Respecting human rights – protecting the environment

Every Audi vehicle produced leaves a footprint. And we are responsible for ensuring that this footprint is not only as small as possible but – where possible – also has a positive effect,” says Bernd Zielke, Head of Procurement Management. A modern vehicle contains around 3,000 to 5,000 parts on average from many different suppliers. This clearly shows the extent of the scope of responsibility that lies with procurement employees at Audi.

Bernd Zielke: “Our strategic goal is to have a positive impact on people and the environment through our method of corporate governance – not only in the case of our direct suppliers but also along their supply chain. That is why we are initiating far-reaching positive changes throughout the entire manufacturing process – from raw materials through to the finished car.”

But with which structures and measures can Audi achieve this goal in the widely branched supply chain? “We have divided the topic into three fields of action: people, innovation and environment,” explains procurement strategist Marco Philippi. “And through each of these areas we plan to positively change the status quo in the supply chain together with our partners. Collaboration is essential because it is only by working with our partners and their partners that we will be able to minimize risks throughout the supply chain, if possible reducing negative consequences and having a positive impact.”

A further important tool of responsible supply chain management is the Supply Chain Grievance Mechanism (SCGM). This is applied when there is evidence of a potential violation of the Code of Conduct for Business Partners by a supplier. Information may be reported at any time via the Whistleblower System at whistleblower-office@audi.de. In the period under review, 145 reports of violations were processed in the Volkswagen Group using the Supply Chain Grievance Mechanism. A total of four suppliers were blocked temporarily for new awards of contract due to serious violations.

These measures are complemented by, for example, the Raw Materials Due Diligence Management System (RMDDMS) of the Volkswagen Group. Since 2021, the Volkswagen Group has reported annually in the “Responsible Raw Materials Report” on status, progress and targets. The RMDDMS focuses on 16 raw materials such as cobalt, leather or aluminum. The potential risk of human rights violations is especially high in the extraction and production processes of these materials. The RMDDMS helps to identify, assess and minimize these risks on the basis of the five stages of the “Due Diligence Guidance for Responsible Business Conduct” of the OECD and the requirements of the “OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas.”

Alongside this technical innovation, Audi also depends on innovative approaches. With the Act4Impact sustainability initiative, the company is developing a network of key partners to collaborate on solutions for a more sustainable supply chain.

For example, a special online training portfolio on the topic of sustainability was established for this purpose, which is intended primarily for employees of suppliers of the Volkswagen Group. From this target group, around 3,000 participants completed this training in 2022 alone. Audi has also devised the Act4Impact Playbook. Each chapter of this manual aims to show the suppliers possible ways to improve sustainability and to inspire them to develop suitable processes and practices themselves.

Audi is addressing CO₂ hotspots to ensure a targeted approach to decarbonization. Together with its DCI process partners in the company, the “Sustainability Supply Chain” team has identified certain materials and parts that are expected to have the highest savings potential. The biggest emissions driver in the supply chain for an electric vehicle is the high-voltage battery, followed by parts made of aluminum and steel. Together, parts from these three categories generally account for more than half of the carbon footprint. Most CO₂ emissions are not attributable to direct suppliers, however, but occur in the upstream production processes.

Together with the companies involved in these upstream production processes, Audi therefore focuses in various areas on the use of green energy in the production of selected parts. In addition, CO₂-reduced aluminum is used and, in the future, CO₂-reduced steel. The company also deploys recycling concepts and makes use of secondary material. Using secondary aluminum, for example, enables energy savings of up to 95 percent compared with primary aluminum. A good example of how internal recycling loops are closed in the sense of the circular economy is the Aluminium Closed Loop, which has been implemented in increasingly more plants over the years – currently in Ingolstadt, Neckarsulm, Győr and the multi-brand site Bratislava. The offcuts produced in the press shop are sorted by grade and returned to our suppliers. They can then use the high-grade secondary material to produce new aluminum sheet and thus require less primary aluminum. Proof of the fact that this process works is provided by the “Chain of Custody” certificate awarded to Audi in 2020 by the Aluminium Stewardship Initiative for the Ingolstadt and Neckarsulm sites.

This certificate verifies that the material used in the press shop is obtained from a supply chain that is ASI-certified from end to end. On the basis of this – and our own performance certification – the offcuts can also be declared as being compliant with the “Chain of Custody.” Close collaboration with suppliers is an important foundation for success in relation to all of these activities. In 2022, Audi was able to reduce net carbon emissions by more than 375,000 metric tons by means of measures taken in the supply chain together with suppliers.

A further focal point in the environment field of action is the environmentally compatible and efficient use of resources like water.

Regional differences in the availability of clean water pose a particular challenge in developing a water strategy for the supply chain. Audi therefore pursues a risk-based approach that takes regional availability into account. It analyzes which regions are subject to high levels of water stress and identifies the materials that require particularly large amounts of water to produce. Based on the intersection between these regions and materials, Audi identified hotspots. For these, in the next step, effective solution approaches are to be developed together with the relevant suppliers.

As further proof of its commitment, in January 2023 Audi became the first premium automotive manufacturer to join the Alliance for Water Stewardship. The global network of companies, NGOs and governmental organizations is dedicated to achieving more sustainable and responsible use of water as a resource in collaboration with the relevant stakeholders.