For Volkswagen, sustainability means pursuing economic, social and ecological objectives simultaneously and with equal energy. It is our aim to create lasting values, offer good working conditions, and conserve resources and the environment. When it comes to the diesel crisis, we have failed to live up to our own standards in several areas. The irregularities in the handling of emissions tests contradict everything that we stand for. We regret this immensely and are aware that we have let our stakeholders down. We will do everything in our power to prevent incidents of this kind from reoccurring, and are fully committed to re-embracing our standards and winning back public trust. We continue to apply our sustainability concept with the aim of ensuring that opportunities and risks associated with our environmental, social and governance activities are identified as early as possible at every stage of the value creation process. In keeping with this aim, we are determined that our corporate social responsibility activities will have a lasting, positive impact on the Company’s value and reputation.
The automotive world is undergoing a profound transformation, and automated driving, e-mobility and connected vehicle concepts are the dominant trends. Technological changes are influencing customer needs and business models; new competitors are entering the market from other industries; shorter innovation cycles and the establishment of new core competencies are requiring ever more capital; stricter emission standards and increased market volatility are leading to more complex underlying conditions. All this poses new challenges for us as a vehicle manufacturer.
Against this backdrop, in June 2016 the Volkswagen Group Board of Management launched our TOGETHER – Strategy 2025 program for the future, with the full approval of the Supervisory Board. It is our aim to play a decisive role in shaping the mobility not just of today, but of tomorrow as well. This is why we are repositioning our Company with the vision of becoming one of the world’s leading providers of sustainable mobility. Our future program will make the Volkswagen Group more focused, efficient, innovative and sustainable – bringing us closer to our customers and setting us on a steady course of profitable growth.
The Volkswagen Group of the Future
TOGETHER – Strategy 2025
We know that growth can only take place hand in hand with social responsibility and environmental protection. TOGETHER – Strategy 2025 effectively bridges the conceptual gap between sustainability and business objectives. It creates the framework and defines the key building blocks for the future evolution of the Group, with its strong brands, international production sites and skilled, dedicated workforce. The Code of Collaboration formulated as part of our future program is the foundation on which the Group strategy rests. The Code describes how collaboration is to take place within the Group and between individuals in their daily work. Its core values are encapsulated in the terms “open and honest”, “uncomplicated”, “without prejudice”, “on an equal footing” and “for one another”. The change process is complemented by the corresponding strategies of the brands and functions.
The new Group strategy comprises a raft of far-reaching strategic decisions and specific initiatives essentially aimed at safeguarding the Group’s long-term future and generating profitable growth. A total of 16 strategic Group initiatives are assigned to the four key building blocks of the program, which are: comprehensively transforming our core automotive business; establishing a new mobility solutions business; strengthening the Group’s innovative power; and securely funding our investments.
First key building block: transforming our core business
Developing, building and selling vehicles will remain essential for the Volkswagen Group going forward. However, there will be far-reaching and lasting changes to this business. That is why we are profoundly restructuring our core business to face this new era of mobility.
Second key building block: establishing a mobility solutions business
The second key building block of the new Group strategy is the new cross-brand mobility solutions business, in which we are setting up mobility services. In this context, we have established MOIA, a new business unit which will focus on ride hailing. Subsequently, we are aiming to develop or acquire further attractive and profitable services that are tailored to customer requirements, such as robotaxis, carsharing and on-demand transport for the logistics industry. To achieve this, we will rely to a greater extent than previously on partnerships, acquisitions and venture capital investments. Investment selection will be managed centrally so as to generate maximum value for the Group and its brands.
MOIA – Rethinking mobility
The automotive industry is undergoing rapid change. Alongside the traditional automotive business, innovative, digitally connected mobility services promise a high growth dynamic. Together with newly founded company MOIA, Volkswagen is laying the foundations for sustained success in tomorrow’s world of mobility throughout the Group and across all brands. Individual mobility for everyone – this is what MOIA stands for. Convenient, at the touch of a button, at affordable prices and without having to own your own car. As a first step, the app-based ride-hailing business sector shows the greatest potential for MOIA. The Volkswagen Group has already opened the way for new mobility concepts with its stake in Gett, one of the world’s leading ride-hailing providers. Gett app users can already instantly book rides, deliveries and logistics services at the touch of a button in more than 100 cities worldwide. At the same time, MOIA is also focusing on a second major business activity, namely the ride-pooling business. The company’s goal is to set up its own app-based on-demand ride-pooling services – also known as connected commuting. It is aiming for holistic transport solutions making individual and public transport more efficient by avoiding unnecessary individual journeys and optimizing the use of existing road infrastructure. This approach concentrates on transport that takes users beyond one citiy`s borders.
SEDRIC – Automated driving at the touch of a button
In the future, fully automated vehicles will enrich the mobility experience of many people. A mobility concept based on intensively used self-driving vehicles will take up less space, consume less energy, and be safer and more sustainable at the same time. And the concept offers tailor-made mobility for everyone: adults and children, senior citizens and people with physical disabilities, urban residents who do not have their own cars or driving licenses, and visitors to a new city who suddenly decide they want a convenient way to get from A to B.
With SEDRIC (self-driving car), the Volkswagen Group has not only developed a completely new, fully autonomous concept car, but also an integrated mobility concept showing how we will use our roads in the future. A cross-brand ideas platform for the Volkswagen Group, SEDRIC, which features an innovative control system, is giving entirely new meaning to the concept of automated driving. The touch of a button, a verbal command or a smartphone app is enough to summon the self-driving automobile, which comes and takes its passengers conveniently, reliably and safely to their destination.
Third key building block: strengthening innovative power
Both the transformation of our core business and the new mobility solutions business require us to strengthen our traditionally excellent ability to innovate and place it on an even broader footing. To this end, the Volkswagen Group is pushing ahead with the digital transformation of all parts of the Company.
Fourth key building block: secure funding
Becoming one of the world’s leading providers of sustainable mobility calls for substantial capital expenditure. This expenditure is to be funded primarily through efficiency gains across all brands and functions; operational excellence is something that concerns the entire value chain, from product development and sourcing to production and distribution. Additional funds for future investments can also be generated by optimizing the existing portfolio of brands and equity investments.
Goals and key performance indicators of the Group’s strategy
The strategic initiatives describe how we intend to achieve our vision of becoming a world-leading provider of sustainable mobility. For this purpose, we have defined four target dimensions – excited customers, excellent employer, role model for environment, safety and integrity, and competitive profitability – which are designed to help us grow sustainably.
Target dimension: excited customers
This target dimension focuses on the diverse needs of our customers and on tailor-made mobility solutions. We aspire to exceed our customers’ expectations, generating maximum benefit for them. That calls not only for the best products, the most efficient solutions and the best service, but also for flawless quality and an outstanding image. We want to excite our existing customers, win over new ones and retain their loyalty in the long term – because only loyal and faithful customers will recommend us to others.
The strategic KPIs include, for example, the loyalty rate, conquest rate and breakdowns.
Target dimension: excellent employer
Skilled and dedicated employees are one of the keys to sustainable success. We wish to promote their satisfaction and motivation by means of equal opportunities, a modern and attractive working environment, and a forward-looking work organization. An exemplary leadership and corporate culture forms the basis for this, enabling us to retain our core workforce and attract new talent.
The strategic KPIs of this target dimension include the Group’s attractiveness as an employer as determined internally by means of the opinion survey and as perceived externally, as well as the equality index.
Target dimension: role model for the environment, safety and integrity
Every day, we at the Volkswagen Group assume and exercise responsibility in relation to the environment, safety and society. This sense of responsibility informs all our thoughts and actions in equal measure in all the decisions we make.
We pay particular attention to the use of resources and the emissions of our product portfolio as well as those of our locations and plants, with the goal of continuously reducing our carbon footprint and lowering pollutant emissions. Through our innovations and outstanding quality, we offer our customers maximum product safety.
We want to regain and strengthen the trust of our customers and restore the Group’s positive public image. The most important principles in this process include compliance with laws and regulations, the establishment of secure processes, and dealing openly with mistakes so that they can be avoided or rectified in the future. In terms of integrity, Volkswagen aims to become a role model for a modern, transparent and successful enterprise.
The strategic KPIs of this target dimension include the decarbonization index and emissions metrics, as well as compliance, process reliability and an error management culture.
Target dimension: competitive profitability
Investors judge us by whether we are able to meet our obligations as regards interest payments and debt repayments. As equity holders, they expect adequate dividends and a lasting increase in the value of their shares.
We make investments with a view to achieving profitable growth and strengthening our competitiveness, thus keeping the Volkswagen Group on a firm footing and ensuring it remains an attractive investment option.
The goals we have set ourselves are to achieve operational excellence in all business processes and to become the benchmark for the entire industry.
The strategic KPIs are operationalized for internal management purposes: target and actual data are derived from Volkswagen Group figures.
Strategic KPIS – Competitive profitability
|Operating return on sales1||6 %||7 to 8 %|
|Research and development ratio (R&D ratio) in the Automotive Division||7.4 %||~ 6 %|
|Capex/sales revenue in the Automotive Division||6.9 %||~ 6 %|
|Net cash flow in the Automotive Division||8,887 Mio. €||Positive, to allow a distribution ratio of 30%|
|Net liquidity in the Automotive Division||24,522 Mio. €,
|~10% of consolidated sales revenue|
|Return on investment (ROI) in the Automotive Division||-0.2 %||>15 %|
|1 2015 before special items.|
Sustainable MobilityGRI G4-18
Mobility is one of the key conditions for economic growth. The latest challenge is to cater to the growing demand for mobility despite diminishing resources and, in the process, reduce its negative effects on the environment. Holistic mobility concepts have to be efficient, sustainable, customer-oriented and, above all else, designed in such a way that they are accessible anytime and anywhere. We at Volkswagen are researching and developing groundbreaking mobility solutions for our customers that will shape the future in this area. We do not limit our focus to automotive mobility, but take in other modes of transport as well and examine structural issues such as urbanization, urban development and the quality of transport infrastructure. We also take account of demand trends, such as the shared use of vehicles.
It is our goal to provide our customers around the globe with viable, long-term mobility solutions that place equal priority on economic, social and ecological objectives. To offer such solutions, a company must operate sustainably – which means developing sustainable technologies and creating an environment in which they are applied in a sustainable manner. This is our understanding of sustainable mobility.
However, the economic, social and environmental requirements placed on our mobility solutions often contain inherently conflicting goals, as can be seen in some of the examples discussed below:
- Individual mobility solutions facilitate participation in society and individual autonomy. In the future, many people will still want their own cars – despite the continuously increasing availability of innovative mobility concepts such as robotaxis and carsharing. This applies particularly in the growing consumer markets of emerging and developing countries. However, the desire for individual mobility also contributes to increased consumption of natural resources and accelerates the process of human-made climate change.
- The enormous market success of SUVs underscores the attractiveness of Volkswagen products. Fulfilling these existing customer wishes safeguards the economic success of the Volkswagen Group and provides job security to its employees. But the higher fuel consumption of SUVs compared with other vehicle models makes it more difficult for the Volkswagen Group to meet the climate targets it has set.
- Government legislation has made ecological structural change inevitable. Electrification has the potential to transform mobility and makes compliance with carbon emission regulations possible. However, this profound change presents new challenges for existing production methods and requires retraining for employees. At the same time, the shift toward electric mobility and the associated investments in production capacity, like for the manufacturing of innovative battery technology, also generate new employment opportunities.
- But electric mobility also raises new environmental questions, such as how to measure the environmental impact of electric and hybrid vehicles compared with conventional vehicles in terms of the use of mineral resources in production and the recycling of battery cells at the end of the product lifecycle.
- Automated vehicles and new mobility services offer more convenience, boost safety, and encourage further optimization of transport and traffic systems, especially in urban agglomerations. The lines between individual and collective mobility are becoming increasingly blurred. The result is a new competitive environment with completely new players, to which the Volkswagen Group must adapt.
- Connected driving depends on data sharing and big data analysis, but personal data regulations must also be taken into account. For automated mobility to succeed and become broadly accepted, a large number of ethical and legal questions must be answered in areas such as accident prevention.
Identifying, openly addressing and finding solutions to these issues – in collaboration with our stakeholders whenever possible, but at the very least in a spirit of constructive dialog – is essential to the Volkswagen Group’s sustainable growth. Whenever we fail to achieve a balance between economic, social and environmental objectives, long-term risks emerge both for our stakeholders and for the financial success of the Volkswagen Group.
Materiality Analysis and Sustainability Management GRI G4-18, G4-19, G4-20, G4-22, G4-23, G4-24, G4-25, G4-26
Even if the major challenges are known and can be assessed, the resulting demands on the Volkswagen Group are nevertheless subject to constant change and must be reassessed at regular intervals, necessitating ongoing adjustments to our strategic planning. Consequently, within the Volkswagen Group we have several specialized functions engaged in observing megatrends in society, analyzing the overall economic environment, tracking emerging customer trends and continuously benchmarking our products and services against the competition. The results are brought together in a process known as the planning round, which ensures that the important decisions for production, purchasing and sales structures are made on the basis of a ten-year timeline. Another instrument for identifying challenges and expectations and for dealing with changing underlying conditions is the stakeholder dialog, which we cultivate at both Group and market level (see “Stakeholder Management”).
Based on these observations and in light of the widespread societal challenges we face, in 2016 we once again reviewed the identified areas in which the Volkswagen Group can and must make a special contribution – because these are fields where we have a significant impact or where we are particularly well placed to exert influence, and where consequently a great deal is also expected of us.
Origin of the Action Areas for our Sustainability Strategy GRI G4-18, G4-19, G4-24, G4-26
In 2016, two developments played a role in a detailed analysis of the topics of material importance to the Volkswagen Group. Specifically, these were the question of the strategic realignment of the Company under our TOGETHER – Strategy 2025, and the question of handling the repercussions from the diesel crisis.
In practice, our approach to the analysis and identification of significant issues was as follows:
- From global challenges, we derived a list of 16 central action areas in which we need to provide answers. We did this on the basis of the following sources: external studies, industry analyses and our brands’ stakeholder surveys, as well as internal guidelines such as the Group-wide TOGETHER – Strategy 2025 and the individual strategies of our divisions.
- The identification of these action areas was largely based on the findings of three expert workshops held in 2015, addressing topics relating to the economy, the environment and people. One key objective was to develop targets and indicators for issues deemed significant. The findings were incorporated into the corporate restructuring which followed as part of the TOGETHER – Strategy 2025, enabling a systematic examination of non-financial performance indicators.
- Since the creation of the Volkswagen Group’s Corporate Strategy unit in November 2015, information and ideas are shared more closely and intensively between the sustainability and strategy teams. This has included, for example, participation in the Corporate Sustainability Steering Committee and in strategy workshops.
- To ensure that sustainability is implemented as part of the corporate strategy, four workshops were held with sustainability officers from the brands and specialist departments in the first half of 2016. One important result was a clear focus in the topic of decarbonization. This led us to revisit the “climate protection / decarbonization” action area, which was then included in TOGETHER – Strategy 2025 with an indicator (decarbonization index). In addition, activities bundled under “environment and nature conservation” were made more visible in that action area.
- Whereas – in light of the diesel issue – at the 2015 Group CSR Meeting (GCM) we held discussions with representatives of the brands and regions, examining the Group’s sustainability performance based on an analysis of our strengths and weaknesses, at the 2016 GCM we focused completely on TOGETHER – Strategy 2025. This included discussing the significance of the United Nations’ Sustainable Development Goals (SDGs) for the Volkswagen Group and conducting an assessment. The results were explored in depth by the various sustainability committees and have been integrated into the Group’s comprehensive realignment process.
Following these detailed discussions, the overall findings of the materiality process led to the realization that in view of the Group’s size, its potential influence and the associated responsibility, all the issues on the Global Reporting Initiative (GRI) list of sustainability aspects can and must be regarded as “significant” for the Volkswagen Group. The specific measures within the action areas are still being fleshed out in line with the objectives, values and indicators in our TOGETHER – Strategy 2025.
Volkswagen Group's Key Action Areas GRI G4-19, G4-20, G4-21
This representation of the 16 key action areas, broken down into the three dimensions of Economy, People and Environment, is intended to illustrate the factors we focus on in order to be a leading global provider of sustainable mobility. In view of our broad international standing, we have deliberately avoided any prioritization of our action areas. On the one hand, the relevance of the individual areas may vary by region; on the other hand, we do not want to judge, for example, whether the health of more than 625,000 employees worldwide is more important than, for example, resource conservation throughout the vehicle life cycle – or vice versa. As we understand it, sustainable development means taking equal account of economic, environmental and social interests and maintaining an appropriate balance between them.