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

Employees and non-employees were included in the assessment of significant impacts, in accordance with the ESRS. The employees and non-employees who are or may be affected by activities’ material impacts comprise the following groups: employees, self-employed people, and temporary external personnel.

Employees means anyone with an active employment contract who takes part in the Volkswagen Group’s value creation process, including members of top management, people in the passive phase of partial retirement and vocational trainees. The quantitative disclosures do not include people in dormant employment, such as people on parental leave. Nor do they include employees in academic training, such as interns, student workers, or students studying for a PhD, master’s degree, or bachelor’s degree. Employees are categorized according to different characteristics, such as term of employment and gender distribution.

In addition, another group consists of non-employees, who comprise self-employed people and temporary external personnel. In contrast to non-employees, only employees can exert direct influence in the sense of promoting or mitigating the impacts identified below. For this reason, policies, actions, targets, and stakeholder engagement in relation to employees are described in the following. Where policies exist in relation to non-employees (temporary external personnel and self-employed people) or the involvement of non-employees, these are explicitly described.

The impacts identified by the materiality assessment are concentrated on the Company itself. In addition to the ongoing dialog with employees, for example through workers’ representatives, the materiality assessment process has given the Volkswagen Group an understanding of whether and which groups of employees and non-employees might be more significantly affected by negative impacts.

Impacts in the area of working conditions

The Volkswagen Group’s materiality assessment identified a positive actual and potential impact on employees and non-employees with long-term effect. This impact results from the provision of secure jobs with fair and transparent pay and healthy working conditions. This includes, for example, training programs, health protection, and extensive participation rights. For both employees and non-employees, this can mean a secure income, health, and long-term employment prospects despite changing requirements in the working environment.

In addition, the materiality assessment identified an actual negative impact. This arises if business processes relating to the Group’s working conditions have a negative impact for the individual affected (e.g. in the case of job cuts, restricted freedom of association due to local laws, or unhealthy working conditions). The negative impact is related to isolated incidents. This may mean the loss of their job and a secure income for the individuals concerned and also limited opportunities to represent interests and health restrictions.

Impacts in the area of equal treatment and equal opportunities

In addition to the impacts identified in the area of working conditions, the Volkswagen Group’s materiality assessment identified an actual positive impact on employees and non-employees through the provision of an inclusive working environment and equal treatment of employees and non-employees, including with regard to development opportunities.

This also encompasses the inclusion of persons with disabilities, the promotion of a culture free of discrimination, violence, and harassment, and awareness-raising among employees and non-employees of these topics. For employees and non-employees, this impact is felt through a non-discriminatory approach to the development of potential and the facilitation of development prospects.

Moreover, the materiality assessment also identified an actual negative impact. This is reflected in isolated cases of unequal treatment, including with regard to a shortage of development opportunities due to a lack of or insufficient objective rules on avoiding discriminatory behavior, such as remuneration policies or hiring and promotion processes. The negative impact is related to isolated incidents. Discrimination and unequal treatment can have far-reaching consequences, which may lead to both financial losses and adverse health effects.

Impacts in the area of other work-related rights

In addition, the Volkswagen Group’s materiality assessment identified an actual and potential positive impact on employees and non-employees through the promotion and enforcement of compliance with social and human-rights standards with regard to employees and non-employees (e.g. no child labor or forced labor). The impact is potentially long term.

In addition to the impacts identified for the sustainability report in the context of the double materiality assessment, there are additional personnel risks inherent in the business model. These are described in the “Personnel risks” section in the chapter “Report on Risks and Opportunities” in the Group management report. The actions described below also mitigate the personnel risks mentioned there.

Interaction with strategy and business model

The impacts identified in the materiality assessment have an effect on the Volkswagen Group’s business model and strategies. The consideration of impacts on employees is anchored in the Volkswagen Group’s fundamental corporate values. The Code of Conduct maps out the common set of values for integrity and compliance in the Volkswagen Group and specifies a framework of values for the Group’s strategic direction. An in-depth description of the Code of Conduct is provided under the section “HR Compliance Group policy and Code of Conduct” and in the chapter “Business conduct information”. The balance between the interests of the Company and those of our employees is to be safeguarded by the employee representatives through co-determination processes.

This consideration of the interests of employees has an impact that goes beyond the impacts identified in the short term.

The Volkswagen Group’s sustainability strategy regenerate+ includes the aim of being a socially responsible employer for employees. The strategy describes the path to a sustainable future, focusing on a safe and healthy working environment; a diverse, inclusive, and non-discriminatory culture; attractive jobs; fair wages; and good further training opportunities for the long-term qualification of employees.

In addition to the Group sustainability strategy, the management of impacts on employees is also guided by the Group People Strategy, which is the human resources strategy, for the three brand groups of Core, Progressive and Sport Luxury. The Group strategy describes the guiding principles for the transformation of all employees and their diversity as focus topics. These form the framework for the Group People Strategy.

More detailed information on regenerate+ and the new Group strategy can be found in the “General information” chapter. The Group People Strategy is expanded on in the “Sustainable Value Enhancement” chapter of the Group management report. Implementation of occupational health and safety targets is supported by the Group-wide Safety First strategy. The Volkswagen Group attaches great importance to protecting its employees and creating a safe and healthy working environment in accordance with the applicable international standards. Occupational health and safety are therefore key topics for the Volkswagen Group. The vision of this strategy is to anchor “safety first” as a guiding principle in the actions of all managers and employees. The aim is for all occupational safety processes to be known and applied reliably. All managers and employees are to be informed and trained and act in line with safety requirements. The aim is to ensure the protection and promotion of physical and mental health, taking into account psychosocial risks and their effects. Employees should not suffer accidents when working. The workplaces should therefore be designed with the help of the departments responsible for occupational safety.

The Volkswagen Group plays a role in the material impacts described above through its activities. It uses the actions described in the following paragraphs to promote material positive impacts and respond to the influence of its material negative impacts from the business model, strategy and value chain in the area of employees. These are broadly categorized here, but explained in detail further on in the sections “Actions related to working conditions,” “Actions related to occupational health and safety,” “Actions related to equal treatment and equal opportunities” and “Actions related to other work-related rights”.

With regard to working conditions, the Volkswagen Group wants to strengthen positive impacts through the establishment and ongoing improvement of an occupational health and safety management system at production sites with more than 1,000 employees. This system is not only audited internally but also certified externally. In addition, systematic risk analyses and Group audits of occupational health and safety are conducted in the Group in order to further increase this for employees. The action regarding freedom of association described below enables employees to realize their right to freedom of association in compliance with the laws applicable in the various countries and locations. In addition, digital training for employees is being introduced and gradually expanded so that employees can maintain their long-term employability even when requirements change.

The Volkswagen Group wants to prevent negative impacts relating to working conditions, particularly with regard to business processes that have a negative effect on individual employees, for example, in the case of job cuts – by planning Group-wide plant utilization in the budget planning round. Furthermore, the opinion survey is used to identify and mitigate topics that employees view as particularly critical and to derive actions to improve working conditions. The opinion survey is generally conducted annually but was suspended in the reporting year due to revision.

With regard to equal treatment, the Volkswagen Group wants to strengthen positive impacts by defining actions to create an inclusive working environment and equal treatment of employees. The Group provides the companies with a Group-wide policy to define topics and action areas that must be implemented to promote diversity, equal opportunities, inclusion, and belonging. In addition, the Volkswagen Group uses training and provides work materials to empower managers throughout the Group to create an unbiased working environment and processes geared to equal opportunities. In order to create a direct incentive to comply with diversity targets, the Group management’s remuneration is linked to the diversity index. The Company uses this index to continuously monitor how the diversity of its management is developing.

The Volkswagen Group wants to prevent negative impacts relating to equal treatment by penalizing misconduct and collecting and publishing a statistic on the disclosure of the penalization of misconduct. In addition, a new anti-discrimination rule was created to close gaps in regulation on the avoidance of discrimination in the hiring, remuneration, and promotion process. The Group companies are currently working on introducing this.

With regard to other work-related rights, the Volkswagen Group has strengthened positive impacts by extending a Group-wide process to prevent violations of fundamental human rights in the recruitment process (prohibition of child labor and forced labor).

Due to the positive impact of the promotion and enforcement of compliance with social and human-rights standards (e.g. no child labor or forced labor), any risk of forced labor or child labor in the Volkswagen Group with regard to its activities or the countries, regions, or geographical areas in which the Volkswagen Group operates is essentially mitigated.