SUSTAINABILITY REPORT 2018 “ ON DECEMBER 12, 2015, THE PARIS CLIMATE AGREEMENT WAS APPROVED, IN WHICH 196 COUNTRIES HAVE UNDERTAKEN TO KEEP GLOBAL WARMING TO BELOW TWO DEGREES C. THE VOLKSWAGEN GROUP FEELS COMMITTED TO SHARING THIS JOINT RESPONSIBILITY FOR OUR PLANET. ENVIRONMENTAL AND CLIMATE PROTECTION ARE GUIDING PRIN- CIPLES OF OUR ACTIONS.” Dr. Herbert Diess Chairman of the Board of Management of Volkswagen AG STRENGTHENING INTEGRITY AND 01 COMPLIANCE 16 Strategic Approach and Management 16 Integrity: the Foundation of Our Actions CONTENTS 19 Compliant Behavior STRENGTHENING SUSTAINABILITY FOREWORD 02 THROUGHOUT THE GROUP 4 Foreword 24 Strategic Approach and Management 6 The Board of Management 26 Efficient Control thanks to Sustainability Management 8 The Volkswagen Group 27 Checking the Materiality Analysis 11 Goals and Strategies 28 Strategic Stakeholder Management 31 Ratings and Indices 31 Worldwide Social Engagement 32 Active Protection of Human Rights 33 Responsible Supply Chain 36 Effective Controls through Risk Management SHAPING MOBILITY WITH A VIEW 03 TO THE FUTURE 42 Strategic Approach and Management TABLE OF CONTENTS OF TABLE 44 Innovative and Environmentally Friendly Vehicle Technologies 46 Mobility Concepts for a Transport Revolution APPENDIX 48 High Customer Satisfaction in All Business Areas 50 Responsibility for Quality and Safety 74 About this Report 76 About the Nonfinancial Report (NFR) 78 Additional KPIs and Diagrams CREATING TRUST IN ENVIRONMENTAL 88 GRI Content Index 04 PROTECTION 104 Independent Assurance Report 106 Contact Information 54 Strategic Approach and Management 56 Climate Protection through Decarbonization 59 Resource Efficiency in Value Creation 61 Biodiversity and Conservation A detailed description of the sustainability activities of our brands and regions and of the Volkswagen Group’s CSR projects is available at: www.volkswagenag.com > Sustainability > Reporting BEING AN EXCELLENT NAVIGATION 05 EMPLOYER References to sections in the sustainability report 64 Strategic Approach and Management References to websites 66 Employer of Choice 67 Co-determination and Employee Participation References to the Annual Report 68 Qualification in Each Professional Phase References to the nonfinancial report 69 Encouraging Diversity and Equal Opportunities (highlighted in chapter color, see “About this Report”) 71 Healthy and Safe Working Environment 3 FOREWORD Ladies and gentlemen, On December 12, 2015, the Paris Climate Agreement was approved, in which 196 countries have undertaken to keep global warming to below two degrees C. The Volkswagen Group feels committed to sharing this joint responsibility for our planet. Environmental and climate protection are guiding principles of our actions. On the road to emission-free mobility, we are putting all our weight behind the electric car. From today’s perspective, this is the best and, compared to other drive technologies, most efficient choice for reducing CO₂ in transport. By 2025, we will put 50 new electric models on the road. Every fourth car in our range will then be an electric car. For this alone, we will in- vest around €30 billion over the next four years. Our striving for clean mobility will change the face of our factories. Zwickau, Emden and Hanover will be turned into pure-play electric car plants. Together, they will form Europe’s largest e-production network. In China, too, the conversion of the Anting and Foshan plants is in full swing. Production of electric cars will start in North America in 2022. The Volkswagen I.D., which will be launched soon, will be the first vehicle with a CO₂-neutral supply chain and production. It will be the foundation of our electric offensive, in the first step involving around 15 million cars on the basis of our new MEB electric platform. In addi- tion, we are discussing a Group-internal CO₂ levy on power, heating energy and fuel. In this way, we would not only provide incentives for an improved ecological footprint, but also free up funds for important energy initiatives and projects. This type of ecology-based corporate governance is uncharted territory for us. Yet it under- scores how seriously we take our responsibility for people and the natural environment. It is, however, equally true that, to ensure the success of the electric car and to cut CO₂ emissions permanently, there has to be a clear political roadmap – especially for expanding the charg- ing infrastructure and for dealing with regulation. In its first interim report, Volkswagen’s Sustainability Council appreciated the results of our work achieved to date and made suggestions on the development of the Group. Experts pro- viding input from the outside – this also reflects the new self-image of Volkswagen. Through our “Together4Integrity” change program, we want to continue to drive cultural change and elevate our culture, integrity, compliance and risk management initiatives to an equal level with product quality and financial success. 4 We have taken on a considerable challenge – there is no doubt about it. This Sustainability Report 2018 will provide insights into our endeavors. It follows the guidelines of the Global Reporting Initiative, with reference to the Sustainable Development Goals of the United Na- tions. It also represents our Communication on Progress under the United Nations Global Compact and serves as our Nonfinancial Declaration under the German CSR Directive Imple- mentation Act. We look forward to receiving your suggestions and feedback! Dr. Herbert Diess oreword F 5 THE BOARD OF MANAGEMENT OF THE VOLKSWAGEN GROUP Hiltrud Dorothea Werner Integrity and Legal Affairs Dr.-Ing. Herbert Diess Chairman of the Board of Management of Volkswagen AG and Chairman of the Brand Board of Management of Volkswagen Passenger Cars, Volume brand group, China Andreas Renschler Truck & Bus 6 Gunnar Kilian Human Resources Dr. Oliver Blume Chairman of the Board of Management of Dr. Ing. h.c. F. Porsche AG, Sport & Luxury brand group oreword F Frank Witter Finance & IT Dr. Stefan Sommer Components & Procurement Bram Schot Chairman of the Board of Management of AUDI AG, Premium brand group 7 THE VOLKSWAGEN GROUP With 12 brands, the Volkswagen Group – based in Wolfsburg, Ger- shareholdings in accordance with sections 285 and 313 of the Han- many – is one of the world’s leading automobile manufacturers and delsgesetzbuch (HGB – German Commercial Code), which can be the largest in Europe. In 2018, the Group – including Chinese joint accessed at www.volkswagenag.com/ir and is part of the annual fi- ventures – delivered a total of 10,834,012 cars and commercial vehi- nancial statements. cles to customers. Volkswagen AG is a vertically integrated energy company within OUTLINE OF THE LEGAL STRUCTURE OF THE GROUP the meaning of section 3 para. 38 of the Energiewirtschaftsgesetz (EnWG – German Energy Industry Act) and is consequently Volkswagen AG is the parent company of the Volkswagen Group. It subject to the provisions of the EnWG. In the electricity sector, develops vehicles and components for the Group’s brands, but also Volkswagen AG is involved in electricity generation, sales and produces and sells vehicles – in particular passenger cars and light distribution, together with a subsidiary. commercial vehicles – under the Volkswagen Passenger Cars and Volkswagen Commercial Vehicles brands. In its function as parent Volkswagen AG’s Board of Management is the body ultimately company, Volkswagen AG holds direct or indirect interests in AUDI responsible for managing the Group. The Supervisory Board AG, SEAT S.A., ŠKODA AUTO a.s., Dr. Ing. h.c. F. Porsche AG, Scania appoints, monitors and advises the Board of Management, and is AB, MAN SE, Volkswagen Financial Services AG, Volkswagen Bank directly consulted on decisions of fundamental significance for GmbH and a large number of other companies in Germany and the Company. abroad. More detailed disclosures are contained in the list of SHAREHOLDER STRUCTURE EMPLOYEES BY CONTINENT as of December 31, 2018, in % of voting capital as of December 31, 2018, in % German institutional Porsche Automobil investors 2.5 Holding SE 30.8 Africa 1 Germany 44 State of Lower Saxony 11.8 America 9 Asia/Australia 16 Qatar Holding LLC 14.6 Foreign institutional investors 25.3 Private shareholders/ others 15.1 Rest of Europe 30 ORGANIZATIONAL STRUCTURE OF THE GROUP related services. The collaboration between the MAN and Scania commercial vehicle brands is coordinated within the TRATON The Volkswagen Group is one of the leading multibrand groups in GROUP. The commercial vehicles portfolio ranges from pick-ups the automotive industry. The Company’s business activities com- to heavy trucks and buses. prise the Automotive and Financial Services divisions. All brands in the Automotive Division – with the exception of the Volkswagen The Power Engineering Business Area manages business activities Passenger Cars and Volkswagen Commercial Vehicles brands – are involving large-bore diesel engines, turbomachinery, special gear independent legal entities. units, propulsion components and testing systems. The Automotive Division comprises the Passenger Cars, Commer- The activities of the Financial Services Division comprise dealer cial Vehicles and Power Engineering Business Areas. The and customer financing, vehicle leasing, banking and insurance Volks wagen Group’s passenger car brands are mostly consolidated activities as well as fleet management and mobility offerings. in the Passenger Cars Business Area. Activities focus on