Substances of very high concern

Material impact and its interaction with strategy and business model

Interaction with strategy and business model

The topic of substances of very high concern is anchored at an overarching level in the environmental standard on material and chemical conformity of products, which references the Global Automotive Declarable Substance List (GADSL) along with the requirement to comply with globally applicable regulations. The Code of Conduct for Business Partners requires that suppliers in the supply chain take appropriate actions to eliminate or avoid using substances and materials that adversely impact people and the environment – for example carcinogenic substances, mutagens and reprotoxic substances – in the context of applicable laws and taking into account the applicable requirements of the Volkswagen Group. This topic is also identified as an action area in the Group sustainability strategy regenerate+. Here, the focus is on reducing and substituting SVHCs in products. The detailed formulation of the strategic topic is currently still in the development phase and will be defined in greater detail in the course of the further strategy processes.

As regards its own business operations, the Volkswagen Group is reducing its impacts by implementing precautionary actions for risk mitigation and management, as well as actions to avoid and replace SVHCs.

The Volkswagen Group regards chemical compliance as a crosscutting issue that is integrated into and influences existing policies.

The “Actions and resources: Pollution” section provides a detailed description and explanation of the actions in these two areas of activity.

Policy: Substances of very high concern

The topic of SVHCs is strategically anchored in the environmental standard on material and chemical conformity of products. In order to achieve this strategic anchoring, the management of chemical substancesis to be further improved. As a world-leading automotive manufacturer and provider of mobility services, the Volkswagen Group is aware of the increasing importance of the sustainable management of chemical substances. The legal and regulatory requirements of chemicals management are complex and vary in the global markets where the Group operates. The Volkswagen Group is committed to complying with existing regulations and to responsibly handling the chemical substances that are required for its products, activities and services.

The Volkswagen Group regards chemical compliance as a crosscutting topic. The necessary compliance processes are already integrated in the existing Volkswagen AG management systems.

In addition, the Volkswagen Group engages in needs-based exchanges with its employees, suppliers, industry associations and regulatory authorities in order to reduce the use of hazardous chemicals. This ranges from research and development, through design, production, sales and logistics, to the reuse and recycling of products.

Registration, evaluation and restriction of substances and raw materials are also emphasized in the Code of Conduct for Business Partners. This includes compliance with international agreements (Minamata Convention, Stockholm Convention) and legal instruments on the production, use, handling, and disposal of certain substances. Suppliers are expected to take appropriate actions to eliminate or avoid the use of substances and materials that have adverse environmental or health impacts, such as carcinogens, mutagens or reprotoxic substances. When doing so, they must comply with the applicable laws and regulations of the Volkswagen Group.

Minimizing the use of substances of very high concern

To comply with regulations in all markets, the Volkswagen Group and its suppliers must adhere to the regulations, laws and regulatory requirements in the target markets. In addition, compliance with standards, including the Environmental standard on material and chemical conformity of products and Evidential and approval requirements for delivery of chemicals, is a mandatory contractual requirement for suppliers. This ensures compliance with all applicable material regulations and restrictions.

The Group standard on Evidential and approval requirements for delivery of chemicals addresses the registration, evaluation and restriction of chemical substances. Chemicals classified as carcinogenic, germ cell mutagenic or reprotoxic in categories 1A or 1B are generally prohibited from use (terminology used in Regulation (EC) No. 1272/2008 – CLP). Decisions to use them are only permitted in justified exceptional cases only with due consideration of the principle of substitution. Substances of very high concern, such as those referred to in EU REACH Regulation (EC) No. 1907/2006, Article 57(2), are largely to be avoided and may be rejected on a case-by-case basis following assessment of their longer-term usability.

A specific process with defined roles (regulation coordinator/regulation expert process) was implemented in Technical Development to navigate new or amended pollutant laws emerging worldwide, including end-of-life vehicle, battery, chemical and biocide laws, and requirements on interior emissions. Implementation and internal/external communication are carried out in accordance with the Environmental standard on material and chemical conformity of products which references sources including the GADSL. Since 2000, compliance has been verified by using the international material data system (IMDS) in conjunction with consistently requesting supplier data on the chemical composition of components and materials in vehicles. All IMDS data is assessed in line with relevant and applicable legislation.

The Environmental standard on material and chemical conformity of products requires avoidance of the use of SVHCs within the meaning of the EU REACH Regulation (EC) No. 1907/2006. These are included in the ECHA candidate list and are updated periodically. Beyond legal requirements, the Volkswagen Group requires that the use of substances subject to authorization pursuant to Annex XIV of the EU REACH Regulation (EC) No. 1907/2006 should be avoided in new contracts as a rule, even if the authorization requirement does not enter into effect until after series production.

In addition, an alternative test for the use of SVHCs (within the scope of Appendix C of Annex I to Commission Delegated Regulation (EU) 2021/2139) for deliverables that are relevant for reporting under the EU Taxonomy Regulation is carried out by the supplier with professional and technical support. In fiscal year 2024, the Volkswagen Group fleshed out the existing specifications and processes in its vehicle-related business with the aim of fundamentally avoiding and replacing the substances of relevance under the EU Taxonomy. On this basis, the Group’s analyses look at the vehicle-related materials and components of all-electric vehicles in order to assess whether the SVHCs they contain can be substituted, taking into account factors such as technical and economic criteria.

Furthermore, we impose an obligation on our suppliers to comply with the requirements based on international conventions and other legal instruments regarding the production, use, handling and disposal of certain substances. Compliance is required in particular with the requirements of the 2013 Minamata Convention on Mercury and the 2001 Stockholm Convention on Persistent Organic Pollutants (POPs), as well as the corresponding applicable implementing regulations at national and supranational level.

Targets: Substances of very high concern

Prevention and control of SVHCs

The Volkswagen Group generally develops targets where there is a connection to its strategies. No measurable outcome-oriented targets within the meaning of the ESRS have been defined for the production sites in relation to the prevention and control of SVHCs. Systematic data collection is currently being worked on to enable complete quantitative reporting. The large number of substances, as well as the concentration data of SVHCs in chemical mixtures, which are often only specified by suppliers within concentration ranges, pose a challenge in terms of data collection and quantification. The Volkswagen Group and the site operators of the individual brands base their actions on legal requirements and have put processes in place to implement them.

If SVHCs are used during vehicle production and/or remain in the vehicle, they are recorded, verified and approved in advance by internal chemical management processes and systems. In addition, the Volkswagen Group implements processes to generally avoid SVHCs and to review them for substitutability. One example is the review of substitutability in accordance with the EU Taxonomy Regulation and the associated reduction of SVHCs during vehicle production and in components of all-electric vehicles.

Actions and resources: Substances of very high concern

Compliance with legal requirements with regard to chemicals and SVHCs

There is no separate management system for chemical compliance requirements. The Group’s brands and companies are required to incorporate the topic of chemical compliance into their existing management systems. The governance structure is designed to ensure that risks along the supply chain are reduced and that requirements are met.

The aim is to manage the risk associated with the handling of chemicals and SVHCs in the Volkswagen Group within the structures of the Three Lines Model of the Institute of Internal Auditors (IIA). The first line comprises operational risk management in the business units, the second line covers Group-wide risk management and the third line is Internal Audit, which reviews the effectiveness of the first two lines. The tools for identifying and implementing the specific requirements are supplied by the management systems used.

In addition to the management system tools, new and revised regulatory requirements are also added during the regulation coordinator/regulation expert process in the second line and distributed in a targeted manner within the organization. To verify material-related requirements, data from the internal material information system (MISS) is accessed in the second line. The data used is the supplier data from the IMDS. In addition to continuous risk management using the Three Lines Model, the Volkswagen Group has established specifications and processes for managing regulatory requirements (regulation coordinator/regulation expert process) and internal requirements (for more information, see the “Minimizing the use of substances of very high concern” section) in its vehicle-related business, which stipulate that SVHCs must be avoided and substituted wherever possible. On this basis, vehicle-related chemicals and components of all-electric vehicles are analyzed in accordance with the requirements of the EU Taxonomy Regulation and the substitutability of SVHCs in these products is reviewed together with suppliers, taking into account technical and economic criteria, among other factors.

Engagement and reporting in the upstream and downstream supply chain for raw materials

The Volkswagen Group extends responsibility for its engagement to improving the supply chain to its suppliers. For this reason, the Code of Conduct for Business Partners demands from business partners to implement appropriate actions to eliminate or avoid using substances and materials that adversely impact people and the environment (for example carcinogenic, mutagenic or reprotoxic substances).

Metrics: Substances of very high concern

The IMDS SVHCs list of the European Automobile Manufacturers’ Association (ACEA), which is derived from the ECHA candidate list, is used as the basis for rating substances of very high concern.

Total amount of SVHCs generated, used or procured during production

An evaluation of substance-related quantities for SVHCs cannot currently be fully carried out at Group level. An approach for recording the quantities of all SVHCs used as substances or in mixtures (SVHCs > 0.1 M%) during vehicle production is currently being developed. This is intended to ensure that the total quantity of SVHCs procured and used can be recorded in future.

Different chemical substances are combined during certain production process, such as in process baths. These process baths are used exclusively to make specific changes to the chemical properties of the products being processed. The Volkswagen Group produces no chemical substances and operates no facilities or processes used to manufacture new isolated chemical products.

Theoretically, there is a possibility of new chemical compounds forming on a small scale due to the adjustment of the chemical equilibrium within process baths. These process baths are located in facilities that require approval and monitoring and are operated exclusively on the basis of official approvals. There is no official requirement to identify newly formed SVHCs.

Total amount of SVHCs generated in production in the form of emissions

The Volkswagen Group and the operators at the sites of the individual brands always act in accordance with the applicable legal requirements. The site and system technology has been approved by the authorities in accordance with these requirements. This applies in particular to environmentally relevant installations, where operations generate emissions to air and water, resulting in extensive operator obligations being outlined in their plant permits. Within the framework of such ancillary provisions, recurrent emission measurements are also conducted to ensure compliance with applicable limits.

To facilitate Group-wide compliance with all binding commitments on production-related emissions, the Volkswagen Group has implemented the Three Lines Model described in the “Actions and resources: Pollution” section.

There is currently no limit that encompasses the full range of all known SVHCs. There is also no measurement method for recording the total spectrum of all SVHCs. In view of the current state of the art, it is therefore not possible to gather data on these emissions.

Total amount of SVHCs generated in production as part of products

The total amount is calculated for each SVHC. To do this, the proportion by weight per SVHC is first determined for each component containing SVHCs (threshold of > 0.1% per smallest relevant item in the component according to REACH Article 33) in conjunction with the European Court of Justice ruling on the reference value for SVHCs in articles and added up for the corresponding reference vehicles (ID.7 Tourer and Tiguan) (for more information on the reference vehicles, see the “Metrics: Resource use and circular economy” section of the “Resource Use and Circular Economy” chapter). Calculation of the total amount of each SVHC is based on production figures for battery-electric vehicles and internal combustion engine vehicles. Lastly, the SVHCs are allocated to the reportable hazard classes. Since individual substances may be allocated to multiple hazard classes, the overall total amount does not correspond to the sum of the individual hazard classes due to double counting. Nevertheless in order to provide a total amount of the SVHCs used, the total weight per substance is allocated to only one hazard class in the table below.

In addition, the SVHCs information for the Porsche AG Group and TRATON GROUP is provided below, excluding the consideration of Everllence. The values are determined as described above.

Total amount of SVHCs generated in production as part of products in the Porsche AG Group

The determination of SVHC amounts is based on a reference vehicle approach. One vehicle model is analyzed for each of the five vehicle segments (two-door sports car, SUV internal combustion engine, SUV solely battery-electric vehicle, saloon internal combustion engine, saloon battery-electric vehicle). The assessment is carried out using component-specific supplier data. The SVHC amounts of the reference vehicle are extrapolated to the vehicles produced in each segment in the reporting year based on the production volumes. Finally, overarching segment totals are calculated for each substance, and the substances are allocated as required by law to the appropriate hazard classes for substances of concern.

Total amount of SVHCs generated in production as part of products in the TRATON GROUP

To calculate the amounts (SVHCs), the TRATON GROUP uses the lead content in starter batteries, which according to a study by MAN Truck & Bus, make up 98% of all SVHCs in a typical truck. For the reporting year, the amount of SVHCs in the products corresponds to a total amount of 23,922 (24,780) tonnes.