EU Taxonomy

Doing business in an environmentally sustainable way is one of the central challenges of our time. The EU has defined criteria for determining the corporate degree of environmental sustainability. With our taxonomy-aligned investments in development activities and in property, plant and equipment, we are today already shaping our future in an environmentally sustainable way as envisaged by the EU taxonomy.

BACKGROUND AND OBJECTIVES

As part of the European Green Deal, the European Union (EU) has placed the topics of climate protection, the environment and sustainability at the heart of its political agenda in order to achieve climate neutrality by the year 2050. To this end, the EU Action Plan on financing sustainable growth was developed that aims to reorient capital flows towards sustainable investment, to mainstream sustainability in risk management and to foster transparency and long-termism in financial and economic activity. The Action Plan comprises ten measures and centres around the EU taxonomy (Regulation (EU) 2020/852 and associated delegated acts).

The EU taxonomy is a classification system for sustainable economic activities. An economic activity is considered taxonomy-eligible if it is listed in the EU taxonomy and can potentially contribute to realizing at least one of the following six environmental objectives:

• Climate change mitigation
• Climate change adaptation
• Sustainable use and protection of water and marine resources
• Transition to a circular economy
• Pollution prevention and control
• Protection and restoration of biodiversity and ecosystems.

An activity is only considered environmentally sustainable, i.e. taxonomy-aligned, if it meets all three of the following conditions:

• The activity makes a substantial contribution to one of the environmental objectives by meeting the screening criteria defined for this economic activity, e.g. level of CO₂ emissions for the climate change mitigation environmental objective.
• The activity meets the Do-No-Significant-Harm (DNSH) criteria defined for this economic activity. These are designed to prevent significant harm to one or more of the other environmental objectives, e.g. from the production process or by the product.
• The activity is carried out in compliance with the minimum safeguards, which apply to all economic activities and relate primarily to human rights and social and labor standards.

FIRST-TIME REPORTING FOR FISCAL YEAR 2021

Under the EU taxonomy, the Volkswagen Group is required to report on the climate change mitigation and climate change adaptation environmental objectives for the first time for fiscal year 2021; the disclosure requirements extend to the share of economic activities that are taxonomy-eligible and that are not taxonomy-eligible in sales revenue, capital expenditure and operating expenditure. The figures reported relate to the consolidated companies included in the Volkswagen Group’s financial statements. Volumes and financial

data for our Chinese joint ventures are therefore excluded. As the EU taxonomy is being applied for the first time, prior-year figures are not provided. The wording and terminology used in the EU taxonomy are currently subject to some uncertainty in interpretation. Our interpretation is set out below.

In addition to the current disclosure obligations, we have voluntarily assessed our business activities for taxonomy alignment. We already report the relevant figures for passenger cars and light commercial vehicles, and for our hydrogen activities in the Power Engineering Business Area.