Ladies and gentlemen, our dear valued ESG analysts and investors. It's my great pleasure to welcome you to our ESG conference. It's the sixth time we hold it, and we are webcasting here live out of Wolfsburg. Before we come into the details, I have to remind you that you please have a very careful and close look at the disclaimer, because the safe harbor language and other cautionary statements of this disclaimer will govern today's presentation. One reminder also for the Q&A: we are still in the closed period ahead of our first quarter results, and please focus your questions on ESG-related issues or on the contents you will see in the presentations. How will the ESG conference today be structured? We have three presentations.
The first one will be held by our Chief Sustainability Officer, Dirk Voeste, and it will be about the new strategy Regenerate+, followed by the first Q&A session, and I have the pleasure to moderate the Q&A session. The second contribution will be from our Human Rights Officer, Kerstin Waltenberg, and Kerstin will give a presentation on human rights and the supply chain due diligence law. The last presentation will be held by Daniel Göhler. He is presenting supply chain due diligence, and Daniel is our Head of Sustainability Management Group Procurement. We will host the combined Q&A session for the last two presentations, and I have again the pleasure to moderate it. To ask a question, yeah, please use the chat function provided in the webcast. We try to answer all questions. If there are technical issues or if you run into time constraints, don't be worried.
We will note down the questions, and the SAR team and RR team are more than happy then to follow up. Please also have in mind that under the ESG section controversies, you will find an up-to-date Q&A on all recent controversies matters. With that brief intro, I'm very happy to welcome Dirk here on stage. Dirk, please join me. Dirk's presentation will start after a brief video.
Merci.
Now we're shaping the largest transformation in our history to deliver sustainable mobility for future generations. As a company that cares, it's our responsibility to create and uphold values while prioritizing what truly matters. Our decarbonization strategy is strong, and we've taken big steps on our way to becoming a CO2-neutral company. In addition to our electrification efforts, we support the construction of industrial-scale wind and solar parks.
They'll feed more renewable energy into the grid to power our vehicles and generate more job opportunities.
Because at the heart of the Volkswagen Group are our people. Being a top employer, we understand the importance of nurturing and developing the team to reach our goals.
Transformation means change.
We strive to change for the better. Fostering diversity within the team is essential. We're dedicated to creating a culture that celebrates diversity, inclusivity, and integrity.
Our corporate citizenship efforts are focused on environmental, educational, and community projects around the world.
Climate protection is the core of our business. It guides our investment choices strategically and operationally. Our top priority is ensuring the successful transformation of our business model. We want to create a positive legacy for future generations. Indeed, the journey has already begun.
So, also welcome from my side. It's the first time I present to you, and I'm very proud and thankful and happy, let's say, to present to you our new and revised sustainability strategy Regenerate+. I'm within my position as the Chief Sustainability Officer since a year, and across the summer this year, we have, let's say, found the time and also I think the evidences to revise and rethink sustainability for the Volkswagen Group. When you look at the sustainability topics and initiatives which have been ongoing, they are focusing on decarbonization, they focused on social engagement, and there was a lot of momentum into it.
But we felt we need to bring it together and also in terms of really driven by the topic of Earth Overshoot Day, which was really in August at that point in time, we thought, and we came to the conclusion with a small team, an inner circle, to say, are we doing the right things? What is our goal? What is our vision? Where should we really strive for? Where should we go? And normally maybe in terms you would find external consulting helping us, we set the time and the team to do it internally, exclusively. A small team started, and then at the end of the day, it flourished into more than 100 people.
We involved the brands, we involved the functions, the board, the advisory board; all were material, all were really substantially working on the strategy which you see in front of you, Regenerate+. So let's guide you through it. We started with our vision, and the Earth Overshoot Day really reminded us to the topic of saying, we need to regenerate. We and Volkswagen Group set the ambition, we set ourselves the ambition to become a nature and society positive mobility provider. We felt that regeneration is really key and important, and we felt ourselves to put our way into the responsibility to move this path. We know it's a long path. We know we need partners on the path. We know with our right engagement, with the responsibility we feel and the passion for sustainability, we felt we need to take this road.
It will be a long road, it will be a very tough road, but it's worthwhile doing it, and we also feel that hopefully a lot of companies, corporations, but also institutional others will follow us. So how does the strategy look like? The first thing is we divided our, let's say, path forward, our approach in four dimensions. You normally would find three dimensions in sustainability, but we feel with more than 600,000, 670,000 employees worldwide, they deserve an own dimension. They deserve an own dimension because our people, our colleagues, our employees are the foundation and the asset of what we really do. They are the core of our success today and in the future. And that's why we define sustainability also as creating value for today's and. Mention our people, society, and certainly business.
We provide from the group a clear framework for all four dimensions, for the brands and functions to work on. The framework allows all our brands, 12 brands, very strong brands, very traditional brands to position and to perform in their specific environment. We feel that the sustainability contributions of the brands and the functions overall create even more leverage, even more impact, from that point of view than just the group alone. And of course, to steer it, we systematically steer our approach by 12 so-called top KPIs with given ambitions and profiles. So how should this impact-driven ambition really look like in detail? First, you see here the four dimensions, and you see, and you will see that in a minute, those sustainability targets we set ourselves. But we also want to demonstrate and show, are we really on the right way?
Are we really moving towards a positive contribution? Are our initiatives really focusing on the right topics? Are we addressing the right aspects and issues and topics in terms of sustainability and long-term business robustness? First thing is very, very important, and you heard it from the definition. It's about value creation. We are really moving sustainability from the topic of a cost position into a value driver. We will see in the transformation we are currently ongoing from combustion engines into electromobility. We will see that the value creation is a key part. We will talk about circular economy and other value drivers in a minute. For sure, the ESG parameters are a key criteria for us.
And we are using them, and we believe if we are implementing our strategy right, if we are implementing our measures right, ESG performance will also continue to be into the right dimension, which will improve time over time with the ambitions we have set ourselves. Impacts, you read it on the other side, impact-driven. We will measure and assess impact by a methodology of the Value Balancing Alliance. It is a methodology which monetizes intangible assets and provides an aspect and a drive of how such impact is really materializing in a number. We joined from the Volkswagen Group the Value Balancing Alliance in the first of January, and we will now in the first year pilot the methodology on this end, and it will help us to provide us as a kind of North Star, are we moving into the right direction?
Then the utmost is your feedback. Your feedback from the analysts, the feedback from society, from stakeholders, from NGOs, but even more important, feedback from our customers. Are we moving into the right direction? Does sustainability create a differentiator with our customers who really said, yes, Volkswagen cars from the Volkswagen Group are the right cars to buy? So we will, of course, with our ambitions, with our measures, provide a right angle so that our profile, our products are also accepted and positively recognized by the market. And here are the 12 indicators. The way you read it, on the one side you see the four dimensions, so 12 KPIs, so we will go through them step by step in the next slides.
The value drivers behind it, the business drivers, it is for sure buying behavior, and we know that with an equal offer, customers tend to buy from the more sustainable perceived companies. We know sustainability has a huge impact on employee attractiveness. Employee attractiveness in terms of gaining and new talents, but also holding new talents within the Volkswagen Group, offering really jobs, employments, which really have a future perspective, and it's worthwhile to be on our journey to drive transformation and sustainability in this aspect. Of course, very, very important, the social license to operate. The social license to operate is a key parameter in order to drive business and of course also to, let's say, set the baseline.
Very, very important, of course, also in your aspect is looking at conditions for refinancing, looking at our sustainability approach, the right measures, the right topics we are setting, and certainly then having the right evaluation. Our 12 top KPIs. You see that per dimension we have three KPIs chosen. For example, for nature, and we'll go that into detail, you see the Decarbonization Index as a criteria number one. You see in the people dimension, the diversity part. You see in sustainability or society, sorry, society, you see sustainability performance in our supply chain. And certainly in business, you see the shares of BEVs and topics you feel which are important, let's say, to describe our sustainability journey, Regenerate+ in the right way. It is a broad strategy. It's a holistic strategy, and it covers sustainability in a lot of aspects.
If you would ask us, saying, hey, do you want to be the number one in all 12 aspects? I would answer, we will set focused targets on certain areas where we believe, yes, we want to be leading. In others we feel, yes, we are doing our part, but I think it is also here again, it's about the right mixture, it's about the right balance, and it's also about having a reactive system depending on the changes, the challenges we are currently perceiving in the world, in the environment, macro environment, and financial environment, and business environment, we need to react in one or the other way. So it's, it's also about providing the right framework, but it's also providing our flexibility to react in the other way. As I said, offer a framework for all brands to participate and to drive the content.
Certainly, needless to say, it fits very nicely into our sustainable development goals, the UN Sustainable Development Goals. Nature. Aspiring towards nature positive. And here you see our qualitative targets and the way the presentation is now built up, that we have one over the overheads, let's say, overlooking slides, and then individual slides step by step towards the respective indicators. It is about the topic of how do we get nature positive. Nature positive can be done in various ways. Yes, we drive our, our CO2 targets towards zero or carbon neutral by 2050 as a group. But brands like Porsche and Bentley, they have targets to go beyond and be much earlier. We'll talk about it in more detail. We will talk about shared circular materials, and you will see here biodiversity.
And you may ask yourself, biodiversity, why from an automotive topic they are taking up biodiversity? But if you look at the planetary boundaries, by getting into nature positive, biodiversity is a key asset. Biodiversity is part, and depending on how you calculate and look at it and discuss it, it is the basis for, for future success and certainly also for future, for ourselves, our generations to come to be on the planet. And just to take in the forefront, we drive biodiversity in a way that we're taking care about our supply chain, we're taking care about our own assets, but we will also launch a biodiversity fund in next year with a rough annual volume of EUR 25 million to drive biodiversity projects along and outside of our value chain. And this fund will be guided by external capacities or, or renowned experts, not by ourselves.
So, a contribution where we feel, yes, let's move towards nature positive. You see here the aspirations we are really driving. From a group perspective, we will remain to our target to become balanced carbon neutral or net carbon neutral by 2050. But we're seeing individual aspects, we are driving on a different speed. So our production, our production will be carbon neutral, net carbon neutral by 2040. Already since 2018, we have reduced our emissions by roughly 30%. Meanwhile, in Europe, with our European production sites, we're nearly 100% based on green and renewable energy, roughly 50% overall. We will believe, and we are strongly convinced that, you know, we will achieve this target by 2040 in our production. So wherever we can, we push the agenda, we push the envelope to be much faster and much more driven towards carbon neutrality.
What you're also seeing is, and we talked about it, is circular material. Circular economy is an important business factor. We are currently focusing our activities really, let's say, under Regenerate+ to drive a circular economy strategy. But circular economy is already taking place. So for example, in the ID. Buzz, 25% of the ID. Buzz is based out of recycled material. We are driving, you know, our ID. family through the MEB platform that this will be two tons less CO2 overall. We are setting ourselves the ambition by 2040, by 2040, 40% of the material we are using in our, our production will be based on circular material.
We have, let's say, the brands behind it. We are currently breaking down the targets to the individual brands, but certainly this ambition is really driving us because we believe circular economy is important for a resilience of the supply chain. It is important as a profit pool, very much so. Certainly when you look at the nature positively thought is that we'll need to use less resources from the Earth as possible. It is for us a very important new business field. It really fits to the transformation from combustion engine to electromobility. If we move on to the people session, our people session, it is very, very important that, you know, we're not only fostering a diverse culture, a diverse thinking, and a diverse community. It is also important that we stick to the values, to our values, and, and drive them from then on.
It is also here very, very important that we, let's say, do the utmost to be a unique employee of choice. And to help our people, our colleagues in the transformation to become even more a stronger asset into the future. And certainly I think it's about health and safety, in our own assets. So let's deep dive into some of those topics. The first one is very, very clear, you know, we are driving the education and the support of our people. It is very, very important that you look at last year already, we had more than 14 million hours, 14 million hours spent on training. And we set ourselves a target by 2030, we will, let's say, grow this up by another 35%.
So education, skill set of our people are key, particularly when you move from a combustion engine into electromobility, if you move from an analog into a more digital AI-driven base of how we produce and engineer and design cars. So very, very important to take our people along and with the transformation. It is here very clearly said, key, education, training, and we'll grow. That was one too fast, hold on. And then it is about the diversity. Diversity says, yes, from 2023 on, or 2023, we had 19.2%, roughly 8.5% increase. And we will set the target by 2025 to come with 22.0, nearly a little bit above 20% of portion of women in management.
This, I think, is from our end a topic which we'll further drive or we'll put even more emphasis in the future to come, but very, very important asset and basis and pillar as, as a foundation of our people, diversity. If we move on in terms of society, what are we doing? It is on one side, yes, we are a corporate citizenship. We take responsibility as part of our society. We want to be a reliable partner. And certainly I think it is important here again to increase the social impact. So what do we set ourselves? What do we want to do? It is on one side to look at the S-rating, and you will hear later on from Daniel Göhler much more details on, on this topic.
It is about the reputation or how are we perceived as a company by you and other stakeholders. And certainly how can we really grow and, let's say, drive the sustainability impact? The first thing is we believe in the S-rating, we are roughly currently at around 79%. And by 2040, we want to be stable above 95%. Why 95 and not 100? With our 63,000 Tier One suppliers, there is a little bit of ongoing, offgoing every year. So we believe after a certain time, you know, our suppliers have been rated, it needs a little bit of time that we are stable above 95%, which comes at the end of the day that more or less all suppliers go through the S-rating in terms of environmental and social aspects.
Strong improvement, strong commitment towards sustainable sourcing and sustainable responsible supply chain. We're looking at supplier risk categorization, we're looking at IRMA, where in the long run we want to be about 50%-75%. And certainly very important key, and Daniel will talk about it, on-ground projects to, let's say, demonstrate our commitment and also say that we're really walking the talk. And social impact, we're just putting donations out with roughly EUR 28 million per year plus employee donations. And we believe we substantially want to be above EUR 80 million by 2014. And also, in addition to it, we also said, yes, we need intrinsic and we need incentives for our colleagues, for our employees to drive sustainability, to drive it from an environmental part, but also from a social part.
Therefore we have initiated a EUR 20 million fund per year here also for projects, for employees, for business partners, for colleagues to really drive sustainability and the impact to go even go forward. Overall you see that our sustainability approach, regenerate+, is moving away from single initiatives, which are moving into the right direction, into a much more holistic frame. In a holistic frame to put ourselves as a reliable partner, to demonstrate our commitment to sustainability, to demonstrate our commitment to our responsibilities, but also to demonstrate that we want and will move that path. We don't know if and when, how to achieve it, but not moving that path is to go with our alternatives. You saw that we have, let's say, distinct targets and measures, we have 12 KPIs to measure it with different ambition levels.
You see that these, that those will also be part of the, the brand's targets. The first time, beginning of this year for 2024, the majority of those 12 KPIs have been broken down to brands. So the brands have received those targets. And certainly we are currently in discussion to see how our ESG remuneration factor, which is currently diversity and the DKI, the Decarbonization Index, may be also being enlarged by other top KPIs in terms of management and board remunerations. And if you go now into the business arena, it is really to promote sustainability-related business areas . It is also to strengthen our sustainable financing. And you see here the, if it works. It doesn't work. Here it is.
The first part is, and we talked a little bit about circular business models, but it's not only circular business models where we want to grow and where we want to earn money. It's a BEV transformation, it's a venture capital fund of $300 million, which we have recently launched. It is about decarbonization technologies, for example, with MINES. Those technologies will, on one side, with green hydrogen, but also with decarbonization technologies like DAK, remove, reduce the emissions, but also actively remove carbon dioxide from the atmosphere, which really brings us closer to the topic of being nature positive, going beyond zero in providing a positive contribution. And very, very important, of course, the positive business cases.
Because whatever you do, and you saw it, it's a value-based assessment on one side really having the right workforce in place, on the other hand having the right social aspects in place, but also differentiating in terms of carbon emissions, green steel, circular economy, and other topics as well. And you see it here from the bond side: at least 30% of the outstanding bonds volume will be green in the future. So that's another commitment from the refinancing side. How does it look like from the BEV shares and the numbers you've you know from the report and Rolf has said also the frame where you see it.
In a nutshell, on those three segments you see our ambitions, where we want to go mid-term and where we want to go strategic. And you see here the different ambition levels. We stick to our BEV transformation by 2035 to really be 100% of BEVs. We are in good shape and good progress to really, let's say, move the BEV share into, sorry, into the right direction. And certainly, let's say, having the right targets in place. So how does it look in a summary for you? We have, and you will see later on, provided to you a short table of all KPIs, of all ambition levels on the status and where we want to go. But very clearly takeaways, Regenerate+ is a holistic strategy. We have implemented it, we have developed it together with our colleagues.
So already development was part of, of implementation. It really was done together with the board, with the advisory board, all senior management and even more important with the sustainability colleagues, colleagues in the functions and in the brands. So it is really a strategy with developed within the Volkswagen Group for the Volkswagen Group. Secondly is, yes, we have clear measures in place, we have clear KPIs in place, we have a framework in place so that it, so it allows systematically steering. The first targets have been broken down on brand level. It will be part of the remuneration of, of as part of the ESG factors. And certainly I think we are systematically steering it. But we also have the flexibility depending on our where we go, that we may need to adapt in one or the other way.
That's why the fourth part is so important. We will be, sorry, continuously report on the progress. So you will receive in certain periods updates of where we are, how is the progress, what did we do to be more concrete measures to really follow very transparently where we are on our journey. And if I go to my nearly next slide is, and you will see it in the documents, you will receive a detailed table of all KPIs, the dimensions behind it, the respective targets, what kind of targets we are setting, where do we want to be by 2040, at what time. But you also see what kind of targets are currently in development this year, which will be ready 2024 by the end of the year.
It also gives you an idea that this is really implemented on the ground, people working at the time really doing it. It's not just an overarching PowerPoint slide and really this messaging. It is really includes measures, it includes people behind it, it includes actions. But it also gives you a very transparent and honest and open way saying what kind of, let's say, kind of workshops we are still opening, where we want to go and where we will communicate to you as soon as they're ready and can be communicated. And with this one, I thanks for your listening to the segments and would welcome Rolf on the stage for Q&A.
Thank you, Dirk, for this very comprehensive overview. I think it's reasonably fair to say that you have been very busy since you have arrived here at Volkswagen.
I think it was almost a year ago. First of April, yeah. First of April, yeah, exactly. I can remember it well. I wait until the audience has time here to put in the first question. Yeah, before we have the first question on hand, I would like to start with, with, yeah, your impression. Regenerate+ is a strategy for all brands and markets. How do you involve everyone in such a huge organization, Volkswagen, with 3 different brand groups, the trucks, then we have batteries and everything. So how do you handle it?
Well, the first time we started with 3 people in a small office on a whiteboard and developed it a little bit like the onion principle.
And then, based on this one, we involved the board. We got that direction from the vision. We got really with the board in workshops, where do they see the ambition level, how do we go. So that was really super important. And then what we did is we involved the sustainability managers from the functions and the regions, that was roughly 2024. And then we had weeklies information calls, weeklies workshops, and they got bigger and bigger and bigger. At the end, we were more than 100 people involved designing the strategy. And what happens now, this week, next week and the other weeks is we receive so many invitations from colleagues, please give us a presentation, could you come to Paris, could you be in the U.S., we need you in India to give, you know, more guidance and help and really inspire people.
What really personally for me was certainly the emotional aspect is we had an interview with the when we launched it mid of March. I received so many emails, MS Teams news, asking, I have this great idea on renewable caps for something here, a great idea to optimize the processes. And they found an anchor. So that's super inspiring, really, to get these sometimes even smaller examples on the ground. They bring more efficiency into the processes, they bring employee engagement with it, and they're really getting inspired. So I'm super happy. Let's say 680 colleagues to be involved is a big task. But I think I see it also like waves and ripple effects to really go there. Hey, it's almost the mentoring work, yeah, rather than only being Chief Sustainability Officer.
But all in all, super positive feedback, really constructive feedback, a lot of applause, a lot of additions. And, you know, we just asked for examples to be communicated internally. And what I felt was extremely encouraging, 95 of those examples were not German. Really global examples on what we do in terms of PV, photovoltaic, wind, engagements. And a lot of topics are about how can we improve our processes, how can we be more renewable, and how can we, let's say, drive further initiatives, even collaborations were, let's say, already announced, but proposed. Really cool. Very good. So while we are waiting here for the next question for Dirk, Dirk, following the presentation, yeah, and looking at the 12 KPIs you have highlighted, from your impression, which one is the most important KPI?
Yeah, or can you even do a ranking or are they all equal weighted important? Just your view on that. If one would be more than important, the other, let's say, if you drive electromobility and transformation, we're certainly looking at the BEV part and the DKI part. Because this is driving us. But on the other end, if you are, let's say, much more looking at our own colleagues, it is how do we educate or take our colleagues along. This will be more important. If you are, let's say, in supply chain like Daniel, he will certainly say, hey, come on, the S-rating is the more key one. And this is, I think, the beauty from the functions, but also the brands, that they pick what they believe is important and where they put emphasis.
What you see is over Volkswagen Group, all KPIs are really going into the very level field. We don't have the ambition to be number one. But I think it's very important that we perform on all areas and balance also our resources in inputs, long-term, short-term investments in all area, that we're really living, I think, the term of being long-term profitable in our business.
So all KPIs equally important. It's more a cultural question, yeah, also to change the mindset of the whole organization, which is quite a challenge, given how large it is with 680,000 employees. We have here the first question from the audience, yeah, and they say sustainability is a broad field. And how can we measure success in a tangible way? Good luck with that one.
Yeah, thank you very much. I know that you're on my side.
But what is success? First of all, I think it's not about being the first one. I think it's about being really bringing everybody along. Sustainability, and like Oliver Blume said with all what we do, is about a team sport. So we need to bring all along. It is about successes to create partnerships. Having the right partnerships and drive those topics is successful. But what we do is, and I just said it in one slide, is first of all, if value creation starts, if we're seeing, hey, sustainability, circular economy is opening new business, business pools, is opening new areas, that would be a success. If you see that our ESG rating is improving over time based on the measures we're taking, I would consider this a success.
If we're seeing the Value Balancing Alliance methodology saying our impact is getting more and more positive, I would see that's a success. Listening to colleagues inside a Volkswagen Group, listening to external stakeholders, to neighbors, to, to, to you from the investors and then finance and analysts community, from NGOs and getting constructive feedback of, we also like to hear what we do good, but I think it is also important to give, let's say, indications where we could do better and where we put focus, I would consider it a success. It is not a monolith, it's really an engagement, it's really about creating this regenerate and regeneration aspect. We want to move this path, we know it's really difficult, but not doing it will be difficult as well.
Yeah, feedback is this overly important, yeah, positive as well as constructive feedback, yeah.
So please feed us and give us the feedback in order to allow us to improve. The next question is from Mike Eberhardt from BlackRock. Can you please explain net carbon neutral? Does this suggest that vehicles produced by these factories will effectively have zero embedded emissions in the future?
Yeah, thanks Mike for the question. I think, you know, we maybe need to dissect your question in two aspects. One is, by 2050, we aim for net carbon neutrality for the Volkswagen Group. Which means there will be, based on SBTi certification, maybe 10% less, let's say we're reducing those emissions, be it through green steel, be it through green energy and others, to really reduce it. And there may be at the end roughly about 10%, which may stick and may stay.
This is where we then, let's say, look into other technologies, nature-based, but also technical-based, to actively remove them. If you then look at the factories, and that was the second part of your second question, is saying, the when we are working in the factories, it is Scope 1 and Scope 2, which will bring until 2040 to net carbon neutral. Scope 3, which is for the supply chain and the other aspect, will be taken on gradually by 2050. But by 2040, we will have all our factories, which are part, of course, part of the carbon neutral of each individual car, down to zero, with again this 10% SBTI certification, where we may take some removals or the aspect of a removal.
Very good. Mike, I hope this has explained the question in detail. The next one is from Gianmarco from Neuberger Berman.
The question is, can you update on which steps Volkswagen is taking to avoid any risk of future potential controversies, which may be coming from the plants Volkswagen is running in joint ventures with SAIC, Xinjiang region of China where Uyghur minorities are located? How Volkswagen can de-escalate further the controversy with MSCI related to allegations of forced labor in China? So I would be very happy to take this one. Good. Yeah, so Gianmarco, I think to avoid any risks in the future is almost impossible. Yeah, we are a global company and we have our systems and our mechanisms in place. Yeah, we have the business partner code of conduct, as well as our principles on how to do business in the respective countries, always adhering to the local law.
I think the operations in Urumqi are a particular case, because in this instance, we are not the owner of the operations. So it's in a joint venture with our partner SAIC. And we have listed our activities on the controversies website. So as you know, our latest statement here has been that we are in advanced talks with our partner SAIC, in order to find a solution, not only for the plant in Urumqi, but also for the Test Track in Turpan. And as soon as we have an update here, yeah, as with the ESG audit we conducted in December of last year, we will keep you up to date as soon as we can, yeah, in a very transparent and open way. Similar is true with MSCI. So the recent conversation we heard, and also the recent accusations we have heard, we take them all very seriously.
Please grant us, we are a huge organization. Means that it takes a bit of time actually in order to really get our arms around the specific accusation or the specific, yeah, investigation we have then to undertake. As within the recent dialogue with MSCI, we are proactively approaching them. Yeah, we tell them what we have, provided also investors like you and feedback, make it available in the public domain so that MSCI can react to it in a very timely manner. And this is what we will not change in the future, but do even in a more constructive way than we have done it in the past. So hope that answers your question. The next one is coming from Joey, from Columbia Threadneedle. So he wants to know, what is the timeline for developing the biodiversity index?
What data points and scope of value chain impact will go into this index?
Mm-hmm. Joe, thanks for the question. Maybe a word before we talk about the index itself. You know, as I said, we will launch a biodiversity fund most likely at the end of the year. We're just preparing the setup, it will be a separate entity. Where roughly 20, no, where we will at 2027, 2028 have EUR 25 million per year of funding into it. So we are slowly ramping it up from next year onwards. This fund is intended to be managed not by Volkswagen. It is intended to really be managed by an independent organization, by also experts really guiding us to invest into high value ecosystem and biodiversity projects. Of course, also open for partnerships, also open, of course, for co-funding for others.
This will be developed and we will most likely talk to you about this at the end of the year. Based on this one, of course, is also a biodiversity index. The biodiversity index will be ready this year. We are clearly setting ourselves that with the so-called open, in top indicators, which are still under development, they need to be ready and done by this year. We're looking at an index and there are several index and there is not the one and only index, Joe, as you know, globally. But the data points which are incoming is first of all the area itself. There we need to decide and to discuss saying, is the area close to our assets or is it close to any value chain or supply chain partners? Here we roughly have the distance of 20 kilometers.
It's something we set ourselves within the frame of 20 km. This area is considered to be relevant for our own internal biodiversity measures, which will be financed outside the fund. The fund really comes on top of it. So it is the area and then it's very important that we somehow get the idea of the value of the ecosystem. In principle, you have a multiplier saying, what is the area? What is the value of the ecosystem services? What is the status today? And how are we gradually improving? So we currently don't have a target, but this is how the index will be structured. We are currently looking at several, I think currently the inner core is roughly 3-5 biodiversity indices.
Roughly it will be most likely a clustering from 1 to 5, based on a scientifically and globally recognized methodology which we will implement.
So in summary, KPIs not finally decided yet, yeah? The scope, you have a very precise idea. But better actually do it right, actually than do it quick. By the end of the year we can provide our investors and analysts with the outline of the overall.
We will. That was also mentioned in the table, which was on a gray part. This is where we're currently working on.
Very good. So the next one comes from Saida, from Schroders. And the question is, are you lobbying for low carbon mobility and are your workers cooperating there? In the transition away from traditional cars? Will you use more recycled materials? I think that's the second part then of the question.
Okay, so the first part is, yes, we are strongly promoting low carbon mobility. I think very clearly said, but in Europe by 2035, 100% BEV cars. We are strongly, let's say, advocating on our way, also in accordance with the Paris Climate Agreement. By 2050, low emissions, by 2050 zero emissions, plus these 10% as I laid out. So we are actively not only lobbying, but also positioning ourselves in scientific communities, in meetings, etc. This is the path we will go and which we will stick to. And yes, our workers are cooperating with it. For, of course, it is difficult for a lot of people, and I'm only here one year, as we just said, but you're seeing that people, it is a transition. And there you need to let certain things go.
If you were, let's say, a person who developed tanks or combustion engines, and you now are transformed into electromobility, it's a long way. But we're seeing that our people more and more really following this transition. They're seeing, yes, BEV is the future. So they're investing into new jobs, in new positions. They see it really as a positive momentum to go this way. But clearly, as you also said in your question, it's a transition. It is not from one day to the other. It really takes a long time, as we all know, as people, is sometimes letting something go and getting into something new takes some time. But we're really seeing it super positive.
If I'm looking at the amount of BEV cars and new, let's say, cars entering the stage, now with the Porsche Macan, e-Macan, the Audi Q6, so this is really creating a lot of excitement. And if I just follow internal news, the Twitter, LinkedIn, you see there is a strong momentum towards really, let's say, getting there. And the third question is, do you use more recycled material? Yes. A very, very clear yes. Step by step. We have the ID. Buzz with 25% recycled material. The IDs have, you know, a lot of interiors, the seats, the other interior is made out of PET. So we're really going this route. We're looking at battery recycling. We are looking also at aluminum recycling, for example, with Audi.
We are also looking at glass recycling, very much, so you can see the new Audi Q4 e-tron, the glass of the windows is based out of recycled glass. So more and more will come. And here again, our target is by 2040, 40% recycled material over our fleet globally. I think that was the number I saw in the presentation, right? Very good. Okay, while we wait here for the next question, just as a reminder, if you want to ask a question, please use the chat function in the webcast and then we can have it answered here on stage.
So, the next question is, what topics will become even more important in the future in the whole ESG area, Dirk, and why? According to your view.
Yeah, I think there are various topics. And decarbonization certainly is and will be a topic for quite a long time.
Super important and it will stay. But what we also saw is, the whole area of biodiversity will, and that's thanks for the question again, is it will create more and more momentum. It will become important, what do you do for nature? What is your supply chain impact, based starting from the mining to the car manufacturing? How do we, let's say, work with it and what are you doing? This will be more important. And certainly I think the whole area of taking responsibility as a corporate citizen will become much more into focus. It is on one side currently really strongly based on nature. And a lot of those topics can be quantified and maybe that's also sometimes closer and easier. And climate change, and we just look at the current weather conditions in April. I think there is no denial what is currently happening.
I think we need to keep the pace and the balance to really invest in the right time. But more and more social responsibility will come into focus. And I think this is where Volkswagen has a heritage and DNA to grow this part.
Very good. Dirk, I thank you very much. Thank you very much. I see that you made yourself available to briefly regenerate+ Strategy to present it here on stage. It was really a pleasure having you here. Thank you very much. Thank you. Whenever there is a follow-up, yeah, please contact the CSR team as well as the RR team for any further questions. And I'm very sure that we will see Dirk here in this round even more often in the future. Thank you very much. Thanks, Ralf. Thank you.
With that, I am very happy actually to farewell, Dirk, and welcome Kerstin on stage. Our human rights officer, Kerstin. The stage is yours. Please do your presentation and afterwards we will join us after Daniel's presentation here for the Q&A session.
Thank you.
Thank you. Hello, ladies and gentlemen. My name is Kerstin Waltenberg. I'm the human rights officer for the Volkswagen Group. Respect of human rights is of paramount importance for the Volkswagen Group. We are convinced that a sustainable economic activity practices is only possible by acting ethically and with integrity. Within the framework of our entrepreneurial activities, we are fully committed to our responsibility regarding human rights.
Even before the German Act on Corporate Due Diligence Obligations in Supply Chains, known as the Lieferkettensorgfaltspflichtengesetz, or short, LKSG, came into force, we set ourselves the goal of respecting human rights along our supply chains in our own business area and in the area of our suppliers and responding appropriately and sustainably to potential risk in our group-wide code of conduct in our social charter. The group board and the European Group and Global Workers Council have established this in the Volkswagen Group's joint declaration on social rights, industrial relations, as well as human and business rights, in short, the social charter, which was signed in 2020 as an amendment of the first social charter. We confirm our commitment to major international agreements and declarations, in particular, the International Bill of Human Rights and the Core Labor Standards of the International Labour Organization, ILO.
Our entrepreneurial activities follow the UN Guiding Principles on Business and Human Rights, or UN Global Compact, which determine the most important cornerstones for our actions. Volkswagen first joined the UN Global Compact almost 2 decades ago. Since then, Volkswagen has worked and engaged in this topic. Acknowledging the context in which we operate regarding human rights is crucial for comprehending the intricate nature of our operations within the Volkswagen Group. You should see the complexity of the Volkswagen Group's value chain. But that was this one. The Volkswagen Group operates in 162 countries around the world. It employs around 670,000 people at its 119 sites worldwide. The Volkswagen Group comprises of some 2,500 companies, including more than 1,200 controlled companies. Furthermore, we have more than 59,000 direct suppliers in more than 90 countries as our business partners.
In 2023, the Volkswagen Group of Companies comprises of, apart from the Volkswagen AG, 13 other group companies subject to mandatory reporting in accordance with Section 10 of the LKSG, to which the LKSG applies pursuant to Section 1 of the LKSG. The complexity of our operation and the vast network of suppliers underscores the magnitude of our responsibility and the complexity of this obligation. As a global company, we are aware of our responsibility to human rights and to comply with our due diligence obligations as regards human rights and the environment. This is the benchmark for our corporate activities throughout our supply chain and value chain. The establishment of the human rights officer role underscores our dedication to this cause. In the next few minutes, I will provide you with insights into my function and the tasks I undertake as the human rights officer for the Volkswagen Group.
It's abbreviated HRO, for short. As a global company, we are aware of our responsibility to human rights and to comply with our due diligence obligation as regards human rights and the environment. This is the benchmark of our corporate activities throughout our supply chain and value chain. For the first year in which the LKSG became valid, so last year, 2023, the Volkswagen Group's strategic objective concerning human rights was to ensure that the obligations imposed by the act were met completely in the best possible manner. For the 2023 fiscal or financial year, it has been, first of all, our ambition to implement the legal requirements in a timely and complete manner. This has been challenging given the local operational expansions of our business activities and the high complexity of our supply chains and value chains.
In the coming years, we will continuously review and improve our initial risk assessment system in terms of defending protected legal positions under human rights and environment laws, and to broaden it to include further strategic goals and objects of legal protection, including beyond the scope of the LKSG. To mitigate human rights and environmental risks, the LKSG specifies several due diligence obligations that companies must adhere to. These obligations include, among others, the implementation of risk analysis, the establishment of preventive measures, the adoption of remedial actions once legal violations have been identified, as well as the establishment of a whistleblower system. The effectiveness of these measures needs to be checked and documented continuously. The adherence to these obligations applies both to the Volkswagen Group's own business as well as its supply chain.
This supply chain, consisting of direct and indirect suppliers, is both complex and globally spread out due to the diversity of the Volkswagen Group's products. Now I come to the organizational setup and the Volkswagen Three Lines of Defense model in which the human rights officer plays a role. At Volkswagen, clear responsibilities are established throughout the group as part of the so-called Three Lines of Defense model as a regulatory framework for a realistic governance, risk, and compliance management system for managing corporate risk, including the risk to protect legal positions under the LKSG. The first line of defense consists of the specialist and functional departments responsible for day-to-day operational business. In their operational activities, they mitigate risks, including protected legal positions under the LKSG, which they detect at an early stage, analyze, and actively manage by means of suitable preventive measures.
Relevant divisions for ensuring the fulfillment of human rights and environmental due diligence obligations are defined in the LKSG and primarily include, in Volkswagen AG's own business area, the Human Resources Department, the Group Occupational Health and Safety Department, Group Security Divisions, as well as Group Procurement for Suppliers. The second line of defense consists of the advisory departments with regards to objective legal protection under the LKSG at group level, primarily Group Legal and Group Compliance. Furthermore, it's HR Compliance, Group Environment, and Group Occupational Health and Safety as well. These advisory departments are responsible mainly for ensuring compliance processes and for advising and supporting the operational divisions in their risk management activities. The third line of defense is internal audit. It is an all-encompassing and independent auditing body.
On August 1, 2022, the Volkswagen AG has created the independent and exclusive position of the human rights officer, in addition to the aforementioned structures. This role at Volkswagen is positioned in the three lines of defense model between the second and the third lines of defense as a continuously accompanying, controlling, monitoring, and consulting function. It therefore completes the holistic system for managing corporate risk as defined by the LKSG. The HRO's business area is represented by an organizational structure with currently more than 60 employees who have regionally focused and strategic cross-functional roles. The HRO's area focuses on monitoring, auditing, and consulting tasks in accordance with Section 4, Subsection 3 of the LKSG on behalf of the group board management.
In addition, the group board of management has delegated the HRO various responsibilities, which include internal and external communication, the report in connection with the LKSG, as well as coordinating the fulfillment of obligations of reporting and preparing a policy statement across the group, which refers to Sections 10 and 6 of the LKSG. The HRO reports directly to the member of the group board of management from finance at Volkswagen AG, whose area of responsibilities does not include the first and second lines of defense, which have to be monitored by the HRO.
The HRO was appointed by a resolution of the Group Board of Management on the 24th of June, 2022, as human rights officer as defined under Section 4, Subsection 3 of the LKSG for the whole of Volkswagen's own business area as described in Section 2, Subsection 6 LKSG, including the currently 13 other group companies that are subject to mandatory reporting along Volkswagen AG. In the same resolution, it was decided that the companies of the Volkswagen Group that are subject to mandatory reporting shall be at liberty to appoint their own human rights officer as defined in Section 4, Subsection 3 of the LKSG, in addition to the HRO. The decision was then embedded in a group policy governing the divisions of responsibility.
In 2022 and 2023, the companies Audi AG and Volkswagen Financial Services AG, which are both each subject to the mandatory reporting, each appointed a role of human rights officer to one person in addition to the group HRO in accordance with Section 4, Subsection 3 of the LKSG. In 2023, the companies Porsche AG and TRATON SE, which are also both subject to the mandatory reporting duties, each set up committees to perform monitoring, auditing, and consulting tasks on behalf of the two companies and their subsidiaries in addition to the HRO in accordance with Section 4, Subsection 3 of the LKSG. Irrespective of this, the HRO also monitors the aforementioned companies and performs the remit assigned by the group board of management in coordination with the functionaries of Audi AG, Volkswagen Financial Services AG, Porsche AG, and TRATON SE within the framework of a corporation model.
Last but not least, I would like to conclude my remarks by emphasizing once again, sustainability and social responsibility are an integral part of our corporate culture. We are deeply convinced that sustainable business is only possible through ethical and honest action. Volkswagen is committed to respecting the universal principles of human rights as set out in the United Nations Universal Declaration of Human Rights. This commitment forms the basis of our actions in our own business area and also in our supply chains, today and also in the future. I thank you for your attention, and I hand it over to Mr. Daniel Göhler, who represents the Group Procurement Department. Come further. Come closer. Thank you very much.
Thanks a lot.
Dear ladies, dear gentlemen, my name is Daniel Göhler. I'm heading the Sustainability Management Department for the Group Procurement Organization. Yeah, it's a pleasure to present you today our approach and our processes concerning supply chain due diligence. It has been a while since we began to think about sustainability and supplier relations. Ten years ago, in 2013, 2014, we implemented our first code of conduct for business partners into the first contracts. In 2019, for example, we embedded sustainability requirements into our sourcing process. Further steps, I will explain now. You will see the current status of our activities in the following slides. Before I start to explain in detail our processes, I would like to again underline and highlight the size and complexity of our supply chains. When talking about global supply chains of VW, we need to think in layers.
The first layer is our direct business partners, so our tier one suppliers. These tier one suppliers, we have around about 59,000 or more than 59,000 direct suppliers and an estimated more than 500,000 active part numbers, with most of them having also different supply chains. The second and third, fourth layer is the subsupply chain. This subsupply chain can contain up to 1,000 different supply chain actors for one single part. For some complex parts, it can be even more. We see, based on our experience and our supply chain transparency activities, that from the raw material extraction to the direct business partner we have, we count up to nine tier levels. Additionally, due to the high complexity and also due to the volatility of the supply chain, full supply chain transparency is currently not given.
We are not able to track each and every batch of the materials from the raw material extraction to the first business partner. Looking at the whole variety of subsuppliers and talking about figures, it is estimated that just for the parts distribution from our direct suppliers, we have around about 200,000-250,000 indirect suppliers. If we count also all service providers, machinery providers, and so on, it's estimated to be 1 million. Having said that, we have also a lot of impact. We would like to use that for a positive change also in the supply chain. Therefore, we are focusing on three different focus areas. First focus area, social, with human rights and responsible raw material sourcing. The second focus topic for us is the environment. Dirk also mentioned a lot about that. Compliance, and especially anti-corruption, is part of our third layer.
Today in the presentation, I would like to focus on the social aspects of our supply chain due diligence process. I explained a bit about the history in the beginning. We started in the beginning with a small team. Nowadays, we are more than 110 people, experts in the procurement organization worldwide working on supply chain due diligence and sustainability topics in the supply chain every day. For these experts, it is relevant that we are closely working together. We are using their knowledge. We are using their local expertise. They know the culture. They know the suppliers. They know the specifics and circumstances in the different brands and regions. Therefore, this sustainability family is for us an extremely relevant and helpful tool to also implement sustainability at scale in our supply chains.
For today's focus, I would like to show you two different management systems we have implemented. The first one is the Responsible Supply Chain System, short ReSC system. There we are focusing especially on direct business partners. And then part of it is our RMDDMS, the Raw Material Due Diligence Management System, which is especially designed to focus on the risks we have identified in the entire supply chain, especially on mining level and the raw material extraction level. Starting with the ReSC system, in 2022, we wanted to have one holistic management system which covers all different steps, all major steps of a due diligence process. And therefore, the first process step was for us to do a risk assessment. This is done on a yearly basis. So we are updating the risk analysis on a yearly basis.
Or if new events are coming in and we see that it's needed to update it faster, then we also do that. But as a first step, we are looking at these supply chain risks from a business point of view. So we are looking at the suppliers and the business model of the supplier. We are using internal and external sources, for example, studies, reports, but also results from our audits. And then in a second step, we are defining the risk for the specific supplier based on the risk and business model. In a second step, based on the criteria and the business model and the risk, we compare high, medium, and low-risk suppliers. And for each risk category, we have implemented specific standard measures.
These standard measures are, for example, that for in general, all suppliers, we put our requirements for sustainability and for suppliers in the code of conduct for business partners. The second step is that we have a grievance mechanism in place that if we receive hints for potential violations against our code of conduct for business partner, we also start a process and an investigation. And I will explain a bit more about that on the following pages. We have a media screening process in place. This media screening process covers especially the medium and high-risk suppliers. Also there, I have another chart prepared and go a bit more into detail.
Then, as mentioned before also by Dirk, we have our sustainability rating process prior to nomination of a supplier, where we try to assess the sustainability performance on a production plant level and on a site level of the supplier. Then we have our supplier trainings. So we offer different trainings formats to see or to build also capacity at the supplier site. Additionally to our identified and implemented standard measures, we have also deep dive measures and two additional supply chain management systems. First one is our human rights focus system. There we are focusing on dedicated systemic risks we have identified, for example, as part of our audit process. And we have the raw material due diligence management system. And I will talk about that also shortly.
These processes I just explained are all in detail described in handbooks, in process documentation, but also in a group policy to define also the responsibility in our organization with the groups and with the brands and regions. Talking about our supply chain grievance mechanism I just mentioned, the grievance mechanism is the process to work on hints of risks or violations concerning human rights and environmental topics in Volkswagen's supply chain. First of all, we start with receiving the hint. We can use different sources or we are using different sources. For example, we are using press articles, NGO reports, hints from employees of suppliers. This is the first step. We check in the first column, you can see here on the left-hand side if we have a business relationship or if this company is somehow connected to VW.
Second step is then determination of the responsibility, meaning that we are sharing the responsibility also with the brands and regions. If, for example, another brand has the biggest turnover with this company, the brand is then actively engaged and investigating the case. Of course, in a last step, we are checking if the allegations are plausible. Then we are starting with the second step, the processing, the investigation process. Basically, in most of the cases, we are starting with a direct communication with the supplier. We are asking them for additional documents. We are asking them for a statement if they, for example, are already familiar with the allegation and if they understand or if they already have implemented first mitigation measures. Second step is then the assessment of all the responses.
In some of the cases, we are also doing additional assessments with external parties. Like we are using several audit standards to assess the sustainability performance at the supplier site. The third point is then the definition and tracking of dedicated measures to end the violation or to mitigate the risks. Last step is then the case closure. When the measures are completed or a measure continuation plan is implemented, then we process review. We are doing a process review, and we are doing also a final documentation. From time to time, based also on the allegations and the hints, we are also including subject matter experts like our colleagues from the Environmental Department or the Legal Department. In most of the cases, we are closely working together also with the Group Compliance Department in working on the cases.
The media screening I just mentioned is now covering more than 30,000 suppliers worldwide. This media screening process is done with an external service provider together. It's called Prewave. This service provider is checking these supplier locations on a daily basis against potential connections between the supplier name and the supplier location and hints from, for example, press articles or social media articles. We have more than 40 event types and categories where we are having a focus on, especially environmental topics, but also health and safety topics, human rights issues, which are popping up in external media. There we get a direct feedback from the system and can act accordingly. In some of the cases where we see that we have hints received from the system, we are then, for example, using our supply chain grievance mechanism I explained before.
Prewave is screening the suppliers and the media in more than 150 countries in more than 50 languages. We started the rollout with the first suppliers in 2022 and are continuously rolling out it to our main business partners, but also in some of the cases to subsuppliers we have identified. Next one, and this is really relevant, is capacity building for suppliers. We are offering to the suppliers different types of training formats. For example, we have established a workshop for human rights due diligence, which explains and introduces the elements of human rights management systems and elaborates also on the implementation into business practices. We are offering additionally different e-learning platforms, e-learning formats like for the code of conduct for our business partners to explain our requirements. Also we are introducing and working together with other OEMs in the initiative Drive Sustainability.
are working also together to define training material and spread it to the different suppliers. For example, an introduction to the sustainability and supplier relations. Last but not least, we are also offering in addition support for suppliers which are struggling to fulfill our requirements in the first step, for example, with a webinar for the S-Rating to explain the S-Rating basics for explaining also the tools we're using in the S-Rating, like the on-site checks. In 2023, we have trained with these different training formats we have established around about 7,700 suppliers. The second management system for today I would like to show you is the Raw Material Due Diligence Management System. This management system is used to, in a first step, identify the main raw materials we're using in our cars and parts on a daily basis and check whether they have the biggest sustainability risks.
In the first step, we had identified in the past 16 high-risk raw materials. Now we updated also the risk management and the risk assessment and added two additional raw materials. We have one due diligence management system to cover these risks we have identified so far. We try to identify and implement specific measures for the dedicated risks we found in the supply chain for these specific raw materials. Therefore, we have implemented different measures like specific specification documents we are using. We are requiring more transparency and building more transparency. We are supporting different certification schemes and the work in initiatives. But also we are actively supporting local initiatives and on-the-ground projects, also Dirk mentioned before. As one example, the Cobalt for Development project in the Democratic Republic of Congo or the Responsible Lithium Partnership as part of our work in Chile.
We are striving towards a rollout of these high sustainability standards towards our sourcing processes and continuously improving, based on our knowledge, the standards and measures we are implementing. Currently, more than 20 people are actively working across the group in that field and exchanging ideas, exchanging their knowledge for the specific raw materials. To give you one example, I would like to talk about leather. Leather is one of the just mentioned 18 raw materials where we have identified high risks. We see that, for example, for leather, the risks in the direct business partner area, for example, seed suppliers or suppliers of steering wheels is not that high. If you look in the upstream supply chain and especially, for example, in the tanning process, in the tannery process, then you will see that there are, for example, severe environmental risks we need to cover.
Therefore, we, in the first step, joined the Leather Working Group. The Leather Working Group is an initiative where different stakeholders are working closely together from different platforms, from different industry sectors, but also NGOs and civil society actors are included. They developed in the past years a certification scheme which is also used in our specification sheets, for example. We are using these dedicated requirements for the leather supply chain in our sourcing processes for relevant leather products. Last but not least, I would like to talk about collaboration. Collaboration is, from my point of view, a key success factor in working on sustainable supply chains. We as VW are not able to cover all the risks and everything alone.
We need to work closely together with other partners, with civil society actors, with NGOs, and so on to be sure that also the acceptance of these standards in the supply chain is high. Just to name some of the examples, IRMA was covered before also by Dirk as one of the most ambitious initiatives for the certification of mining. This is also a raw material agnostic initiative and can cover several raw material sectors. We're also engaging in the Responsible Minerals Initiative, especially in our work on the so-called conflict minerals, but also the work in Drive Sustainability. And this is an initiative where we are working closely together also with other OEMs to define, for example, assessment standards like our SAQ we are using in our S-Rating system is of high relevance for us.
Other initiatives as well, like the Aluminium Stewardship Initiative, the just mentioned Leather Working Group, Copper Mark, or also the Responsible Mica Initiatives, are highly relevant for our overall approach to working closely together and have a huge impact on a positive change for the supply chain. Having said that, for us, sustainable supply chain management is a journey. So let's shape responsible and sustainable supply chains for future generations together. Thanks a lot. And I'm looking forward to your questions.
Daniel and Kerstin, thank you so much for doing the presentations here for our audience. I think very comprehensive and very detailed. Daniel, the first question, the icebreaker question I would have for you. I mean, given the vast territory you and your team have to work on, where do you think actually have you made biggest progress over the last couple of years?
Yeah. I think one major milestone was, for example, the integration of the S-Rating into our procurement systems. This was in the last year. In 2019, we started with the implementation, further rolled it out to bigger supplier groups. And now we are covering more than 80% of the total turnover of the procurement with these S-Rating systems. And we are focusing on the high-risk suppliers. But it is of high importance that we saw that before we implemented that system, that it was not easy to convince all the suppliers to also fill out the questionnaires, to accept audits, and so on. And to have that as part of the business decision was one key factor. And I think with that point in 2019, we also started to integrate sustainability into the DNA of procurement.
Therefore, I think this was one of the major milestones we achieved.
Very good. Yeah, while we are waiting here for the first questions on stage, please, as a reminder, put the question in the webcast. And if your name should be mentioned actually as part of the answer, then please type also your name. Otherwise, we will do it in an anonymous way. So there is, again, a question for Daniel. So on the supplier rating, it fits very well. Can you explain the supplier rating system and what's the distribution of scores across the suppliers? And does the system extend also to tier N, so to the various chains actually in the supply chain?
Yeah. I start with the last part of the question. It's basically designed for assessing the sustainability performance of our direct business partners. As only with them, we have a negotiation process. With them, we have a tender process. The process is designed to assess the sustainability performance prior to nomination. To explain a bit more about the process, we start with an SAQ, with a self-assessment questionnaire. I mentioned that before, that we developed that together with other OEMs and partners in Drive Sustainability. Now it's available in version five. It was updated continuously and also improved during the last years. This is the first step to assess the performance based on management systems which the suppliers have integrated, but also policies available, responsibilities, trainings they are performing. This is the first step. Then we are looking at also additionally the country risk of the supplier.
Based on the first information we have available, we are deciding if an additional on-site check is necessary. In this case, an external service provider is checking the sustainability performance also on production site level. Then both results will be combined to an S-rating. The S-rating can be an A, B, or C rating. If you have an A or a B rating, you are fundamentally eligible for awarding. So meaning it's possible that you are being nominated. In case of a C rating, in general, it's not possible to be nominated. I think this is also an active incentivization that the suppliers are continuously working on their sustainability performance. I mean, especially if you find risks or violations as part of an on-site check, then measures are agreed on.
They need to close the gaps, especially if they have a C rating, to then again be part of our supply chain.
Sounds to me as a very effective tool, actually, and also to motivate our suppliers to become better according to our standards in the future. Very good. So the second question is for Kristian. And the question is, how realistic is it that the function of a human rights officer alone is sufficient to ensure compliance? I think the right translation for LKSG is Supply Chain Due Diligence Act. In a corporation of your size, isn't that too much for one person?
Answer is it would be. Yes, it would be. But luckily, I'm not alone. First of all, I have the first line of defense and also the second line of defense, which I explained earlier, which are responsible for safeguarding the human rights issues that come along our own area of business as well as the supply chain. Also, my team comprises of more than 60 people currently. Also in the different group companies, we have mirroring organizations which are also responsible for monitoring and consulting the first and the second line of defense. So I'm not by myself. And that kind of answers the questions, I guess.
Very good. Thank you, Kristian. Yeah, and it's in particular in the stock quoted and stock listed entities like TRATON SE and in Porsche AG. OK. The next question comes from Justin from Hermes. And I think it goes to Daniel. So you mentioned IRMA, I-R-M-A, regarding mining. Could you confirm Volkswagen's continued support for the moratorium on deep sea mining?
Excellent question. Thank you. As we are supporting IRMA, we also continue to support the deep sea mining moratorium. This is for one specific reason. I think, or we think, that currently more research needs to be done to really assess the negative or potential negative impact from deep sea mining, especially to the biodiversity space in the deep sea. Therefore, we need to really carefully look at the impacts of these new mining activities deep sea. Therefore, yes, we continue the support.
The second part of the question from Justin is, you have a very clear supply assessment program, which you have set out very clearly. So thank you. I also found it very comprehensive. In the latest group sustainability report, you have set out a series of measures. However, it is difficult to assess how the company is progressing as I don't see the targets you are aiming for. Can you summarize Volkswagen's thinking in this area?
Yeah. Maybe I start with the specifics of the raw materials space. For the raw materials due diligence management system I explained before, we also report on a yearly basis transparently to our stakeholders in our responsible raw materials report. I can say now that we are planning to publish that document in May, where also you will see again our targets, but also our identified risks and the mitigation measures. We are continuously working. Dirk explained the Regenerate Plus strategy before. We're continuously working on also the targets and the KPIs we're setting. As part of the Regenerate Plus strategy, we also started internally to look based on the Regenerate Plus and the goals, how we as the department procurement can work on new and ambitious targets for that.
For example, one of the targets we also saw in the Regenerate Plus strategy is the S-Rating target, where we have the clear aim to have in 2040, 95% of the positive S-Rating ratings.
I think, if I remember correctly, Dirk mentioned a number of more than 60,000 suppliers. 95% would be really a lot.
Would be a lot.
OK, very good. Daniel, you're in high demand. The next question comes from Saida Eggerstedt from Schroders, who we know already from Dirk's session. First part is, will electrification lead to less suppliers or in-house manufacturing? And the second part, are you being able to train the supply chain as well?
First of all, I would like to start with the second question because I already talked in my presentation about the training and the training formats we are offering to the suppliers. And yes, we are being able to train suppliers in our supply chain. And this is an offer in the first step. So we are offering different formats. Also, our brand Audi has a dedicated program established, Act for Impact, where also different training formats are available for the suppliers who need support, who need the help, who would like to better understand several requirements or new processes maybe they have also to integrate by themselves. We are continuously working also on our training formats. And we try to support as much as we can the suppliers, also with the new legislation we see, with the new requirements from different sides.
Especially for small and medium-sized companies, in most of the cases, they are really struggling to have a full overview, to understand what they need to do. And therefore, this capacity building is one of our central points in the overall strategy. Will electrification lead to less suppliers or in-house manufacturing? I think for the electrification, there is a complete transformation of the whole automotive industry. And therefore, also, there is a change in the supplier landscape. For example, exhaust systems are not needed anymore if you're driving an electric car. And therefore, we will see new suppliers. We will see different suppliers. And especially the trend towards digitalization and software is something where also new providers are entering the markets or where, due to new technology, the supplier landscape as such is changing. Therefore, I think there will be a dramatic change in the supply chain. Yeah.
I think I would even amend, given where we currently see over the last, let's say, 2-3 years, away from globalization to more regionalization, that I would even stipulate that the number of suppliers could, and this is a little bit counterintuitive, even increase as we have to act more local for local in certain regions. And that might be well the case that where in certain cases, we might have had single or dual sourcing, we might now come to triple sourcing, is costing more money and is creating inefficiencies. On the other side, avoiding supply chain disruptions, actually, if the situation becomes uneasy. Very good. So the next question we have here is for Kerstin. And the question is, with the function of human rights officer, the Volkswagen Group fulfills a legal requirement. What is the significance of your work?
It's more a philosophical question, right?
I guess so, yeah. Well, it definitely extends the legal requirements. It definitely extends the scope that the law requires. So for example, or let me start by saying the function itself, yes, it was institutionalized in August 2022 at the advent of the group entering into the Supply Chain Due Diligence Act, which came into effect in January after. However, we did have a function of a human rights coordinator before that, for actually three years before that. That person was also putting in significant work and effort jointly with, again, the first and the second lines of defense to safeguard human rights along the supply chain as well as in the operations that we own. So the institutionalization was a logical step after the first steps we've taken before it becoming a legal requirement.
Now we have assigned to the role more than the law requires the role to do. As I explained earlier, for example, I not only have the duty to monitor and report internally and externally, but it's also my duty to communicate, like I'm doing today, as well as to relate with stakeholders, to engage with stakeholders, to be approachable for any type of interest groups, for the civil society as well as our shareholders and other groups of interest. I'm also the one channel of communication with regards to politicians or politics in general.
Or regulators.
Or regulators, yes, which more often than not also kind of mix into my role what's also responsibilities of other compliance officers around the world. So it does extend that a lot.
That's the complication because you are two and a half, basically, and not the third layer or the second layer. I can reassure you also that she is of very significance of my daily work because we have a lot of interaction. I'm really grateful that Kristian is on board and helps us in our daily work, actually, to get rather complicated circumstances explained and sometimes even solved in a very fast and in a very elegant manner.
Thank you.
Next question is for Daniel. And Daniel, the question is, what are you doing specifically to audit your suppliers? How do you detect violations? And I would even ask, how would you sanction it?
Yeah. OK. So how do you or what are you doing specifically to audit your suppliers? I think we have different audit and on-site assessment tools available, also based on which triggers the audit. First of all, I just explained the S-rating process. As part of the S-rating process, we are also doing on-site checks. There is a dedicated audit standard available, which is used and which is facilitated by an external service provider. They are doing the audit. And they are assessing the sustainability performance. And there, we are covering, for example, the different legal positions from the LKSG. And this, as you asked for the sanction, again, this result of an audit or an on-site check as part of the S-rating can lead also to a C rating. And therefore, it's not possible in general to nominate the supplier.
Additionally, we have also other audit standards available. I give you one example. In the HV battery supply chain, since years, we have the goal to increase transparency, to better understand which sub-supply chain partners are working daily with their materials for the production of our cells we receive from our business partners. Therefore, we have or using the tool of so-called forensic audits. It's a mapping audit where we check the supplier location, first step, and the business partner, the first supplier, against the OECD guideline for responsible sourcing for high-risk raw materials. And additionally, they are checking the warehouses, the shipping documents, to identify which Tier 2 suppliers are involved in the production of our parts. Then they are going to the Tier 2 suppliers, doing the same again. So it's a cascaded approach.
Another example is if we receive hints for potential violations as part of our supply chain grievance mechanism, we also have a dedicated audit standard available for assessing especially social risks. Therefore, for each type and each question we have, we try to have an answer within a fitting audit standard. I mean, this is continuously further developed.
Very good. And yeah, we have the last question coming from Jory Horrocks-Tyler from Columbia Threadneedle. Just as a precaution, we are not quite sure if we are the right persons to answer it, but we will find out, actually. But let me first raise the question. Thank you, Kerstin and Daniel. Really appreciate the presentations. Thank you. Join him in this applause. On the topic of leather procurement, how prepared is Volkswagen for the EU Deforestation Regulation? And will Volkswagen look to make a zero deforestation commitment? And well, Daniel.
I can take that.
OK, very good.
The EU Deforestation Regulation is something new. Therefore, we are currently still in the process. We finalized our scoping to see which parts, which materials are really in scope of the EU Deforestation Regulation. Now we are in the process of defining the right adjustments in the different departments and in the different processes, from sourcing process to the development process. We need to implement and design our processes in a new way to also be compliant with the EU Deforestation Regulation. This is not only covering leather, as you just mentioned, but also other materials as well. So if we will have a zero deforestation commitment available, I think you will see that at least by the end of the year if that's the decision done.
Very good. Thank you very much. Thanks for being here on stage. I think I can speak on behalf of all the, well, maybe the last one. Sorry. There was one last question, actually, coming in from Theodore Crowthers. I hope I pronounced it rightly, from the Church of England. Are Volkswagen actively acquiring stakes in critical mineral companies as a way to secure future supply? And if so, how do you see this impacting your transition to net zero? I would say, Daniel.
Excellent question. I think we can answer that in a written form because afterwards, we also need to align with the colleagues internally responsible for securing raw materials in general. I think, of course, as part of our transformation towards an e-mobility company, we also need to secure procurement and the long-term availability of materials. And therefore, there are different tools and mechanisms available. One of them could be also an involvement or a direct sourcing of materials.
Among others. Because these raw materials are only available in certain regions of the world.
Correct.
This is why we might be forced, actually, to do so. But the answer is, we will give a written feedback, actually. And that would then also be made available to the remainder of the audience. But now, no last question. I thank you very much. I'm looking very much forward to having you on a different occasion on stage again. And yeah, thanks for all the insights and your willingness to talk today to the audience. I think we had, at peak, more than 100 participants. Shows the great interest the investor community has into this topic. And thank you very much for joining us here on stage.
Thanks.
Thanks.
Thank you.
Very good. I hope the clicker works because there are some closing remarks I want to make. Yeah, as said, I hope you have enjoyed the presentations and the contents as much as I did. I hope it provided comprehensive and insightful information, which is useful for your daily work. It was the sixth conference we held. It shows you that we take the topic really serious and that we value the continued dialogue, be it with the ESG analyst community or the ESG investors. The recent highlights are shown here on that slide. Just to name a few, we have a new sustainability report published. It's really a lot of content in there. From next year on, it will be an integrated reporting together with our annual report. We have the lobby report.
I think this was a long-awaited publication we did, long time asked for at our annual shareholder meeting by some of you. The lobby report on the Association Climate Review posted on our website. The raw materials report 2024 will be released by the end of April. You have currently on the website the one dated, actually, from 2023. The PAI scorecard, I think, where we received a lot of positive feedback that it was a very comprehensive tool for your daily work. This is currently also in preparation. The update of the ESG KPIs should be published in due course. The condensed overview is allowing to give orientation over all these complex reports, actually, we are publishing. The new Green Finance report is to be expected in the first half of this year. We stay up with giving the transparency here.
Leaves me with mentioning the next occasions where you can meet us. So first of all, you hear from us with the delivery figures report on Wednesday, so already by tomorrow. In the course of the day, we will publish how deliveries developed over the first quarter of 2024. Then you have, on Thursday, the pre-close call, which will be held, I think, in late afternoon. It's 5:45 P.M. CET. The next occasion to meet us then in person is the China CMD. So I can only motivate you. We have already more than 100 registrations for this event, which is alongside the Beijing Motor Show on April 24 in Beijing. Then we are not tired, actually, to give you a continued update on Volkswagen. So Volkswagen's first or Q1 financials are due on April 30.
Then, obviously, the annual general meeting on May 29 with the dividend proposal, EUR 9 for the ordinary shares and EUR 9.06 for the preference shares. With that, I thank you very much for joining us, spending almost two hours with us on this Tuesday afternoon. We look very much forward to your feedback. Please keep us employed, asking questions. Anything which has been answered during the session, please shoot us an email. The CER team or the RR team or myself or the participants here in the presentations are more than happy to follow up. Thank you. Looking forward to speaking to you next time.