Resource use and circular economy

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

Intensification of the closed-loop circulation of materials helps to reduce the negative environmental impact of resource consumption and counteract the shortage of raw materials. This makes it a key sustainability topic for the Volkswagen Group.

Impacts in the area of resource inflows

The materiality assessment identified an actual negative impact in the resource inflows, including resource use topic. The Volkswagen Group believes this is attributable to its current use of primary and non-renewable resources in its own business operations, but is also connected with the resource intensity of the automotive sector, including in the upstream supply chain.

In addition, the materiality assessment identified an actual positive impact, advanced by the use of secondary materials in the Group’s own production and in the supply chain. For one thing, the useful life of resources is being extended. What is more, greenhouse gas emissions are being reduced and supply chains are becoming more resilient, as the use of secondary material increases material availability and creates a second supply chain option. This leads to greater resilience in the supply chain.

Impacts in the area of resource outflows

The Volkswagen Group identified an actual negative impact in the materiality assessment. The Group contributes to the depletion of scarce resources by manufacturing products using non-renewable resources in its own business operations, but also because of the current challenges in recycling and reparability in the downstream value chain.

Yet, the Group also contributes to the circular economy in a variety of ways, reducing resource outflow by promoting the reusability of products and extending the service life of products by offering repair services. In this respect, the materiality assessment also identified an actual and potential long-term positive impact in the Group’s own business operations and in the downstream value chain.

Impacts in the area of waste

In the materiality assessment, the Volkswagen Group identified an actual and a potential long-term negative impact on the scarcity of resources in the area of waste. Waste is generated at all stages of the Group’s value chain, from the mining of raw materials through production and up to the end of the use phase of vehicles.

Financial risks in the area of resource use and circular economy

Three material risks in the area of resource inflows were identified in the materiality assessment. Owing to proposed future statutory obligations to use high-quality plastic recyclates, raw material procurement costs are rising. This squeezes the Volkswagen Group’s margins and profitability because the price increases cannot usually be passed on to customers in full.

The fluctuations and occasional scarcity in the availability of raw materials needed for battery production, as well as the tightening of statutory regulations on the recycling of old batteries, may lead to higher purchase prices or even limit availability (for example of old batteries). This may squeeze the Volkswagen Group’s margins and profitability because the price increases cannot be passed on to customers in full.

Furthermore, as a result of the forthcoming tightening of legislation (Euro 7), it is likely that tires with excessive abrasion which release excessive amounts of microplastics into the environment will no longer be approved for use or that compensation payments will have to be made for such tires. As few tires are currently below the expected limits, this could lead to higher costs. Tires could become significantly more expensive, not only due to increased raw material prices but also as a result of rising demand in connection with current reduced availability.

A material risk in relation to resource outflows was identified in the materiality assessment. Non-compliance with statutory and general requirements in relation to the Group’s own product may result in it not being authorized for market release. The fluctuations and occasional scarcity in the availability of raw materials needed for battery production, as well as the tightening of statutory regulations on the recycling of old batteries, may lead to sales issues. Additionally, challenges such as the limited availability of recycled materials and quality issues with recyclates may prevent the achievement of the proposed regulatory recyclate quota. According to the current draft of the new Directive on end-of-life vehicles, this could result in failure to obtain type approval in the EU. Further regulatory clarification is also required as to how the goal of achieving a circular economy will be governed in future in connection with material bans.

Interaction with strategy and business model

The impacts and risks identified in the materiality assessment have an influence on the Group’s business model, strategy and value chain. The overarching topic of circular economy and resource inflows is strategically anchored in the Group sustainability strategy regenerate+. Key elements are the increasing closed-loop circulation of materials, the introduction of new recycling technologies and the use of secondary materials. The environmental mission statement also focuses on further improving resource efficiency and promoting approaches for reusing and recycling materials. In addition, the topic of resource efficiency is anchored in the Code of Conduct for Business Partners.

The Volkswagen Group responds to the impacts and risks to its business model, strategy and value chain in the area of circular economy and resource inflows by taking the following actions to mitigate negative impacts and risks and strengthen positive impacts:

The identified impacts and the risk related to resource inflows, including resource use, occur in the upstream value chain and in the Group’s own business operations. In the area of resource inflows, including resource use, the use of primary raw materials, for example, will be reduced through the use of recyclates and renewable raw materials, and cross-brand working structures will be developed for a circular and resource-efficient business approach. The impacts and risks identified in connection with resource outflows related to products and services concern both the Group’s own business operations and the downstream value chain. In vehicle development, actions are taken based on reparability and recycling, with plastic components labeled for easy identification and separation by type.

The impacts identified in the area of waste have an effect throughout the value chain. To counteract this, production waste is recycled at the sites in the Group, for example, and a waste management system is implemented with the aim of reducing the amount of waste and recovering unavoidable waste. Waste will also be further minimized by closing loops.

By taking additional actions throughout the entire life cycle of the product and therefore along the value chain, the Volkswagen Group counteracts the impacts and risks identified. These include moving over to new circular business models, which is to be examined and implemented.

POLICY: RESOURCE USE AND CIRCULAR ECONOMY

Resource use and circular economy play key roles in the Group strategy and regenerate+, and are addressed in a corresponding policy.

Impacts and financial effects for the topic Circular economy were identified in the materiality assessment that refer specifically to resource inflows, including resource use and resource outflows related to products and services, as well as waste. The identified impacts and risks are addressed by the resource use and circular economy policy. Key elements are the closed-loop circulation of materials, joint development of recycling technologies, the use of secondary materials, improvements in resource efficiency, and reuse and recycling of materials and components.

The increasing closed-loop circulation of materials helps to reduce the negative environmental impact of resource consumption and counteract the shortage of raw materials. This makes circular economy a key sustainability topic for the Volkswagen Group. At the same time, this development offers many opportunities: it promotes the development of new technologies through innovations in material design, recycling technologies and business models.

Conserving resources, secondary raw materials, sustainable procurement and renewable raw materials

In the nature dimension of regenerate+ , the Volkswagen Group is working to continuously reduce its demand for primary raw materials. The finite nature of natural resources and the social and environmental consequences of mining raw materials make the development of a circular economy a key sustainability topic. The focus here is primarily on conserving resources.

The topic of circular economy is a core element of the environmental mission statement goTOzero, on which the strategic design of this action area is oriented. As part of this mission statement, the Volkswagen Group is setting itself targets including further improving its resource efficiency and promoting reuse and recycling approaches in relation to materials and water. This will be achieved by using recycled material and renewable raw materials as well as by establishing closed loops for materials and water.

Resource efficiency is also addressed in the environmental protection section of the environmental policy. The Volkswagen Group’s ECMS includes processes that support environmentally compatible waste management in production, recycling of waste and use of secondary raw materials.

Other topics that contribute to a circular economy are embedded in the strategic vision of the Zero Impact Factory program. Material efficiency is a focal point here. Production processes must be designed to use and reuse materials efficiently and sustainably, to reduce the volume of waste to a minimum and to recycle the waste created.

The circularity and environmental compatibility of vehicles is included in our thinking from the development stage onwards. The requirements for the development of vehicles and their components are specified in the Volkswagen Group’s environmental standards. One particular example of note here is the Volkswagen Group environmental standard for vehicles, Recycling Requirements, Use of Recyclates, Recyclability Type Approval, which contains recommendations and guidelines on design for circular economy.

Other requirements include the preferred use of recyclates if technically suitable and available throughout the service life, as well as the legally required labeling of plastics in accordance with internationally applicable ISO standards.

The topics of resource efficiency, circular economy and waste management are central components of the Code of Conduct for Business Partners. Business partners are required to take appropriate actions to ensure efficient use of energy, water and raw materials, use of renewable resources and minimal damage to the environment and health. In addition, the Code calls on business partners to take appropriate actions to prevent waste, to reuse resources, to implement recycling, and to dispose of residual waste, chemicals and wastewater in a safe and environmentally friendly manner. Such actions may be taken in the development or production stages, during the product lifespan or recycling at the end of their useful life, and during further activities. Business partners must also comply with international conventions on cross-border movement of hazardous waste (for more information, see section “Actions and resources: resource use and circular economy”). Where technically possible and economically viable, the Volkswagen Group recommends that business partners use secondary materials in their processes. Business partners should know the proportion of recycled content in their products and be able to provide this information. They should also endeavor to establish and promote closed loop systems.

TARGETS: RESOURCE USE AND CIRCULAR ECONOMY

Overarching targets:

The overarching Umweltentlastung Produktion (UEP – Environmental improvement production) metric includes the volume of waste for disposal per vehicle. The UEP target therefore provides an incentive for the sites to reduce the volume of waste.

Moreover, the Impact Points method covers all production waste. The metric assesses the environmental impacts that arise through the transport and handling or disposal of production waste. The overarching impact points target likewise helps to improve waste management by rewarding higher-value processes for waste treatment.

The site checklist has a clear link to circular economy in production through the “material” action area. This includes, for example, implementing closed-loop recycling, achieving zero landfill and completely avoiding disposal of production waste to landfill, as well as substituting disposable packaging with reusable alternatives. The targets set for fulfilling the site checklist provide an incentive for the production sites to increase their resource efficiency and close material cycles.

Increasing the proportion of circular materials in vehicles

The Volkswagen Group aims to be using 40% circular materials in its vehicles from 2040 onwards (excluding China). By increasing its use of renewable, recycled, and reconditioned materials, the Volkswagen Group aims to make a significant contribution to the circular economy, reduce its use of primary raw materials and extend the service life of valuable resources.

The Volkswagen Group is also working hard to meet future statutory targets for improving the sustainability and environmental friendliness of its products. In accordance with the draft regulation on circularity requirements for vehicle design and on disposal of end-of-life vehicles, starting from around 2032 new vehicles must contain a specific share of post-consumer plastic recyclate (PCR), with a corresponding proportion coming from end-of-life vehicles (ELVs).

Another target in accordance with the new Batteries Regulation concerns the battery cells in electric vehicles. From 2031, 6% lithium, 16% cobalt and 6% nickel must come from end-of-live high-voltage batteries or battery production waste.

Sustainable sourcing and use of renewable resources

The Volkswagen Group intends to increase the use of circular materials, with the increasing use of renewable resources playing a key role. The sustainability rating (S-Rating) target can support the sustainable sourcing of resources (for more information, see the “Workers in the value chain” chapter). The S-Rating is used to check the level of compliance with Volkswagen’s sustainability requirements by direct suppliers with a high sustainability risk. We have set ourselves the objective of, in terms of revenue, 95% of our direct suppliers having a positive S-Rating (A or B scores) by 2040. We have set ourselves the objective of, in terms of sales revenue, 95% of our direct suppliers having a positive S-Rating (A or B scores) by 2040. As an intermediate target, we aim to achieve 85% in 2025.

Sustainability requirements for suppliers

In line with the goal of increasing the number of suppliers with environmental certification (see the “Overarching targets and metrics” section in the “Introduction to environmental management” chapter), 95% of the Volkswagen Group’s suppliers that operate a production site with more than 100 employees are to be certified in accordance with the ISO 14001 or EMAS environmental management system by 2040.

Expansion of circular product design

The Volkswagen Group has not yet set measurable outcome-oriented ESRS-related targets for expanding circular product design. The “Circular economy” area generally focuses on the use of circular materials. Vehicles are already developed based on circular criteria with a view to their entire life cycle. Attention is paid to the recyclability of the materials and avoidance of pollutants (for more information see section “Policy: resource use and circular economy” and “Actions and resources: resource use and circular economy”).

Allocating targets to the waste hierarchy

The Volkswagen Group bases its treatment of waste on the waste hierarchy. Avoiding waste has top priority. Unavoidable waste must be subjected to recycling processes of the highest possible quality. The lower levels of the waste hierarchy provide for disposal in the form of incineration and, as the last option, landfilling.

The waste hierarchy is also taken into consideration in the Impact Points method. Waste with lower environmental relevance has lower eco-factors than waste with a potentially high environmental impact. The Impact Points targets therefore provide an incentive to allocate waste to a higher-value recovery operation.

ACTIONS AND RESOURCES: RESOURCE USE AND CIRCULAR ECONOMY

Contribution to a circular economy

After achieving the longest possible service life, material recycling during the vehicle recovery phase is becoming increasingly important. Vehicles already have a long service life; the average age of an end-of-life vehicle is 14 to 20 years according to national authorities in Europe. The initial steps in relation to circular economy concentrated on batteries, steel, aluminum and plastics. The results obtained from this are used to further develop the overall circular economy strategy and to devise new business models. The topic of circular economy is also about strengthening the company’s resilience and minimizing dependencies. The Volkswagen Group achieves this in particular by closing its own material loops.

Cross-divisional and cross-brand working structures have been developed at Group level for managing the topics to be developed. These build on the work of committees including the Group Steering Committee for the Environment and Energy, the Group Steering Committee for Product Recycling and the Sustainability Product Group platform. In addition, information is shared between the employees active in waste management, who meet up regularly within the scope of a working group. The Volkswagen Group will seek to intensify its efforts for a transition to an economically and environmentally sound circular and resource-efficient business approach in the future. To achieve this, it relies on alliances and the implementation of joint projects with various partners, such as suppliers, plant manufacturers, the recycling sector and universities.

Among others, two alliances for sustainable raw material extraction can be highlighted here: the Global Battery Alliance and the Initiative for Responsible Mining Assurance (IRMA). Sustainable use of resources involves extracting these raw materials under fair and humane conditions and using them efficiently. This is why the Volkswagen Group supports the Global Battery Alliance, a partnership of 140+ companies, governmental and non-governmental organizations as well as researchers. Its main goals are socially and environmentally responsible raw material extraction, transition to a circular economy achieved through reuse and recycling, and innovation along the entire value chain. This alliance of companies, mining companies and non-profit organizations works to implement common standards for better conditions in industrial mining – for example, with regard to health and safety in the workplace or environmental protection. The IRMA standards are being gradually integrated into the Volkswagen Group’s own supply chain.

Actions along the entire life cycle

The most important actions to be taken to implement the circular-economy strategic orientation include further clarifying targets and indicators and also realizing circular business models. This applies to the most important components and materials, such as batteries, steel, aluminum and plastics. In addition to the existing metrics (DCI, UEP), the Board of Management adopted a set of metrics for the topic of circular economy in the reporting year. It includes a description of the use of circular materials at vehicle level. This set of metrics will also be used in battery production and will show the progress in this area. There will be reports on the metrics.

To make our contribution to a circular business approach, the Volkswagen Group is continuously stepping up efforts to use material loops in production processes, as recycling is an important means of reducing environmental impact and conserving resources. Material loops are being intensified, for example, by the return of aluminum or through the recycling of waste.

For the Volkswagen Group, recycling begins at the new vehicle development stage. Here it focuses on the recyclability of the materials and avoidance of pollutants. The Group also gives recommendations on the reparability of the materials. For this reason, all components made of plastic are labeled in accordance with international ISO standards so that the plastics can later be identified and separated by type. In addition, the vehicle environmental standard includes design recommendations that enable materials to be more effectively separated from each other after the end of the vehicle’s life. Likewise, all fluids can later be removed from the end-of-life vehicle and many components disassembled.

In its environmental standard for business partners, the Volkswagen Group requires the use of secondary materials obtained from production waste (pre-consumer recyclates) or end-of-life products (post-consumer recyclates) if these meet the same quality standards as primary materials and are available in sufficient quantity over the service life.

Sustainable supply chains

In the area of Group Procurement Sustainability, a comprehensive strategy program was launched in 2022 whose aims include continuously strengthening sustainability. It focuses on the topics of circular economy and climate neutrality, fairness and equality and global management. The first focus topic covers initiatives and projects relating to the topics of decarbonization, the circular economy, resource efficiency, and biodiversity. Additional work focuses include implementing projects and partnerships in the area of the circular economy and reducing CO₂e emissions in the supply chain.

The Volkswagen Group is aware that its suppliers’ business activities can have an impact on people and the environment. To that end, it published the first of its now annual Responsible Raw Materials Reports in 2021. This provides detailed information on the Volkswagen Group’s methodologies and activities in the context of the raw materials due diligence management system.

The Volkswagen Group works continually on responsible supply chains for 18 high-risk raw materials, including battery raw materials and rare earth elements. Since 2022, there has been cooperation with international representatives from industry, government ministries, science and technology in the field of rare earth elements. Specific sustainability criteria are to be determined in cross-industry initiatives and implemented along the supply chain. The same applies to possibilities for auditing. As part of the DRIVE Sustainability Initiative, a risk analysis of human rights and environmental issues was carried out for the rare earth supply chains. Based on a systematic risk analysis, social and environmental risks and corruption along the supply chain will be preventively avoided. The analysis should also help to detect and deal with violations by suppliers and continuously improve their sustainability performance. The Volkswagen Group’s responsible supply chain system (ReSC system) includes elements for this that build on each other.

For example, there have been material specifications for leather since early 2022, with compliance mandatory for all new contract award suppliers since April 2022. Disclosure of the country of origin of the raw product and provision of a leather-specific sustainability certificate – such as Leather Working Group certification – is requested by means of the specifications. In this way, the Volkswagen Group obligates its suppliers to respect animal welfare and ensure responsible production and processing of leather. This includes compliance with strict criteria regarding water consumption and avoiding water contamination in the tanning process, among others.

Leather is one of the 18 materials defined by the Volkswagen Group as high risk. The Sustainable Leather Specifications have been created to work towards environmentally and socially responsible procurement of leather and to minimize the identified risks. The Volkswagen Group therefore requires transparent and responsible raw materials supply chains as a binding prerequisite for all future nominations (global and forward sourcing) of all procured leather, including direct and indirect quantities. Suppliers are requested to adhere to the “Sustainable Leather” Specifications and provide proof of this prior to nomination.

Use of renewable raw materials

To cut down on resource consumption, the Volkswagen Group starts using raw materials from renewable sources from the vehicle design phase onwards. Wherever possible, the Group brands use, for example, the natural fibers flax, cotton, wood and cellulose.

Use of recyclates in vehicles

Using the highest possible proportion of recycled materials is very important for the Volkswagen Group. The Volkswagen Group’s environmental standards also state that recyclates or materials with a recyclate content are to be used preferentially in place of other materials where technically possible. In the ID. family, recyclates can be used in the following components, for example: headliners, fabrics, carpets, seats, door trim panels and decorative inlays. Some of the seat textiles for individual equipment lines are made of up to 100% recycled PET, mostly manufactured from used PET bottles.

The Volkswagen Group is researching a range of promising approaches and implementing them in series production with the aim of continuously reducing its environmental footprint further. It focuses on non-animal and recycled materials for interior equipment. The plan for Volkswagen brand all-electric models is therefore to use non-animal materials as alternatives in the interior as far as possible. For example, alternative materials made of marine plastic or old PET bottles (approximately 63.500 milliliter bottles) are used in the seat covers of the Design and Comfort lines of the ID. Buzz People. The surface material of a seat cover is made of Seaqual® yarn, which contains 10% ocean waste and 90% recycled PES. This saves 32% of CO₂e carbon emissions in manufacture compared to traditional surface materials. The recycled content of seat covers made of ArtVelours Eco® is 71%.

Recycled materials are also used in the ID.7. Recyclates – materials from recycled products – are used for some of the seat upholstery, floor coverings, surfaces and the roof liner of the ID.7. The decorative headliner “Anmut”, the “Dilours” carpet and the floor mats, for example, are made from nearly 100% recycled PET. ArtVelours Eco consists of 71% recycled material made from PET bottles and used T-shirts. Highlights in the interior include – depending on equipment – ArtTex imitation leather and the microfiber material ArtVelours Eco, used for the center console and the interior door paneling. Both materials look just as classy as leather and have a similar feel. Bio-based plasticizers are used, which is an important step towards increased sustainability.

In-house expertise in battery recycling and conserving resources

The Volkswagen Group has been heavily involved with research, development and validation of battery recycling processes, concepts and strategies since 2009. The Group is currently exploring strategic partnerships with numerous players in the battery value chain to comprehensively close the loop for the Group. The Volkswagen Group opened its first pilot facility for recycling high-voltage batteries at the Salzgitter site in early 2021. The objective is to develop industrialized recovery of valuable raw materials such as lithium, nickel, manganese and cobalt in a closed loop and also of aluminum, copper and plastic. Additionally, various concepts for discharging and dismantling batteries are being developed, alongside investigations into the further recyclability of battery materials. The facility has been initially designed to recycle up to 3,600 battery systems per year in pilot operation. The long-term goal is to develop a closed material loop for high-voltage batteries to support the provision of the Group’s own supply chains with the most sustainable raw materials possible.

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 – from the procurement of raw materials all the way through to recycling. The PowerCo cell factories play a key role in this ambition, and will be designed to maximize material use within production through close-to-production recycling of production waste. PowerCo is also planning the systematic use of recyclates and, in collaboration with the Volkswagen Group, is forging ahead with the development of end-of-life battery recycling.

In the reporting year, three Group-owned sites for battery cell production were under construction, including the main plant in Salzgitter/Germany, Valencia in Spain and St. Thomas in Canada. In addition, each factory will use electricity generated with low CO₂ emissions and be designed for future closed-loop recycling, i.e. recycling as part of a circular economy. The circular economy will first be implemented for NMP and cathode active materials.

To date, tools for engine production have been processed at the center of excellence for tools at the Salzgitter site to make them suitable to return to use. The existing expertise in production tool preparation is also to be applied to battery cell manufacture in the future.

Along with efforts to recycle batteries, other solutions for conserving resources are also being worked on, for example in the ID.7. Intelligent and resource-saving solutions for electric car batteries are currently in development.

Aluminum closed loop

The Aluminum Closed Loop project, launched at the Audi plant in Neckarsulm/Germany in 2017, is the first closed loop for aluminum to be implemented across company boundaries. The waste from aluminum sheet-metal parts from the press shop is sent directly back to the suppliers, who recycle the waste and use it to produce new material that Audi then uses again in the press shop. Compared with using primary aluminum, recycling aluminum waste can save up to 95% of the energy used in manufacturing. In this way, Audi continuously avoids CO₂e emissions and reduces the quantity of primary raw materials needed. In addition to the Audi plants in Ingolstadt/Germany, Neckarsulm/Germany and Győr/Hungary and the multibrand plant in Bratislava/Slovakia, the Audi Münchsmünster and Volkswagen Emden sites in Germany have been part of the aluminum closed loop process since 2024.

Internal and external recycling of production waste

Waste with recyclable content generated in production is increasingly being incorporated into closed-loop processes. For example, all aluminum chips generated at the Kassel/Germany site are returned to the casting process in the foundry. Almost 15 tons of aluminum chips are produced in Kassel each day and melted down in the plant. According to forecasts, this alternative to regular aluminum production using primary raw material reduces energy requirements by up to 2,000 MWh per year and reduces CO₂ emissions by around 800 tons per year.

In addition, at the Volkswagen plant in Wolfsburg, plastic waste produced in the process of manufacturing gasoline tanks (co-extrusion) is treated and used for the production of diesel tanks (mono-extrusion). As a result, over 400 tons of material that would otherwise have been disposed of was reused in plastic tanks in 2023.

The Volkswagen Group aims to optimize the recycling processes even further by being actively involved in publicly funded research projects on recycling technologies. These projects are carried out in collaboration with partners such as universities and research institutions throughout Germany and aim to improve and automate individual process steps. This relates, for example, to dismantling batteries or recycling raw materials multiple times.

One example of this is the research consortium HVBatCycle. The consortium, which was created in 2023, is funded by the German Federal Ministry for Economic Affairs and Climate Action (BMWK) and is set to operate for three years. Under the leadership of the Volkswagen Group, the consortium wants to prove that the most valuable components of traction batteries can be recovered and reused several times in succession through recycling. The aim is to permanently recover valuable materials, contributing to more sustainability and greater security of supply.

The Open Hybrid LabFactory (OHLF) in Wolfsburg is also involved in researching automotive material loops. Funded by the German Federal Ministry of Education and Research (BMBF), the research campus provides a platform for dialog between science and industry in order to accelerate research activities and their implementation in mass production. The OHLF’s work is divided into four fields of research: design for circular economy, processes for reverse production, circular material concepts and overall system analyses and design.

Waste management

The Volkswagen Group’s approach to waste disposal in production aims to continuously reduce the quantity of waste we produce, to reuse unavoidable waste to a high standard and to close loops. The focus is on avoiding waste creation by optimizing production and auxiliary processes and increasing material utilization levels (material efficiency), prioritizing the reuse of waste and reducing the quantity of waste for disposal. Digital waste management systems are increasingly being used to optimize the management of waste. They make it easier to control waste management processes and facilitate state control of the disposal of hazardous waste.

The Procurement Division has established a Group-wide system for recovering waste materials that can generate income, for example, paper, plastics, wood, electronic components and metal. Efforts to avoid plastic waste have been stepped up with the Zero Plastic Waste project. This includes recycling plastic waste in diesel tank production.

Waste management also forms part of the Code of Conduct for Business Partners. This sets out that business partners must take appropriate actions to prevent waste, to reuse resources, to implement recycling, and to dispose of residual waste, chemicals and wastewater in a safe and environmentally friendly manner. Such actions may be taken in the development or production stages, during product use and recycling at the end of their useful life, and during other activities. In particular, our business partners must also comply with national and international conventions on waste, in particular the 1989 Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and their Disposal, and other applicable conventions and legislation at national and international level.

METRICS: RESOURCE USE AND CIRCULAR ECONOMY

Resource inflows

Material and product inflows

A vehicle essentially comprises around 10,000 individual parts. A particular focus can be placed on the following components with a view to raw material criticality, supply chain risk and relevance to sustainability (see illustration): steering wheels, aluminum wheel rims, aluminum exterior parts, high-voltage batteries, permanent magnets, generators, wiring harnesses, brake discs, semiconductor-relevant material groups (e.g. infotainment systems, control modules, radios) catalytic converters and seat modules (foam and covers). Every year, the Volkswagen Group purchases a wide range of raw materials, components and other goods.

Critical raw materials and rare earths in operations and the value chain

As already mentioned in section “Actions and resources: resource use and circular economy”, the Volkswagen Group uses raw materials from renewable sources to reduce resource consumption. Wherever possible, the Group brands use, for example, the natural fibers flax, cotton, wood and cellulose. Such materials can be used if they comply with all the technical requirements and perform better than conventional materials over the life cycle.

Electric drives are an important step toward low-emission mobility and so help to protect the climate. At the same time, their production results in different components entering circulation from the production of conventional vehicles, for example, high-voltage batteries. The raw materials these contain are valuable and it is important for them to remain in circulation for many reasons. Using battery raw materials multiple times helps the Volkswagen Group to reduce its carbon footprint, for example.

The Volkswagen Group wants to live up to its responsibility in the procurement of raw materials in the automotive industry. To that end, it published the first of its now annual Responsible Raw Materials Reports in 2021. In total, the management system currently covers 18 raw materials. These include the battery raw materials cobalt, lithium, nickel and graphite, the conflict minerals tin, tungsten, tantalum and gold (3TG), and aluminum, copper, leather, mica, steel, natural rubber, platinum group metals, and rare earths, and the newly added raw materials cotton and magnesium.

In terms of procurement, the following raw materials are currently purchased directly: steel, platinum group metals (PGMs), aluminum and plastics (both for in-house production only) and leather. Given the increasing complexity of the supply chains and the geopolitical and material availability challenges of recent years, it is necessary to expand the range of raw materials purchased directly and to define an efficient Group-wide material protection strategy. The plan is to develop a Group raw material procurement process to secure critical and strategic raw materials (contained in focal components). Strategic support is to be provided for nine different raw material groups. The raw material groups are magnesium, rare earth elements, aluminum, semiconductor materials (gallium, germanium, silicon and indium), tungsten, titanium, recycled materials (plastics and aluminum), copper, plastics (primary production) and PGMs. The definition of these nine focal raw material groups is based on an internal criticality analysis that applies six different criteria and their commercial relevance. The results were then compared with the Critical Raw Materials List from the EU Critical Raw Materials Act and confirmed accordingly (see illustration).

Water in operations and the value chain

The supply chain, in particular obtaining and processing raw materials, is responsible for the majority of our water use. Through the Code of Conduct for Business Partners, the Volkswagen Group exerts influence on the supply chain and requires that its suppliers do not cause water pollution or excessive water consumption that could lead to significant harm to the natural basis for food and drinking water or human health. Approximately 42.3% (around 14.5 million m³) of Group-wide water withdrawal is attributable to sites in areas of high to extreme water stress (for further information on water management see the “Actions and resources: water” section of the “Water” chapter).

New production sites in the reporting year

No new production sites were opened in the reporting year, so there were therefore no significant resource inflows in this respect.

Methodology used to record quantitative resource inflows based on reference vehicle approach

The resource inflows for the vehicle-related business for reporting year 2024 were calculated using a reference vehicle/output-based approach. This involves a back-calculation from the materials installed in the vehicle to the materials flowing into the vehicle to determine the resource inflows in quantitative terms. The Tiguan and ID.4 passenger car models were selected as sample reference vehicles. They were among the most produced vehicles in the reporting year.

In terms of vehicle configuration, the most representative configurations based on sales data were used. The maximum vehicle weight was selected based on conservative assumptions.

The waste material created in production was not included for reporting year 2024 as insufficient data was available.

The reference models are weighted based on production figures in the reporting year and extrapolated based on the ratio of production of internal combustion engine models to battery-electric vehicle models to determine the resource inflow metrics.

Information about the resource inflows of other Volkswagen Group brands (Porsche and TRATON GROUP) can be found at the end of this chapter. There is no reporting on quantitative resource inflows for MAN Energy Solutions in 2024.

Methodology used to record technical and biological materials and products

The reference vehicle approach is also used to calculate technical and biological materials and products. The materials are recorded in line with the VDA 231-106 material classification. VDA categories 1 to 9 comprise technical materials such as steel and polymer materials (with the exception of category 7.1, which comprises biological materials such as leather and wood).

Methodology used to record sustainably sourced biological materials

The reference vehicle approach described above is also used to calculate biological materials that were sustainably sourced. The following definition applies to determining biological materials that were sustainably sourced: a biological material is deemed to be sustainably sourced if it is certified under a recognized and widespread certification system. Leather is considered to be sustainably sourced at the Volkswagen Group in line with this definition. In accordance with the “Sustainable leather specification document”, suppliers must have a certificate from the Leather Working Group (LWG) or comparable certification from a similar organization.

Biological materials are determined pursuant to VDA category 7.1 “modified organic natural materials”, which include organic natural materials such as wood and cotton fleece in addition to leather. To identify the leather within VDA category 7.1, a structured analysis was carried out for weight-relevant parts per vehicle so as to list all materials that indicate a leather material based on their pure substances (for example, collagen). These pure substances were only identified for the Tiguan; there is no leather in the ID.4.

There are no biofuels used for non-energy purposes with respect to our product.

Methodology used to record shares of secondary materials

The reference vehicle approach is used to calculate the proportion of secondary materials flowing in. The materials are recorded in line with the VDA 231-106 material classification.

The Volkswagen Group has developed a standardized process to calculate the share of secondary materials in vehicles. Essentially, the objective is to determine the proportion of secondary materials in accordance with DIN EN ISO 14021:2012. This process follows an internal work instruction which has been externally audited. A system-based method is used to determine the share of secondary materials. In VDA categories 1 to 3, the proportion of secondary materials is determined based on VDA data, and in categories 4 to 9, based on supplier data. The resulting proportion of secondary materials in the vehicle is presented as a from/to range. The results reflect the data available at the time the data is collected.

Packaging is also significant in resource inflows in relation to the product. In this context, the vehicle is considered the product. Accessories or other materials are not included. Packaging within the meaning of the ESRS definition comprises materials passed on to the user or consumer. Although the Volkswagen Group does use packaging materials to transport vehicles to dealerships, they are removed prior to handing over the vehicles to users and consumers. Therefore, the transport protection materials pursuant to the ESRS definition are not to be understood as packaging and are not included in the report.

Avoidance of double counting in reuse and recycling

No reused components are currently used in production, so double counting of reused and recycled components can be ruled out.

Methodology used to record quantitative resource inflows of the Porsche AG Group

To determine the total material consumption for the vehicles produced, the percentage-based material composition is evaluated for each model series for a representative vehicle. The evaluation categories are taken from VDA 231-106 “Material classification in motor vehicle construction: Structure and nomenclature”. Finally, the total number of vehicles produced and the average weight per model series can be used to determine higher-level totals for material consumption per material group. Leather is the most relevant biological material in Porsche vehicles. It was not possible to collect data on the proportion of secondary materials for the vehicles produced in the Porsche AG Group for the 2024 reporting year.

Methodology used to record quantitative resource inflows of the TRATON GROUP

Vehicles’ total weight is calculated either based on supplier data on the weight of the parts or by directly weighing the vehicles. To calculate the total value, the weight data for each product group is averaged and multiplied by the production volume. The total weight of the products is divided into material groups and the corresponding proportion of secondary materials is applied.

Resource outflows

Group standard 98000 defines indicators for waste that are to be collected uniformly at all sites worldwide. This includes both production waste and non-production-specific waste.

The site checklist also describes voluntary criteria for the handling of waste. With regard to waste disposal, this includes waste disposal audits for waste streams, a ban on landfilling of production-specific waste and quotas for the maximum proportion of disposal waste in production. With regard to packaging and disposable products, criteria such as the substitution of disposable packaging with reusable alternatives or the recycling of packaging materials were defined.

Material and product outflows

Activities focus on the development of vehicles, engines, motors, vehicle software and batteries, the production and sale of passenger cars and light commercial vehicles, and the genuine parts business. The product portfolio ranges from compact cars to luxury vehicles and also includes motorcycles, and is supplemented by mobility solutions. The Commercial Vehicles Business Area primarily comprises the development of vehicles and engines, motors, the production and sale of trucks and buses, the genuine parts business and related services. The commercial vehicles portfolio ranges from light vans to heavy trucks and buses.

When new vehicles are being developed, attention is paid to the recyclability of the required materials and avoiding pollutants in order to make a contribution to a circular economy. Under the current European Directive on end-of-life vehicles, passenger cars and light commercial vehicles must be 85% recyclable and 95% recoverable at end of life. All Volkswagen Group vehicles registered in Europe comply with this law.

In addition, the Group standard on recycling sets out requirements relating to the recyclability of vehicles, including design recommendations that enable materials to be more effectively separated from each other after the end of the vehicle’s life. Another example is the labeling of all components made of plastic in accordance with international ISO standards so that they can later be identified and separated by type.

Vehicles already have a long service life: The average age of an end-of-life vehicle in Europe is 14 to 20 years according to national authorities. This useful life helps to minimize the consumption of resources and energy and provide extended producer responsibility with a circular business approach in mind.

Sector comparison of product service lives

Mileage of 200,000 km is assumed for passenger cars. This is a standard figure used by the Volkswagen Group and various other car manufacturers which applies the life cycle assessment. This figure was also confirmed in a scientific study by Weymar and Finkbeiner (2016), which involved statistical analysis of different data sets, including from the Kraftfahrt-Bundesamt (KBA – German Federal Motor Transport Authority), of a sample of more than 800,000 vehicles.

TRATON GROUP vehicles are constructed and built to be operable for a long period of time. Their longevity is underpinned by regular maintenance and repair or through replacement of defective parts. However, there is currently no industry-wide standard or average method for calculating the service life of heavy commercial vehicles.

Reparability

The Volkswagen Group’s focus on high quality with a low need for repair and good reparability is aimed at ensuring a long service life for the vehicles during the use phase and is therefore an important contribution to resource efficiency.

Availability of replacement parts

A network of some 2,000 service facilities support repair work on Volkswagen Group vehicles in Germany. The service experts are equipped with cutting-edge technology and special tools in order to ensure efficient and high-quality repairs.

The Volkswagen Group offers its customers high availability of parts, delivering these as quickly as possible. This enables the service facilities to provide repairs and services quickly. Automatic delivery of quick-turn parts ensures that the Volkswagen dealer and service facility network can always guarantee a direct and prompt supply.

Repair time

The design of vehicles enables fast and comprehensive reparability that is highly adaptable to the cause of the damage. For instance, according to the repair manual, the headlight of the Tiguan model year 2025 can be replaced in 110 time units (66 minutes). In cases of minor crash damage, the highly complex and expensive LED headlights are not generally affected, so replacement of the plastic headlight base is sufficient. This alternative repair solution involves a separate working position in addition to the inexpensive headlight bracket. Furthermore, this customer-centric repair solution is sustainable and reduces the cost of replacement parts and the working time compared to replacing the entire headlight.

With respect to high-voltage batteries, the professional service centers and the damage assessors from insurance companies are also provided with a damage assessment checklist for all battery components. In the event of an accident repair, this ensures that reusable components can remain in the vehicle, where environmentally and economically viable, and that only the damaged components are replaced. In such cases, the dealer is provided with extensive workshop information including the necessary repair times.

Costs

The Volkswagen Group offers a comprehensive range of services, with service reflecting the vehicle’s current value and high replacement part quality, enabling more cost-effective repairs. It includes, for example, the Volkswagen Economy Service for vehicles older than four years, which is offered to customers in Germany. This underscores the company’s objective of reducing overall costs for vehicle owners.

Proportion of recyclable content in products

Under the European Directive on end-of-life vehicles, passenger cars (M1) and light commercial vehicles (N1) must be 85% recyclable and 95% recoverable at end of life. All Volkswagen Group vehicles registered in Europe comply with these standards.

The recycling and reuse rates are calculated based on ISO 22628 (Road vehicles – Recyclability and recoverability – Calculation method). The rates are calculated in an internal IT system and based on the material data sheets of the components and materials used.

For information on packaging, refer to the section “Methodology used to record shares of secondary materials”.

Relevant waste streams and materials present in waste

As an automotive manufacturer, production-specific waste streams are of particular significance to the Volkswagen Group. The majority is attributable to scrap metal comprising chips, sheet stamping waste, castings and other metal debris. The composition of scrap metal varies based on the production process and the materials used. For example, scrap steel predominates in vehicle body production, whereas the manufacture of engines and transmissions creates mainly scrap aluminum.

Large quantities of waste containing plastic are also generated, such as from injection molding, extrusion and mechanical processing of interior components, bumpers and other structural vehicle parts. The content of this waste is very varied and comprises mainly polypropylene, polyethylene, polyurethane, and composite materials.

Paint sludge generated from painting vehicles represents another important waste stream. Its composition depends on the type of paint used and may include solvents, pigments, resins, fillers, and additives. The delivery of components also involves paper, cardboard, and plastic packaging materials. The final type of waste is hazardous waste, which is generated from processes including chemical surface treatment and coating of body parts, replacing used oils and lubricants, and the use of cleaning agents and solvents.

Methodology for calculating the waste generated

The volumes of all types of waste generated must be reported. This necessitates determining the masses of waste that leave the company’s plants or are disposed of in the plants’ own disposal facilities (e.g. landfills or incinerators). The total volume of waste also includes waste that is prepared for reuse, recycled, recovered in some other way, incinerated, landfilled or otherwise disposed of. Waste is to be recorded by weighing or calculating the unit weights.

For more information on recording environmental data, see the “Overarching targets and metrics” section in the “Introduction to environmental management” chapter.