Do-No-Significant-Harm (DNSH)
The DNSH criteria were analyzed in the reporting year for economic activities covered by 3.3 Manufacture of low-carbon technologies for transport, and 3.18 Manufacture of automotive and mobility components.
In the vehicle-related business, analyses were performed largely for our all-electric vehicles and at the level of the production sites where passenger cars, light commercial vehicles, trucks, buses and components are or will be produced that meet the screening criteria for the substantial contribution of economic activities 3.3 Manufacture of low-carbon technologies for transport and 3.18 Manufacture of automotive and mobility components, or that are to meet them in future according to our five-year planning, and based on current regulations. Of the approximately 40 sites included, the majority are located in the EU, with some in the United Kingdom, Türkiye, South Africa, the USA, Mexico, Brazil, Argentina, China and India. We also included the sites that manufacture specific components for electric vehicles. The truck site in Rugao, China, where no all-electric vehicles are being manufactured at present, was not considered conclusively.
The wording and terminology used in the EU Taxonomy are subject to some uncertainty in interpretation. To some extent, the EU Taxonomy goes beyond the regulations to be applied in regular business operations. In addition, the application of the EU Taxonomy to sites outside the EU is associated with particular challenges due to the possibility of diverging legislation. Below, we set out our interpretation and describe the main analyses we used to examine whether there was any significant harm to the other environmental objectives. Our assessments confirmed that for Europe and China we met the requirements of the DNSH criteria in the reporting year in the vehicle-related business at the sites producing passenger cars, light commercial vehicles and components, as well as at the sites of the European truck and bus brands and for the all-electric vehicles and their components produced at these sites.
Climate change adaptation
We performed a climate risk and vulnerability assessment to identify which production sites may be affected by physical climate risks. The physical climate risks we identified were assessed on the basis of the lifetime of the relevant fixed asset.
Volkswagen’s climate-based DNSH assessment is based on the Representative Concentration Pathway (RCP8.5) and on the Shared Socioeconomic Pathway (SSP5-8.5) scenario to the year 2050 and thus assumes the highest concentration of CO2 according to the Intergovernmental Panel on Climate Change (IPCC). The relevance of the identified threats was assessed for the local environment and, if appropriate, the actions needed to mitigate the risk were developed.
Sustainable use and protection of water and marine resources
We evaluated our economic activities with respect to the sustainable use and protection of water and marine resources looking at the three following criteria: preserving the water quality of the surface water used; performing an environmental impact assessment (EIA) or comparable processes that take into account the impacts on water resources; and implementing actions to mitigate water stress. Risks identified in an EIA or comparable processes are examined and, if relevant, result in actions and regulatory requirements. The analysis was based primarily on ISO 14001 certificates, information from site approvals and other external data sources related to sites in regions with a high risk exposure.
Transition to a circular economy
Environmentally compatible waste management in the manufacturing process, reuse and use of secondary raw materials and a long product lifespan are major aspects of Volkswagen’s environmental management system. Volkswagen defines guidelines on the circular economy in its environmental principles, in its overall factory white paper and in its goTOzero strategy.
The product-related requirements for passenger cars and light commercial vehicles are taken into account through implementation of the statutory end-of-life vehicle requirements in conjunction with the type approval of the vehicle models. In addition to this, each brand has defined targets and actions for the use of recycled materials that are being implemented in the new projects.
For trucks and buses, a review is conducted at the level of each brand to establish the extent to which local legislation or internal rules and regulations cover the specific requirements.
Pollution prevention and control
To be considered environmentally sustainable, an economic activity may not significantly increase air, water or soil pollutant emissions as compared with the situation before the activity started.
Overall, the automotive sector is already tightly regulated, as demonstrated for example by the publicly accessible Global Automotive Declarable Substance List (GADSL). Approval and monitoring processes have been implemented with the aim of ensuring compliance with the legal requirements and internal rules and regulations applicable to regular business operations. In this context, we also already consider the use of alternative substances in our analyses and assessments.
In 2023, the European Commission redefined the DNSH criterion of the EU Taxonomy. There is room for interpretation as to the effect that the revised requirements will have on internal processes related to the assessment of options for substituting substances of relevance under the EU Taxonomy, and since 2025 only substances of very high concern (SVHC).
In fiscal year 2024, we put existing standards and processes into more concrete terms in the vehicle-related business with the aim of generally avoiding and substituting substances of relevance under the EU Taxonomy. On this basis, the analyses performed by our brands and companies look at vehicle-related materials and components in order to assess whether the substances of relevance under the EU Taxonomy contained therein can be substituted, taking into account factors such as technical and economic criteria. The time-consuming, complex substitution assessments have been extended to include altered components and new models at sites that manufacture passenger cars and light commercial vehicles and also the all-electric vehicles and their components produced there; these assessments must be carried out primarily with the professional and technical support of our suppliers. The potential substitution of substances of relevance under the EU Taxonomy is contingent on factors such as timing and can, for example, only be implemented in connection with a product upgrade or the introduction of a new model. In the reporting year, it was not possible to demonstrate that the all-electric vehicles and components currently manufactured and sold in North America, our plug-in hybrids, and the truck and bus brands operating exclusively outside the European Economic Area comply with the regulations.
Protection and restoration of biodiversity and ecosystems.
In order to verify adherence to the requirements on biodiversity and ecosystems, the relevant areas were first identified. Where biodiversity-sensitive areas are located close to a production site, we checked whether a nature conservation assessment had been performed and whether nature conservation actions had been defined in the environmental approvals and subsequently implemented. Checks were also made as to whether an area’s conservation status had changed.