment of the Volkswagen Group’s resilience: operational control mechanisms with regard to the material impacts, risks and opportunities, their inclusion in corporate planning and strategy, as well as the capacities required for a more far-reaching alignment of the business model. The time periods correspond to those in the “General information” chapter in the “Notes on use of the ESRS” section, like they were also used in the double materiality assessment. For the long-term time horizon, the focus is on developments up to 2035, the target year for the Group’s future strategy.

A key element in increasing resilience to climate change is the positioning of decarbonization as a cornerstone of the Group’s strategy, as explained above in the “Strategy: Climate change and transition plan” section. In addition, climate change mitigation is firmly anchored in regenerate+ and is measured and managed using relevant metrics, including the decarbonization index (see the “Targets: Climate change” section).

The Konzern-Steuerkreis Flotten-Compliance (KSK FC – Group Steering Committee for Fleet Compliance) is responsible for managing greenhouse gas emissions relating to fleet emissions. It includes experts from all brands and relevant departments. The KSK FC monitors compliance with regulatory requirements and can initiate in particular short- and medium-term actions, for example for sales management, in the event of potential deviations. The regulatory requirements and forecasts are also factored into the medium- and long-term planning process.

The key lever for complying with ambitious fleet limits is the further electrification of the product range (see the “Actions and resources: Climate change” section. The relevant targets are defined with the brands in the planning process, and capital expenditure requirements and necessary adaptations to the production sites are identified over a five-year time horizon. Uncertainties remain with regard to the speed and consistency at which electrification is being driven forward by regulatory actions in the various markets. As a result, a number of different scenarios will be examined during the development of the future Group strategy 2035. Specific courses of action were developed and evaluated on this basis, allowing the Group to adapt flexibly to different variations in the regulatory environment.

In conclusion, the resilience analysis revealed that the material impacts and transition risks are addressed comprehensively, specifically and using an integrated approach. The operational control mechanisms presented and their explicit inclusion in the integrated planning primarily have an impact in the short term, while the adapted future Group strategy will have a medium- to long-term impact.

The Group has sufficient capacity to implement the adjustment measures. In recent years, a double-digit number of sites has already been successfully converted to the production of battery-electric vehicles or the components required for them. This approach serves as a blueprint for the further transformation of the Group’s sites. Implementation of the Group’s emissions reduction strategy, in the context of the decarbonization strategy, requires extensive retraining and upskilling actions, some of which are already being implemented. A strategic approach is in place and regular discussions are held within the Volkswagen Group on training-related topics (see also the “Policies: Employees and non-employees” section in the “Employees and non-employees” chapter).

The Volkswagen Group has access to a range of money market and capital market instruments to cover its capital requirements for the further implementation of its decarbonization strategy (see the “Refinancing” section in the Group management report). The Volkswagen Group’s Green Finance Framework enables the company to refinance EU Taxonomy-aligned capital expenditure, for example for developing and manufacturing all-electric vehicles, through sustainable financial instruments (see also the “Strategy: Climate change and transition plan” section).

The Volkswagen Group has implemented processes and methodologies in supply chain management intended to effectively mitigate short-term supply disruptions. These include an established crisis management structure in Procurement and cross-departmental coordination between Procurement, Quality Assurance, Development, Production, and Logistics. In conjunction with a worldwide supplier network, this may help to compensate for the loss of individual supplier locations in many cases. In the medium to long term, resilience to the effects of climate-related hazards will be a key component of the procurement strategy.

In conclusion, the resilience analysis revealed that the material impacts and transition risks are addressed comprehensively, specifically and using an integrated approach. The ability to adapt the business model to the challenges of climate change is therefore considered to be secured for the short, medium and long term.

Due to the large number of Group sites, it has not yet been possible to conduct a comprehensive analysis of specific countermeasures at site level to assess physical climate risks. This has been done as part of the risk analysis for the EU Taxonomy for the relevant sites. More detailed information on this can be found in the “EU Taxonomy” chapter.

As a general rule, Business Continuity Management requires all operating units to carry out a risk assessment and, if necessary, to develop appropriate contingency plans. Furthermore, the Volkswagen Group continuously and regularly calls on its supply chain to make its own supply chain resilient to climate-related hazards.

Furthermore, the Group has already examined specific exposure to climate hazards and the countermeasures taken at some sites. In the coming years, this will be systematically addressed at all production sites and monitored using milestone plans and checks on effectiveness. Another aspect of resilience is comprehensive coverage of the Group’s own assets with corresponding insurance policies, which are regularly reviewed and adapted to changing risk situations in consultation with insurers for the Group’s own sites.

As a result, it can be assumed that the sites included in detail in the context of the EU Taxonomy are largely resilient to physical climate risks over the observed periods. In light of the existing overarching control mechanisms, the remaining sites and direct upstream value chain are assumed to be basically resilient. This resilience will be further strengthened in the medium term.

With regard to climate-related hazards in the indirect or further upstream supply chain, there are still uncertainties in the short to medium term that will be addressed in the future across the entire automotive and supplier industry.

POLICY: DECARBONIZATION

Decarbonization is a key focal point for the Group and is supported by a corresponding policy. This is based on scientific principles and aims to achieve the goals of the Paris Climate Agreement. That is why we derive our climate strategy from the requirements of the GHG Protocol and the SBTi, among other frameworks. We are committed to the Paris Climate Agreement and have defined corresponding climate change mitigation targets to help limit global warming to 1.5°C. A detailed description of our commitment to the Paris Climate Agreement can be found in the “Strategy: Climate change and transition plan” section. Targets in this context are explained in the “Targets: Climate change” section. The “Introduction to environmental management” chapter specifies the corresponding monitoring processes of the decarbonization policy.

The double materiality assessment identified impacts and risks for the “Climate change” topical standard (see the “Material impacts and risks and their interaction with strategy and business model” section). The identified impacts and risks are analyzed using the risk management process described above and addressed with actions as part of the decarbonization policy. The Group strategy with a focus on decarbonization, regenerate+, the environmental mission statement goTOzero, and our Code of Conduct for Business Partners play a particularly important role in this. A detailed description of the relevant content can be found in the “Introduction to environmental management” chapter.

In addition to other relevant topics, energy and CO₂ are focal points of the Zero Impact Factory strategic vision, under which the Volkswagen Group is pursuing goals including the gradual reduction of the absolute environmental impact of its production sites for passenger cars, light commercial vehicles and components, measured in impact points, by 2050. Moreover, the Volkswagen Group aims to ensure that its production sites meet at least 60% of the internally developed site checklist in 2030. Energy and CO₂ are two specific action areas here.

Finally, in accordance with the Code of Conduct for Business Partners, reducing GHG emissions and using renewable energy sources are sustainability requirements in environmental protection for our business partners.

Climate change mitigation and energy efficiency

The topic of climate change mitigation is part of our Group sustainability strategy regenerate+ and one of the action areas of our environmental mission statement goTOzero. We systematically 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 aim to achieve net carbon neutrality by 2050. A detailed description of the decarbonization levers and corresponding actions can be found in the “Actions and resources: Climate change” section.

In line with our Group sustainability strategy regenerate+, we are focusing on increasing energy efficiency and transitioning to a renewable energy supply to allow us to decarbonize our production sites. Efficient use of energy in production enables cost savings and avoids environmental impacts while maintaining or increasing production performance. Reduced energy requirements have the potential to reduce the negative impacts associated with the provision of energy. A CO₂e-free energy supply is not currently feasible for all aspects of global energy needs, so energy efficiency remains an important basis for effective climate change mitigation and should always be the first lever (a detailed explanation can be found in the “Conversion of energy supply” section).

To this end, the Volkswagen Group set its goal by 2030 to implement energy-efficiency actions at its plants, and thereby to reduce annual energy consumption by 4,900 GWh compared to 2018. A detailed description of these targets can be found in the “Targets: Climate change” section of this chapter.

Climate change adaptation

The current strategic focus in the area of climate change is primarily on decarbonization and the associated climate change mitigation, as well as on energy-related topics. The climate dimension is part of our Group sustainability strategy regenerate+ and one of the action areas of our environmental mission statement goToZero. In the context of the risk assessment of our supply chain and sites, we are working on policies/guidelines for climate change adaptation. These will be expanded and integrated into the strategy process in the future. Countermeasures are defined for high risks on a case-by-case basis (see the “Strategy: Climate change resilience” section for further information).

Use of renewable energies

Going beyond simply reducing GHG emissions is a central pillar of regenerate+. This is closely aligned with ramping up e-mobility and expanding charging networks and renewable energies. In addition to the Volkswagen Group’s increased focus on e-mobility, we are concentrating on integrating renewably generated electricity in the use phase and switching the entire power supply for our plants to renewable energy.

The Charging and Energy area plays a key role in the Volkswagen Group’s decarbonization strategy, with the aim of becoming a leading provider of a smart charging and energy ecosystem. As part of the strategic alignment, the Group is focusing on two key areas: Firstly, sales of battery-electric vehicles are being underpinned by the development of a global fast-charging infrastructure. Secondly, the Group is opening up new business models involving smart charging and energy solutions.

The Volkswagen Group also aims to achieve its production-related targets in terms of renewable energy through conversion of energy supply. The objective is to be procuring 100% of external electricity from carbon-neutral sources at all sites by 2030. In addition, we aim to generate 1,200 GWh of renewable energy per year through our own and local facilities by 2030. These targets are aligned with our environmental mission statement goTOzero and the strategic vision of the Zero Impact Factory.

The Volkswagen Group also has clear targets for decarbonization in the supply chain. One example of this is that in new procurement contracts, suppliers of selected focus components are already contractually obliged to comply with CO₂e limits. A detailed description of this can be found in the “Requirements for decarbonization in the supply chain” section. In our Code of Conduct for Business Partners, we require our business partners to take appropriate actions to reduce air emissions that are harmful to the environment and health, including GHG emissions. With a view to improving the environmental compatibility of products and services, we require our business partners to take proactive steps to reduce GHG emissions along the entire supply chain, such as by increasing their use of carbon-neutral energy sources. On request, business partners that deliver products to the Volkswagen Group provide information to us on the total energy consumption in megawatt hours (MWh) and CO₂e emissions in tons (Scope 1, 2 and 3) at product level. This allows the Volkswagen Group to improve the environmental indicators of our products. We also recommend that our business partners set science- and time-based emission reduction targets as well as targets for the use of renewable energies in line with the Paris Climate Agreement, and to take action to promote decarbonization along the entire value chain. We also recommend that our business partners commit to the Paris Climate Agreement and strive to achieve carbon neutrality by 2050.

TARGETS: CLIMATE CHANGE

Overarching targets

The overarching Umweltentlastung Produktion (UEP – environmental improvement production)” metric includes aspects such as the specific energy consumption and CO₂e emissions needed to produce a vehicle or component. The corresponding metrics are reported in the “Overarching targets and metrics” section of the “Introduction to environmental management” chapter.

There is also a connection to the impact points method through the inclusion of GHG emissions and energy requirements (see the “Overarching targets and metrics” section in the “Introduction to environmental management” chapter). This concerns, for instance, Scope 1 and 2 emissions and the use of fossil, nuclear, and renewable energy.

The site checklist (see the “Overarching targets and metrics” section in the “Introduction to environmental management” chapter) also has a clear link to the topic of climate change through the Energy and CO₂e action area. The main focus is on energy efficiency and decarbonization. Specific site checklist criteria relating to energy efficiency in production include optimization of the electrical base load during non-production periods, or climate control and ventilation based on use. Criteria relating to decarbonization include external procurement and internal generation of renewable energy.

Reduction of Scope 1 and 2 GHG emissions

The Volkswagen Group has set itself the target of reducing absolute GHG emissions in production (Scope 1 and 2) by 50.4% worldwide by 2030 compared with base year 2018. Setting this target is a key milestone on the journey to our goal of net carbon neutrality for the production sites by 2040. The target is in line with the 1.5°C goal of the SBTi, which also validated it. Base year 2018 was defined in the course of certification by the SBTi and based on its requirements. This year is a representative year for production as the structure (type and number of sites) has not changed significantly since then. The baseline value for GHG emissions in 2018 was 9.03 million tons of CO₂e. Starting in 2030, regular updating of the base year is planned in order to reflect changes in the corporate structure. The target is based on the definitions for Scope 1 and Scope 2 emissions under the GHG Protocol and the ESRS. The reduction targets are accounted for using the market-based method and relate to the GHGs CO₂, methane (CH₄), nitrous oxide (N₂O), sulfur hexafluoride (SF₆), hydrofluorocarbons (HFCs), and chlorinated hydrocarbons (CHCs). The data for monitoring the target is collected annually via the EIS in accordance with the internal standard 98000, which is based on the current ESRS specifications. The data is part of the internal Decarbonization Report Production, which is also used for internal target tracking. This objective is aligned with the environmental mission statement goTOzero. For information on stakeholder engagement, see the “General information” chapter.

By the end of 2024, the Volkswagen Group had already reduced absolute GHG emissions (Scope 1 and 2 combined) by 51% compared with 2018 and therefore already met its 2030 target for reducing greenhouse gases 6 years ahead of schedule.

Reduction of Scope 3 GHG emissions in the use phase

The Volkswagen Group aims to reduce CO₂e emissions in the use phase (Scope 3) in the passenger car and light commercial vehicle sector by 30% from 2018 to 2030, which was confirmed by the SBTi as in line with the limitation of global warming to 2°C. This target is aligned with the environmental mission statement goTOzero. The use of battery-electric vehicles plays an important role in achieving this target, in combination with the use of renewable electricity. This is crucial because, to date, around 70% of the CO₂e emissions from a vehicle with a conventional powertrain arise in the use phase (wheel-to-tank and tank-to-wheel). The Volkswagen Group is anticipating continuous growth in e-mobility worldwide, which should help us achieve this target. The 30% reduction in CO₂e emissions in the use phase relates to passenger cars and light commercial vehicles worldwide. The baseline value for emissions in the use phase (Scope 3 category 11) was 412,986,695 tons of CO₂e for 2018 after the recalculation of the base year. This was determined based on the requirements of the SBTi Standard and the GHG Protocol.

The objectives were set in line with the requirements of the SBTi, which develops climate roadmaps for various sectors based on scientific findings, and aims to quantify the ambition of the Paris Climate Agreement and implement it in every sector. These targets are reassessed every five years, with the next audit expected to take place in 2025.

Potential differences in emission reports are also recorded and assessed in line with the GHG Protocol. The GHG Protocol requires the recalculation of corporate emissions in the event of material new findings or if changes occur. A recalculation of the base year of the current climate action targets for the Scope 3 inventory (2018) was carried out in the reporting year for the first time. A further information about the recalculation of the base year can be found in the “CO₂e emissions over the entire life cycle (DCI)” section.

In determining and reviewing internal goals, the Volkswagen Group also considers future developments, such as changes in market requirements and general political and environmental conditions, to work toward ensuring that the emission reduction targets are feasible and constructive even when conditions change. Continuous adjustments to calculation parameters are a contributing factor. Targets are derived and tracked by means of the decarbonization index (DCI). Further information on the parameters is available in the guidelines on compiling the DCI, which is a key indicator for the Volkswagen Group based on life cycle assessment.

Increasing energy efficiency at production sites

The Volkswagen Group has set itself the goal of implementing energy efficiency actions at the global production sites from 2018 to 2030, with the aim of saving a total of 4.9 million MWh of energy annually. A total of 9,113 actions had already been implemented by 2024, achieving annual savings of 3.5 million MWh. In reporting year 2024 alone, actions with a potential saving of approximately 0.5 million MWh were implemented. The data is part of the internal Decarbonization Report Production, which is also used for internal target tracking, among other things. This objective is aligned with the environmental mission statement goTOzero. For information on stakeholder engagement, see the “General information” chapter. The same information applies to all energy targets.

Generating renewable electricity

The Volkswagen Group is actively advancing the energy transition at its own sites and has set itself the goal of generating 1.2 million MWh of electricity per year from renewable sources by 2030. The plan is to generate this energy directly at the Group’s production sites worldwide or in their immediate vicinity. A total of 574,801 MWh of electricity was generated from renewable sources in 2024, which represents significant progress compared with the base year 2020 (200,000 MWh).

Procurement of electricity in production

The Volkswagen Group has set itself the goal of increasing the supply of renewable energy to its plants. It aims to ensure that electricity sourced externally for all sites with the exception of those in China is from 100% renewable sources by 2030. A total of 90.9% of this target was achieved in the base year 2020, and an improvement to 94% had already been achieved by 2024. The goal in China is to supply production sites with 100% carbon-neutral electricity by 2030. This may include electricity from nuclear sources due to the short supply of renewable energy in some provinces of China.

Reduction of carbon emissions in the retail and service network

The Volkswagen Group has also set itself the ambitious target of reducing the carbon footprint of its global dealership and service partner network for all Group brands as part of the initiative to operate a retail and service network with the lowest possible negative environmental impacts. Based on the first measurement, taken in 2020, in which CO₂e emissions amounted to a base value of 3.22 million tons, the carbon footprint is to be reduced by at least 30% by 2030, at least 55% by 2040 and at least 75% by 2050. The reduction is measured in absolute percentages and covers the entire retail network, which includes both own retail and the dealerships and service facilities under contract of all Group brands worldwide.

This target, which is part of the goTOzero Retail concept, is in line with the environmental mission statement goTOzero, which in turn is committed to the Paris Climate Agreement and to aligning its own activities with the global 1.5°C goal.

The carbon footprint is recorded annually directly at the dealerships based on the actual consumption figures of the energy sources. The calculation is supported by in-house carbon emission factors in order to achieve uniform calculation, and is linked to the Volkswagen DCI. This target derivation method was developed with the input of external experts and is based on sources such as the National Energy and Climate Plan (NECP), the International Energy Agency (IEA), the Energy Information Administration (EIA), the China Energy Outlook and Statista.

Data to determine the emissions inventory of dealers is collected in accordance with internal standards and norms and is validated annually to ensure it is up to date. This means that the carbon emissions of the entire retail network are measured annually and the results compared with the defined target pathway. The tracking process also includes a regular reconciliation with legal requirements, in order to make any necessary adjustments.

The Group uses a business intelligence tool to track targets, which follows the annual recording and review of metrics in order to make statements about milestones and deviations. This identified that the absolute GHG emissions in 2022 were reduced by 0.8 million tons of CO₂e compared to 2020. The project is progressing as planned.

Key decarbonization levers to achieve the GHG emission reduction targets

Achieving the Volkswagen Group’s GHG emission reduction targets is based on four primary levers: (1) e-mobility, (2) conversion of energy supply, (3) energy efficiency and (4) decarbonization in the value chain. Further information on this is provided in the “Actions and resources: Climate change” section.

Plans to achieve targets through new technology

Technology is the key to progress in regenerate+. As the Volkswagen Group, we are one of the few companies in the world that is taking the strategic expansion of technology leadership in e-mobility fully into its own hands – from cell and battery research to the development and production of battery-electric vehicles.

The Volkswagen Group aims to use new technologies to contribute to climate-friendly logistics outside the Group. Beyond its own value chain, the Volkswagen Group also wants to advance decarbonization in other industries in conjunction with MAN Energy Solutions. For example, the company supplies the shipping and energy industry with engines that can be powered by climate-neutral fuels or converts diesel or heavy fuel oil engines to future fuels. The product portfolio is rounded out with solutions in areas including carbon capture, utilization and storage; hydrogen; and heat pump technology.

Consideration of climate scenarios with respect to the decarbonization levers

The Volkswagen Group’s climate targets are derived from the SBTi requirements for the transportation sector and are therefore based on factors including the climate scenarios included in those requirements. For example, the SBTi climate scenarios are based on the IEA climate scenarios, as well as other sources. Consequently, the material decarbonization levers were identified based on an analysis of the DCI and the emissions inventory.

The Volkswagen Group also uses model data and assumptions in a variety of contexts to make forward-looking statements. As a member of the IEA Transport project working group, for example, we use the IEA APS, STEPS and NZW scenarios, which are based on the GEC model[1]. The focus is on the 2030 target year, which represents a milestone on the path to the goal of Group net CO₂e neutrality by 2050 and acts as a reference for internal metrics. The scenario analysis focuses on the areas of production, sales and technology, the impact of products, and materials procurement. It shows that a significant reduction in emission intensity per vehicle is needed to achieve the UN climate goals, particularly in view of increasing unit sales.

CO₂e emissions over the entire life cycle (DCI)

In the decarbonization index (DCI), we have a informative instrument that makes our progress and interim results in the area of decarbonization transparent and comprehensible and is recorded using software developed in-house. The methodology is based on the GHG Protocol and is published in its guidance². The DCI measures the CO₂e emissions 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 over 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 battery-electric vehicles is also calculated on the basis of region-specific energy mixes. Vehicle maintenance is not taken into account here. 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 the ISO 14040 and ISO 14044 standards. Scope 3 also includes emissions from other Group entities and regions in some categories (see “Metrics on Scope 3 GHG emissions” section for a detailed description). The DCI calculation methodology is regularly adjusted depending on internal and external requirements, such as new test cycles for fleet emissions. Published DCI values can therefore also be adjusted to the new methodology and changed to facilitate the presentation of a time series that is methodologically consistent.

In the reporting year, the DCI value averaged 48.0 tons of CO₂e per vehicle. This represents a reduction of 0.9 tons of CO₂e per vehicle compared with the previous year (after recalculation). This is primarily due to lower emissions in the supply chain – for example, as a result of a shift in the portfolio toward vehicles in smaller vehicle segments, as well as the China region having a lower share in the overall production volume and due to lower emissions in the use phase as a result of reduced fleet emissions.

The GHG Protocol requires the recalculation of corporate emissions in the event of material new findings or if changes occur. There may be various reasons to remeasure previous years’ emissions to enable a fair comparison with current emissions. These include structural changes in the company, changes in the calculation method, an increase in the precision of emission factors, activity data, and findings regarding significant errors. At the Volkswagen Group, changes to the calculation are decided annually in a set process. A recalculation of the previous year (2023) and the base year of the current climate action targets for the Scope 3 inventory (2018) and for all DCI values since 2018 was carried out in the reporting year for the first time. Changed calculation assumptions were generally taken into account for the recalculation if the expected overall effect on the DCI was more than 0.1 tons of CO₂e per vehicle in the base year of the current climate change mitigation targets (2018).

The recalculation includes the following topics:

• use of WLTP instead of NEDC consumption data to calculate the use phase (since 2021)
• availability of region-specific life cycle assessments for the China market (since 2022)
• use of updated and more precise emission factors for fossil fuels (since 2024)
• correction of a calculation error for vehicle-specific logistics emissions (until 2022)
• use of company-specific cutting rates for steel and aluminum components in production instead of generic data (aluminum since 2022, steel since 2023) and calculation of generic life cycle assessments with 0% recycled aluminum content (since 2022):
• All new vehicle life cycle assessments in the Volkswagen Group are calculated on the basis of the new calculation assumptions. Because life cycle assessments for vehicles based on the previous calculation assumptions are still being used to calculate supply chain emissions, recalculation of the base year value is subject to a phase-in.
• use of specific data for the emissions of Group franchises (in particular car dealerships) instead of generic figures (since 2022)
• inclusion of the Bentley and Lamborghini brands in the DCI (since 2020):
• The effect on the Group decarbonization index is below the threshold of 0.1 tons of CO₂e per vehicle, but a change in the scope of decarbonization index reporting under the rules defined by the Volkswagen Group itself in accordance with the GHG Protocol will in any case lead to a recalculation of emissions in the base year.
• transition of emission factors (since 2024) including inflation adjustment (since 2023) for reporting Scope 3 categories 2, 8 and 13:
  The GHG Protocol allows for historical datapoints and changes in data that are not available to be determined via backcasting in the context of base year recalculation.
  In this case, specific data for categories 13 and 14 is used: In category 14, the DCI effect from 2021 (based on primary data first collected for 2020), and in category 13 the share of the Group’s own leased vehicles (first available for 2022) are applied to the preceding years.
  Backcasting with average values is also used in categories 8 and 13, where individual datapoints for which there is no data for 2018 in line with the current methodology are replaced with the mean values of 2019 to 2023.

Based on the recalculation described in the above list, the chart below shows homogenized performance of the DCI since 2018 in terms of the data basis and calculation method. The DCI values for 2018 and 2019 were calculated using a simplified method based on the Scope 3 inventory. Among other things, this involved changing the data basis for vehicle volumes (primarily for the use phase) in Europe from preliminary production volume to the final number of vehicle registrations, as this corresponds more closely to the volume (sales) to be used in accordance with the GHG Protocol. The values for the past years displayed in the chart differ from the DCI values published in those years due to the calculation adjustments explained in the above list.

DCI [t CO₂e/vehicle]

ACTIONS AND RESOURCES: CLIMATE CHANGE

With regard to the hierarchy of actions described in the transition plan, various decarbonization levers were defined as part of efforts to further decarbonize the Volkswagen Group. The Volkswagen Group has identified actions along these decarbonization levers to mitigate climate change.

The first major decarbonization lever is e-mobility. As technology advances, the automotive industry is rapidly forging ahead with the associated transformation toward e-mobility and digitalization. The market for battery-electric vehicles is expected to continue to grow in the next few years, meaning that the cost-efficient and sustainable production of battery systems and the expansion of the charging infrastructure will be crucial to success. From today’s perspective, around 90% of the decarbonization targeted by the Volkswagen Group can be realized through electrification of the fleet and switching to renewably generated energy. Consistent charging with 100% electricity from renewable sources alone would reduce all CO₂e emissions by almost half compared to the normal EU power mix. The Volkswagen Group’s initiative means that the same amount of electricity generated through renewable sources is fed into the grid as the Volkswagen e-vehicle fleet consumes over its lifetime. It is therefore possible to guarantee that the Volkswagen fleet’s use phase is almost net CO₂e-free.

The Volkswagen Group’s second key decarbonization lever is conversion of energy supply. The Volkswagen Group is increasingly focusing on switching the power supply for its production sites to renewable energy. Moreover, the Volkswagen Group directly supports the expansion of renewable energy on an industrial scale, by planning new wind farms and solar parks in various regions of Europe, among other projects. The energy attribute certificates (EACs) of the installations are obtained for ten years under long-term contracts and provide guarantees of origin for the renewable electricity. In this context, the Volkswagen Group is invested in several solar parks in Germany and Spain, as well as wind farms in Sweden and other countries. The wind farm supported by Volkswagen in northern Sweden, of which the Volkswagen Group has purchased 70% of all EACs, is one of the largest onshore wind farms in Europe.

Increasing energy efficiency is a third decarbonization lever. Energy-efficient vehicle production is therefore a core element of the Zero Impact Factory strategic vision. Various actions are being implemented at production sites to increase energy efficiency, including improvements to ventilation technology, installing LED lighting, load-dependent dryer control and/or the implementation of load-dependent plant control.

Value chain decarbonization is the fourth and final essential lever to achieve the GHG emission reduction targets. We consider the environmental impact our products cause throughout the entire life cycle and at all stages of their value chain. This includes the manufacturing process with the associated extraction of raw materials, material manufacturing, supplier processes and our own production at our sites; the use phase with the resulting vehicle emissions and the necessary supply of charging current and fuel, and ultimately the dismantling of the scrap vehicle at the end of its life cycle.

No decarbonization without e-mobility

The Volkswagen Group cannot achieve decarbonization without a transition to e-mobility. Battery-electric vehicles play a central role here, as they do not cause any local emissions during use and their CO₂e footprint is better throughout their life cycles than comparable vehicles with internal combustion engines (gasoline or diesel). The consistent electrification of our fleet paves the way to net carbon-neutral mobility for our customers, too.

Our battery-electric vehicles are manufactured at 18 sites in Europe, China and the USA. The Modular Electric Drive Matrix (MEB) and Premium Platform Electric (PPE) serve as the technical backbone of the electrification campaign. The e-offensive is to be continued with the modular vehicle platform still under development, Scalable Systems Platform (SSP), with the aim of offering battery-electric vehicle across all brand Groups.

The Volkswagen Group systematically pursued its e-offensive in 2024, and will continue to do so. For instance, the reporting year saw the market launches of further all-electric models under various Group brands including the Volkswagen ID.BUZZ LWB (Long Wheel-Base), the CUPRA Tavascan, the Audi A6 e-tron, the Audi Q6 e-tron, the Porsche Taycan and the Porsche Macan. For information on the measure’s progress, refer to the “Metrics on Scope 3 GHG emissions” section.

We are also working on improving efficiency in many models, such as with the highly efficient APP550 modular electric drive which will first be used in the ID.7. The entire ID. family has also had sustainability upgrades, including the use of recycled materials such as SEAQUAL polyester yarn made from recycled marine plastic. In addition, we are taking the next steps in the area of portfolio transformation by realigning the entire architecture of our vehicles, for example through the Volkswagen Group’s partnership with US battery-electric vehicle manufacturer Rivian. The aim of the partnership is to develop next generation software-defined vehicle (SDV) architectures to be used in future vehicles of both companies. The joint venture builds on Rivian’s software and electrical architecture to facilitate the joint development of best-in-class architectures and software for the SDVs of both partners.

Conversion of energy supply

Climate change mitigation in manufacturing

Volkswagen is also paying particular attention to restructuring its own electricity generation. For example, the conversion of the power plants in Wolfsburg from coal to natural gas for the Wolfsburg North/South cogeneration plant, which commenced in 2018, was completed at the end of 2021. Commissioning of the new gas and steam turbine facilities in the Wolfsburg West cogeneration plant was completed in December 2023. The last coal blocks in the Wolfsburg West cogeneration plant were taken out of service on April 1, 2024.

The Volkswagen Group is pushing ahead with efforts to supply its own plants with electricity from renewable sources. To date, 73 sites worldwide have been supplied with external electricity from 100% renewable energy sources. In 2024, more than half (66.9%) of total global electricity consumption was accounted for by electricity from renewable sources. Compared with the previous year, this is a rise of 10.6%.

Volkswagen is also increasingly focusing on generating renewable energy at its sites and in their immediate vicinity. A total of 574,801 MWh of electricity from renewable sources was generated at the sites in 2024.

Net CO₂e-neutral use phase

The Volkswagen Group is committed to achieving a net CO₂e-neutral use phase for its battery-electric vehicles fleet by expanding the use of renewable energy. It is particularly important to ensure that the use phase of the vehicles is net CO₂e-neutral in the long term, as a large proportion of CO₂e emissions are generated during operation. The use of electricity from renewable sources will therefore play a key role as the emissions are reduced. In the EU, for example, almost half of the EU power mix is of non-renewable origin. The Volkswagen Group offsets the amount of gray electricity (electricity from fossil energy sources) in the power mix of the entire fleet charging processes, as determined by a transparency study. To this end, VW Kraftwerk GmbH, Wolfsburg/Germany concludes long-term (ten-year) purchase agreements for green electricity certificates (EAC) with new renewable energy plants using a balance sheet approach. During the contract period, the green electricity certificates of the plants are withdrawn from the market. This balances the calculated amount of gray electricity share during the fixed use phase of 200,000 km. This ensures almost CO₂e-neutral mobility for our customers in Europe during the use phase.

Energy efficiency

Increasing vehicle efficiency

In addition to the increase in renewable energies, decarbonization is also being driven by the increase in vehicle efficiency. This efficiency is basically controlled and continuously implemented by system options designed to reduce energy consumption during vehicle operation. For example, driving mode selection supports fuel-efficient driving via one option. In addition, there are recommendations for changing gear in the case of manual-transmission vehicles. An battery-electric vehicle route planner is optionally available in the electric ID. models for efficient route planning.

The ID.7 provides one example of Increasing vehicle efficiency:

Intelligent design for improved aerodynamics: Sophisticated aerodynamics make the ID.7 an efficiency champion. The technology reduces energy consumption and enables ranges of up to 700 kilometers (WLTP) and lower charging costs. The streamlined basic design, the low drag coefficient (cd value) of 0.23 and the front surface area of 2.46 m² are the result of close collaboration between design and development. In the case of saloon like the ID.7, about 50 percent of the cd value depends on the body shape. The ID.7 has an almost entirely closed underbody and therefore offers as little air resistance as possible. Newly developed wheel spoilers on the front wheels, side air curtains on the front bumper and flared side skirts are also effective. As the wheels also significantly impact aerodynamics (approximately 30% of the cd vehicle drag is caused by the air flowing around the wheels), we have developed special AERO aluminum wheel rims and aerodynamically efficient tires.

Optimizing the electric motor: An electric motor’s efficiency is a crucial factor affecting its power and the range of the vehicle. This is measured as the ratio of electrical energy used to mechanical power generated. Higher efficiency therefore means less energy is lost in the form of heat and friction. The Volkswagen Group accordingly optimized the electric motor for the ID.7, reducing its carbon footprint while increasing its power.

Energy efficiency in manufacturing

Increasing energy efficiency is an important element of our decarbonization strategy. A total of 9,113 actions had already been implemented by 2024, achieving annual savings of 3.5 million MWh. In reporting year 2024 alone, actions with a potential saving of approximately 0.5 million MWh were implemented, including, for example, improvements to ventilation technology, heat recovery, load-dependent dryer control and/or the implementation of load-dependent plant control.

Decarbonization in the value chain

Battery production capacity

The Volkswagen Group is one of the few automotive manufacturers around the world that is adopting a hands-on approach to the battery as a core e-mobility technology.

The formation of the subsidiary PowerCo SE, Salzgitter/Germany in 2022 integrated the development and production of battery cells into the Group’s own value chain, thus keeping a significant part of the added value of the battery-electric vehicle within the Group.

From the new European battery hub in Salzgitter, this company manages the development of international factory operations, continuous development of cell technology, vertical integration of the value chain and supplies of machinery and equipment to factories.

The battery activities are primarily intended to substantially reduce the complexity and cost of this key technology so as to make battery-electric vehicles attractive and affordable for as many people as possible. They also enable a greater degree of technological independence. The main key concepts of PowerCo are the unified cell, the standard factory concept, and vertical integration of the value chain. In the reporting year, three Group-owned sites for battery cell production were under construction, including the main plant in Salzgitter, Valencia/Spain, and St. Thomas/Canada. All sites are to be consistently operated with electricity from low-carbon sources.

PowerCo strongly committed to the reduction of CO₂e emissions along the entire battery cell production value chain. Strict requirements are placed on suppliers and monitored in the upstream value chain, including the use of certified electricity from renewable sources and compliance with fixed CO₂e limits. Continuous decarbonization actions are also planned in logistics.

PowerCo is pursuing ambitious decarbonization strategies in production, which, in addition to using low-carbon electricity, include for example energy saving measures such as innovative dry coating technologies, and reducing production waste and material consumption.

PowerCo is working toward using low-carbon recycled materials and establishing the recycling of production waste. In collaboration with the Volkswagen Group, PowerCo is also forging ahead with the development of end-of-life battery recycling. Finally, PowerCo is investing in the development of low-carbon future technologies and the use of alternative materials in order to further optimize the carbon footprint of battery cells.

Requirements for decarbonization in the supply chain

In new contracts for high-voltage batteries for the European market, suppliers are already obliged to comply with CO₂e limits. In the case of existing supply contracts for current MEB vehicle projects, suppliers are required to use certified power from renewable sources in their production.

For new vehicle projects such as initial use of the SSP, the Volkswagen Group intends to make CO₂e emissions a technical feature for relevant components. This means that binding CO₂e targets will be set for suppliers within the EU, and they must demonstrate compliance with these at all times. This applies to certain components for the European market. One example is the new SSP mechatronics platform on which the batteries are assigned a CO₂e limit. To achieve these limits, suppliers need to implement actions in their own production processes and upstream supply chains – for example, the use of renewable energy. The Volkswagen Group is using actions of this kind to reduce emissions in its value chain and the carbon footprint of many battery-electric vehicle models.

Volkswagen Group China is also working together with its suppliers on a more sustainable supply chain. For example, together with suppliers and partners, the Group is developing a roadmap for the transition to 100% renewable energies by 2030. To date, more than 500 suppliers have already signed a declaration committing to switching to electricity from renewable energy sources.

Zero Impact Logistics

The actions the Volkswagen Group is taking to achieve net carbon-neutral logistics in the future include, for example, the ongoing shift of shipments from road to rail and almost complete avoidance of CO₂e emissions through the use of green electricity generated from renewable energy sources on the electrified lines in rail transport in Germany and other European countries in collaboration with railway companies. This is an important contribution to reducing GHG emissions in the value chain. However, the prerequisites for this include sufficient available capacity in the railway network infrastructure, particularly in Germany.

There is also a focus on preparing for the use of completely battery-electric trucks and biogenic fuels in the truck network. The Volkswagen Group also transports high-voltage batteries for battery-electric vehicles in an environmentally conscious and efficient manner, for example at the component site in Braunschweig. Here, the batteries are loaded fully automatically onto trains that run on renewable power, which then take them to the plant in Zwickau.

Group Logistics uses thirteen roll-on/roll-off charter ships, two of which are powered by low-pollution liquefied natural gas (LNG) to transport vehicles across the North Atlantic. By the end of 2024, four more LNG-powered car freighters had been gradually introduced on this route, replacing a total of six conventionally powered ships. Group Logistics’ charter ships are more climate-friendly than other LNG-fueled marine engines because the high-pressure technology of the two-stroke engines from MAN Energy Solutions means that virtually no methane escapes. In principle, the dual-fuel engines will also enable non-fossil fuels – such as biogas (bio-LNG), e-gas (synthetic gas) from renewables, or biofuel – to be used in future. This will allow carbon emissions to be reduced even further.

Since 2021, Group Logistics has been continuously operating two charter ships on European sea routes using biofuel, which produces less CO₂e than conventional fossil fuels. The raw material for the biofuel is made up of used cooking oils and fats. These waste and residual materials, originating from industries such as catering and food production, cannot be processed into food or animal feed.

Decarbonization of the dealership networks

Since 2022, the carbon footprint of the entire retail and service network has been recorded annually in category 14 “Franchises” of Scope 3 GHG emissions.

To identify and successfully implement the correct actions for decarbonization and to reduce environmental impacts, we provide the businesses with manuals, training and marketing materials, such as a comprehensive guidebook, online training and videos on customer communication. In addition, the Volkswagen Group has developed a cross-brand certification system for the entire retail network – the goTOzero RETAIL certification. This is based on established systems such as the ISO 14001 standard, building certifications and rating systems and also covers a dealership’s core business. Although goTOzero RETAIL was only introduced in 2023, some dealerships have already achieved gold and platinum certification status. All 50 key retail markets, which alone account for 95% of the worldwide retail and service network, are to progressively be included in the goTOzero RETAIL certification. Currently, the scope of the certification is being expanded to “Full ESG”, with a focus on environmental issues. The success and progress of the goTOzero RETAIL project is demonstrated through regular internal and external communication.

In addition to the certifications, an energy and resource consulting concept has been developed, which is available to all markets and partner companies. The Volkswagen Group strives for maximum energy efficiency possible and the use of renewable energy for new and existing dealership and service buildings to the extent this is economically and technically feasible.

Net carbon-neutral handover of battery-electric vehicles

In 2022, the Volkswagen Group decided to take the voluntary measure of making the delivery of a number of the Group’s battery-electric vehicles to our customers in Europe net carbon neutral. Until the Volkswagen Group can avoid CO₂e emissions entirely and use renewable energies everywhere, we will voluntarily offset the remaining GHG emissions from our supply chain, production and logistics. This applies to MEB vehicles from the Volkswagen Passenger Cars, Volkswagen Commercial Vehicles, Audi, Porsche, SEAT/CUPRA, and Škoda brands in Europe.

In 2024, the offset amount was 6.7 million tons of CO₂e for the Group. This action will continue into 2025 and will end with the 2025 reporting year for the Group. As part of net carbon-neutral delivery, we offset unavoidable emissions from the two life cycle phases of the supply chain or production through climate action projects with high certification standards. These include the Verified Carbon Standard (VCS), the Climate Community and Biodiversity Standards (CCB Standards) and the Gold Standard. In addition to external certification standards, we also assess offsetting projects for quality assurance in accordance with our own criteria.

We consider protection of natural carbon sinks and development of additional carbon sinks to be a vital task in climate change mitigation, which is why the Volkswagen Group is committed to developing its own climate action projects via the joint venture Volkswagen ClimatePartner GmbH. It develops and funds certified climate action projects that serve the recognized offsetting of CO₂e emissions. One key requirement for all projects is that they must meet the highest quality standards. For this reason, the joint venture also takes control of quality assurance. Core aspects include the additionality, accuracy and permanence of the emission reductions, the socioeconomic and environmental benefits for the region, and regular audit by independent third parties. The initial project standards are the VCS and the Gold Standard. The joint venture commenced its operational work in 2022 and is focusing on forest protection projects and nature-based solutions. It is accompanied by a specially established independent project advisory board.

Contribution to climate-friendly logistics and hard-to-abate sectors

Beyond its own value chain, the Volkswagen Group also wants to advance decarbonization in other industries together with the MAN Energy Solutions subsidiary. For example, the company also supplies the global shipping and energy industry with engines that can be powered by more climate-friendly fuels (future fuels) and converts diesel or heavy fuel oil engines to future fuels.

MAN Energy Solution’s portfolio helps customers reduce emissions, use energy more efficiently and deploy environmentally friendly fuel alternatives. With a broad range of key future technologies, industry-leading digitalization services and a wide portfolio of durable products, the company provides sustainable answers to today’s climate challenges.

In addition to climate-friendly engines, the portfolio also includes key technologies such as carbon capture, utilization and storage; heat pumps; and hydrogen production plants.

Charging and energy activities

The Volkswagen Group is one of the driving forces behind e-mobility and is resolutely pressing ahead with the expansion of the charging network worldwide. The Charging and Energy area plays an important role in the Volkswagen Group’s e-mobility strategy as part of the 10-point program, and is developing integrated energy solutions for private and commercial customers worldwide through its own brands. The Volkswagen Group is accelerating the expansion of the charging infrastructure worldwide through the Group brands Electrify America (North America), Elli (Europe) and the CAMS joint venture (China). This remains a key requirement in ramping up e-mobility and decarbonizing individual mobility. The aim is to establish more than 40,000 fast-charging points around the world in the medium term, with more than half of them installed so far. The largest fast-charging networks are already operated in the growth regions of China and the USA/Canada. The Volkswagen Group is increasingly supporting sustainable energy projects and developing new business models relating to energy in order to promote power from renewable sources for charging and the expansion of renewable energy. The aim is to charge battery-electric vehicles with electricity from renewable sources and thereby exploit their full potential.

Europe

As a charging and energy company operating across Europe, the Elli brand has set itself the task of supporting private and commercial clients with intelligent hardware and software solutions in the sustainable energy transition and advancing the decarbonization of society. The Elli brand was formed as a Volkswagen Group subsidiary in 2018 and is now one of the leading providers of a smart charging and energy ecosystem. The product range is broad and includes AC wallboxes and flexible quick-charging stations (Flexpole), public charging services, software solutions, energy trading, and electricity supply.

An example of the products for the interface between energy and mobility is the new unidirectional wallbox Elli Charger 2, which, in conjunction with the private PV system and the Elli brand’s dynamic electricity tariff, reduces charging costs for customers by up to 40%.

The Elli brand also offers the Volkswagen Group’s customers as well as commercial and private clients outside the Group access to Europe’s largest charging network with some 850,000 charge points – via a single app or charging cards. The Selected Partner Network established in 2024 comprises premium charge point operators and has optimal charging stations, a high-performance charging infrastructure with on-site convenience services (for example cafés, restaurants, sanitary facilities) and a high level of operational safety.

In addition, the Volkswagen Group is actively expanding fast charging points in Europe via joint ventures. Together with other manufacturers, the Volkswagen Group established the IONITY joint venture in 2017, which had set up 4,700 fast-charging stations on major highways across Europe by the end of 2024.

The process of decarbonizing society increases the need for storage solutions for regenerative energy, in order to ensure stability and efficiency in the electrical distribution system. Vehicle batteries can act as a key asset and powerbank in this regard. Elli’s medium-term vision for the future is a managed battery network, in which batteries – such as mass storage, battery-electric vehicle, residential or commercial building – can be connected to form a standardized, networked virtual power plant. This future ecosystem will not only support the grid when demand is high, but also provide access to the electricity spot markets, to provide customers with financial incentives to make the timing of their electricity demand more flexible. The aim is also to tap into new profit pools for the Volkswagen Group. In this context, the Elli brand received a license for electricity trading on Europe’s largest electricity exchange (EPEX) back in July 2023 and is marketing the flexibility of the electricity market in the first storage testing center in Kassel (Baunatal).

North America

The Group brand Electrify America is the largest public hyper-fast-charging network in the US. It made a significant contribution to the development of a national network of fast-charging points for communities and highways, and to the increasing introduction of zero-emission vehicles. Electrify America’s fast-charging network has expanded significantly since installation of the first charging station in May 2018. The network now comprises over 1,000 charging stations and more than 4,700 hyper-fast charge points.

Electrify America launched the Electrify America Solar Glow™ 1 solar photovoltaic project in San Bernardino County, California, in August 2023. Electrify America Solar Glow™ 1 is an important milestone in Electrify America’s commitment to reduce the company’s energy carbon footprint. The park has more than 200,000 solar panels and generates an estimated 75 MW at peak capacity, which is comparable to the power drawn by 500 battery-electric vehicles charging at once at an average speed of 150 kilowatts. The solar park is the result of a 15-year virtual power purchase agreement (VPPA) with developer Terra-Gen. Electrify America is the largest open network of DC fast charging points for battery-electric vehicles in the US to enter into a virtual power purchase agreement for new renewable energy generation.

Electrify America Solar Glow™ 1 contributes to the additionality of energy generation from renewable sources.

China

As of December 31, 2024, the CAMS joint venture has installed 1,621 charging stations with over 13,000 charging points in 213 cities in China and they have over 6.6 million registered users. CAMS is also active in the field of energy services. At the beginning of 2024, for example, four carbon-neutral charging stations began operating in Guangdong (China), contributing to decarbonization. In addition, the Volkswagen Group is working with a range of partners on projects to improve the stability of energy supply and promote electricity generation from renewable sources. For example, Volkswagen Group China launched a V1G pilot project with State Grid in the Beijing-Tianjin-Hebei cluster in December 2023 to improve interaction between vehicles and the grid, achieve balance in electricity supply and demand, and help stabilize the power grid.

Dependency on resources for implementation of actions

The sustainable transformation will require extensive investment in digitalization and electrification. Among other things, the digital transformation ensures that actions for climate change mitigation can be implemented. The budget designated for this purpose is also determined by the sustainable transformation, among other factors.

The cost-intensive transformation is also associated with the financing and attractiveness of the Volkswagen Group for investors seeking sustainable investment opportunities. The Volkswagen Group has had a Green Finance Framework for various forms of financing since 2020, such as green bonds, which define the framework for financial instruments geared to sustainability.

In the reporting period, we refinanced taxonomy-aligned capital expenditure from fiscal years 2021 through 2023 based on the Green Finance Framework updated in October 2022 by issuing green bonds in the amount of €1.0 billion.

The Volkswagen Group has issued a total of €10.5 billion in green bonds to refinance capital expenditure for battery-electric vehicles since 2020. In 2022, the Volkswagen Group published a revised Green Finance Framework that was further developed in particular through the integration of the EU Taxonomy. As was the case in the previous Green Finance Framework, the Volkswagen Group continues to focus on the exclusive inclusion of battery-electric vehicles in sustainable financing. Under the updated Green Finance Framework, only taxonomy-aligned investments will be considered. This links our corporate objective of net carbon neutrality by 2050 with our financing strategy. The funds raised under the Green Finance Framework are specifically used to refinance environmentally friendly projects such as e-mobility. This both fulfills the clean transportation category of the Green Bond Principles of the International Capital Market Association (ICMA) and is in line with the Sustainable Development Goals of the United Nations and the European Union. The success of the updated Green Finance Framework has been confirmed by Sustainalytics to comply with the ICMA’s Green Bond Principles and the Green Loan Principles of the Loan Market Association (LMA).

Taxonomy-related CapEx and OpEx

Expanding e-mobility is the most important lever for our transformation. Our actions to expand e-mobility are in line with economic activity 3.3. Manufacture of low-carbon technologies for transport. The relevant disclosure requirements of ESRS E1 paragraph 29 c can be found in the “EU Taxonomy” chapter of the report.

Differences concerning operating expenditure and capital expenditure

The data disclosed under this standard on capital expenditure (CapEx) and operating expenditure (OpEx) is in line with the information reported on CapEx and OpEx in the “EU Taxonomy” chapter. There are therefore no differences to disclose.

METRICS: CLIMATE CHANGE

Group standard 98000 sets out indicators for emissions and energy which are tracked uniformly by all sites worldwide. They include GHG emissions such as carbon dioxide (CO₂), sulfur hexafluoride (SF6), nitrous oxide (N2O), chlorinated hydrocarbons (CHCs) and hydrofluorocarbons (HFCs). The data collected with respect to energy includes generation, purchase and use of fossil, nuclear and renewable energy sources, including the use of combustible materials.

Energy consumption and mix

For the purposes of data collection, the energy consumption and energy mixes of the worldwide production sites are recorded annually. Both self-generated energy and energy procured from external suppliers (purchased electricity) are taken into account. In addition, the renewable and nuclear shares of the energy mix are recorded separately. The relevant portion that comes from non-fuel-based renewable sources such as wind power or photovoltaics is also recorded. The Volkswagen Group’s quality criteria must be observed and appropriate documentation provided when procuring renewable energies.

Quantitative metrics for energy consumption and mix are described in the following (see table):

Contractual instruments for the procurement of renewable electricity

A distinction is made regarding procurement of electricity from renewable sources between bundled and unbundled procurement. Bundled means that the certificates of origin, renewable energy certificates or green electricity certificates are purchased together with the green electricity product (not separately) from a supplier. A distinction is currently made between the following contracts:

• On-site power purchase agreements
• Off-site power purchase agreements
• Other contracts

Energy intensity

Energy intensity is calculated based on the total energy consumption and sales revenue. Sales revenue is taken from the consolidated financial statements, where more detailed information can be found. The energy intensity metric is reported excluding the companies with operational control.

High climate impact sectors to determine energy intensity

All activities within the Volkswagen Group contribute to vehicle production and relate to NACE code C.29.10 (Manufacture of motor vehicles). They are therefore associated with activities in high climate impact sectors. Since all of the Volkswagen Group’s activities are included in the calculation of energy intensity, total energy consumption is used here for the calculation. MAN Energy Solutions is also included in the energy intensity calculation.

Energy generation

Self-generated energy includes energy from plants owned, rented, or leased and operated by the Volkswagen Group (for example, power plants, cogeneration plants, boiler houses.). This also applies to the company’s own energy generation systems operated by third parties.

GHG emissions

Metrics on Scope 1 and Scope 2 GHG emissions

Scope 1 GHG emissions are direct GHG emissions that are generated by the Volkswagen Group through sources it controls itself, such as through the use of fuels at the sites. Direct biogenic CO₂ emissions (Scope 1) are emissions that result from the use of biogenic fuels at the sites. The Verband der Automobilindustrie (VDA – German Association of the Automotive Industry) emission factors are used to calculate the emissions.

Scope 2 GHG emissions are indirect CO₂ emissions from energy generation that are generated as a result of purchasing energy from external power plants, cogeneration plants and boiler houses and released elsewhere. Scope 2 GHG emissions are calculated using both the market-based and location-based methods in accordance with the GHG Protocol. Indirect location-based biogenic CO₂ emissions are emissions that result from the use of biogenic fuels by external energy suppliers (for example generation of electrical energy or heat) and are assessed using local emission factors. The current VDA emission factors are used to calculate the emissions.

Methodologies, assumptions and emission factors used to measure Scope 1 and Scope 2 GHG emissions

The GHG emissions (Scope 1 and 2) of the production sites are calculated annually pursuant to the requirements of the GHG Protocol and the ESRS. Provider-specific factors are applied for market-based CO₂ emission calculation, whereas VDA emission factors are used for location-based measurement.

The total GHG emissions of the site are determined by adding all relevant emissions, each multiplied by their global warming potential. The CO₂ emission factors for energy not generated on site (for example electrical energy, district heating, district cooling) are obtained from or provided by the relevant energy suppliers. The CO₂ emission factors for own consumption of primary energy sources for heat or power generation are calculated from the heating values or calorific values of the fuels and the efficiency of the own generation system.

We use the electricity grid mix of the country in question to calculate the location-based Scope 2 emissions.

Identifying and disclosing material Scope 3 categories

Metrics on Scope 3 GHG emissions

In line with the Scope 3 standard published by the World Business Council for Sustainable Development and the World Resources Institute, we are reporting CO₂e emissions for 13 out of a total of 15 Scope 3 categories in 2024. Category 9 (Downstream transportation and distribution) is included in the reporting on category 4. Additionally, category 10 (Processing of sold products) is included in the reporting on Scope 1 GHG emissions. Category 15 includes emissions from various types of investments and is not reported due to low materiality at Group level. Around 21.4% of all Scope 3 emissions fall under the emission category Purchased goods and services, while 72.7% arise during the use phase (well-to-wheel). The following tables show the Scope 3 emissions of the Volkswagen Group, the TRATON GROUP and MAN Energy Solutions, including notes on methodology for data collection and calculation:

Biogenic Scope 3 GHG emissions at Group level

Biogenic CO₂ is reported for Scope 3 category 11. The data is collected on the basis of the DCI, meaning that the reporting is initially focused on passenger cars and light commercial vehicles. The data on the biofuel proportion and average emission factors is taken from a representative generic database. Efforts are being made to expand the scope of reporting in the coming years to heavy commercial vehicles. In the reporting year, biogenic Scope 3 GHG emissions amounted to 9,653,769 tons of CO₂. No reporting possible for 2023.

Methodologies, assumptions and emission factors used to measure Scope 3 GHG emissions

The Volkswagen Group’s Scope 3 inventory is calculated on an annual basis in accordance with the requirements of the internationally accepted GHG Protocol and the ESRS. This enables the success of the actions to be determined and other areas where action can be taken to be identified. The methodologies and assumptions used for the calculation are documented in the internal manual, and updated annually.

The emission factors used to calculate Scope 3 GHG emissions are taken primarily from a representative generic database. Factors from other sources (for example GHG Protocol) are also used for individual Scope 3 categories.

Material changes and their effect on the comparability of GHG emissions

In its internal manual, the Volkswagen Group states how the Group’s Scope 3 inventory is compiled and updated annually. Year-on-year comparability has already been established for the DCI in recent years. In addition, reference was made to significant changes in how the Scope 3 emissions inventory is complied.

In the past, we disclosed changes in the extent of reporting (coverage), the calculation method or the calculation data basis for Scope 3 GHG emissions in comparison to the preceding annual report. The following material changes apply compared with last year’s reporting: Starting in 2024, the category 7 emissions are based on a calculation that takes into account the global number of employees (direct and indirect) of the Volkswagen Group and region-specific, external, generic parameters for the modal split (distribution of transport by means of transport), mode-specific emission factors, average commuting distances and working days. For categories 2, 8, and 13, the emission factors used have been revised with effect from the 2024 reporting year because the source of the previous emission factors is no longer available. With effect from the 2024 reporting year, the data for category 13 has been revised to exclude emissions for leased vehicles from Group production to avoid double counting, particularly with categories 1 and 11. With effect from the 2024 reporting year, the emission factors have been differentiated by region, where possible, for categories 3 and 5. Updated emission factors for fossil fuels are used to determine the emissions in category 11. The “Targets: Climate change” section explains the material changes in reporting compared with previous years and how these changes affect the outcome. The emissions from the supply chains are currently calculated primarily using secondary data and industry averages. Immaterial changes to this data are not specifically assessed in terms of their impact on the overall outcome.

Reporting periods in the value chain

The Upstream transportation and distribution (category 4), Downstream transportation and distribution (category 9) and Franchises (category 14) areas of the Group report figures from the previous reporting year. This is done for procedural reasons. If there are any relevant changes, these would be reported and transparently disclosed in the following year.

Scope 3 GHG emissions based on specific activities in the value chain

The vehicle model and therefore all materials integrated in a vehicle and their weight are based on the vehicle bill of materials, i.e., on primary data. There is primary data from Tier 1 suppliers for individual hotspot materials or components. The same will apply in future for the battery (cell) production processes required in EU Batteries Regulation Article 7. There is not yet any recognized or standardized method of indicating the proportion of these emissions. Neither an indication as a share of datapoints nor as a share of total GHG emissions is entirely meaningful, because, for example, the proportion of emissions from decarbonized hotspot parts is naturally decreasing.

Total GHG emissions

The total GHG emissions metrics are calculated from the sum of the total emissions of the Scope 1, 2 and 3 categories.

GHG intensity

GHG intensity is calculated from the metrics for total GHG emissions and sales revenue. Sales revenue is taken from the financial report, where you can find more detailed information. The GHG intensity metric is reported excluding the companies with operational control.

GHG removals and GHG mitigation projects

GHG removal and storage

No actions have been implemented for the removal and storage of GHGs in the Group’s own business activities or value chain. If such actions are introduced in the future, we plan to differentiate between technology-based and nature-based solutions. Technology-based solutions should be based on specific counting, weighing and measurement of the GHGs removed from the atmosphere; assumptions, methodologies and frameworks shall not be applied. Nature-based solutions, on the other hand, should be based on assumptions, methodologies and frameworks of major established standards in the carbon market, such as VERRA and Gold Standard.

Metrics on GHG removal and storage

No metrics on GHG removal or storage are reported, as no actions for removing and storing GHGs have yet been implemented in the Group’s own operations or in the value chain.

Use of carbon credits

In line with the hierarchy of actions set out in the transition plan, the offsetting projects enhance our decarbonization strategy and, as explained in the plan, are an important factor in achieving our decarbonization targets.

A carbon-free energy supply is not currently possible for global energy requirements. Energy efficiency therefore remains an important basis for effective climate change mitigation and should always be the first lever.

Ultimately, the remaining energy needs requirements be covered with as much carbon efficiency as possible (second priority lever). This involves reviewing innovative energy concepts, direct integration of renewable energies, and technological changes such as electrification.

In the area of hard-to-abate emissions, the Volkswagen Group is considering using climate action projects to offset them, for example to achieve net CO₂e-neutral production (third priority lever). Emissions are considered to be hard to abate if avoiding them is either not currently technically possible or would be disproportionately expensive and therefore not economically feasible. As part of the net CO₂e-neutral transition, the Volkswagen Group continues to offset unavoidable emissions from the life cycle phases, such as from the supply chain or production, through climate action projects with high certification standards. These include the VCS, the Climate Community and Biodiversity Standards (CCB Standards) and the Gold Standard. In addition to external certification standards, offsetting projects for quality assurance are also assessed in accordance with our own criteria. The Volkswagen Group intends to continue to observe the highest quality and certification standards in carbon offsetting (carbon credits) to achieve the long-term climate targets.

Role of carbon credits as part of the decarbonization strategy

The carbon offsetting approach is used for all emission categories from Scope 1 to Scope 3. Once all actions to increase efficiency and reduce emissions as outlined in our transition plan have been implemented, we intend to offset particularly hard-to-abate emissions through carbon offset projects. This will affect less than 10% of emissions. This is based on the requirements of the SBTi.

If carbon credits are used to achieve decarbonization targets, they are used to ensure net carbon-neutral delivery of the battery-electric vehicles. The only carbon credits we use are those that meet the standards of VERRA and Gold Standard. We did not use carbon credits from any other standards in the reporting year.

Metrics on carbon credits

As a general rule, the carbon credits used by the Volkswagen Group must meet the highest quality standards. For this reason, they are only acquired from certain project types and from appropriately prequalified companies. The Volkswagen Group only accepts certain issuing standards for the carbon credits themselves.

The underlying projects are implemented in accordance with publicly verifiable and scientifically based methodologies. The results of these projects are verified by independent third parties.

Each carbon credit used by the Volkswagen Group represents −1 ton of CO₂e. After purchase, the carbon credit is always transferred to Volkswagen Group accounts and only then used (usually at a later date).

Net zero target taking account of carbon credits

It is the Volkswagen Group’s aim to be a net carbon-neutral company by 2050. However, there is not yet a certification standard for a binding net zero target. This means that there are also no specific targets for the removal and storage of GHG emissions. Nevertheless, the Volkswagen Group has set itself the goal of basing its carbon offsetting actions on the requirements of the SBTi and the GHG Protocol and to limit their share to below 10%. The company will abide by internationally recognized standards in carbon offsetting.

Internal carbon pricing

We do not currently use an internal carbon price in investment decisions. However, we apply an abatement cost approach to support strategic decisions and to calculate and prioritize decarbonization actions in production. This involves relating various GHG emissions to the net present value, resulting in a value in €/tons of CO₂e. This assessment produces an abatement cost curve, from savings per ton of CO₂e (energy efficiency actions) to high costs per ton of CO₂e (use of synthetic fuels). This abatement cost curve helps to prioritize actions and to estimate the total costs of target achievement. However, this approach is not yet used in individual investment decisions.

1 https://www.iea.org/reports/global-energy-and-climate-model/

2 Neef, M., Dettmer, T., Bäuml, G. et al. Decarbonisation Index (DCI): an LCA-based key performance indicator for the automotive industry. Int J Life Cycle Assess 29, 557–577 (2024). https://doi.org/10.1007/s11367-023-02247-w)