Volkswagen AG

From 2021, the annual bonus will include an Environmental, Social, and Governance multiplier. The environmental element is calculated using Volkswagen’s Decarbonization Index (DCI). The DCI is calculated based on the CO2 emissions over the life cycle of passenger cars and light commercial vehicles. Volkswagen has four members of the board that have expertise in climate change. With 27 companies being identified as having no expertise and two others having just one expert at the board level, Volkswagen serves as a best practice example in this is an area. Board members that are financially incentivised and advised by experts are more inclined to drive change in the sector.

Volkswagen has science-based targets. It has set a target to reduce absolute scope 1 and 2 emissions by 30% by 2030 compared to 2018. This target is consistent with its 1.5°C pathway, although, approved as a well-below 2 degrees scenario. Volkswagen also set a below 2 degrees aligned science-based target to reduce its scope 3 emissions intensity by 30% between 2018 and 2030. However, this is not ambitious enough to meet a 1.5°C pathway and Volkswagen should set updated targets.

Volkswagen publicly supports climate policies such as the European Union’s plans for a Green Deal and the Climate Protection Law in Germany. The company has a policy that governs its engagement with all external associations, but this document does not specifically cover climate policy. Transparency of its engagement with trade associations on climate change issues would strengthen Volkswagen’s support for regulation. Especially, since our assessment found that Volkswagen is on the board or provides funding to trade associations that hold climate negative positions.

Volkswagen is developing low-carbon business models outside automobile manufacturing. In 2020, Volkswagen launched its first electric bus, the Lion City-e. It is investing in electric vehicle infrastructure through the IONITY joint venture. MOIA and WeShare are two car-sharing services established by Volkswagen that the company is planning to expand throughout Europe. This diversification means that Volkswagen is less reliant on revenue from traditional Internal Combustion Engine vehicle sales. These opportunities could be enhanced if such ventures were expanded beyond Europe.

Between 2018 and 2020, Volkswagen’s low-carbon vehicle sales increased from 0.7% to 4.5% of total sales, but this was not enough to meet its 1.5°C pathway. The company is aiming for 70% of its European sales to be battery electric vehicles by 2030. In North America and China, the company has also set targets for 50% of sales to be electric vehicles by 2030. The company needs to significantly increase its sales of low-carbon vehicles across all its businesses to meet the 64.5% by 2030 low-carbon vehicle share target that is required by a 1.5°C pathway.

Volkswagen has set science-based targets to reduce its scope 1 and 2 emissions by 30% and scope 3 in-use emissions by 30% by 2030. The scope 3 target is not aligned with the company’s 1.5- degree pathway. It is aiming for 70% of its European sales and 50% of sales in North America and China to be from electric vehicles by 2030.

Volkswagen is investing €73 billion (USD 84.6 billion) in electrified vehicle investment to 2025. The company is collaborating with Northvolt to reduce the emissions in battery production. It is aiming to expand its car-sharing services MOIA and WeShare.

In 2020, 4.5% of Volkswagen’s sales were low-carbon vehicles. It launched an electric bus, Lion City-e, in 2020. Approximately 45% of 2020 capital expenditure was dedicated to emissions reductions R&D.

Volkswagen’s scope 3 emissions intensity increased from 83.6 grams CO2 per passenger kilometre (gCO2/p.km) in 2015 to 84.8 gCO2/p.km in 2020. The reported scope 1 and 2 emission intensity decreased and is aligned with the 1.5°C pathway.

The company needs to set more ambitious science-based targets, including long-term targets, to reduce emissions. Volkswagen’s low-carbon vehicle sales should be updated to global sales to align with the company wide science-based targets.