annual review indst 2024 public - Flipbook - Side 24
24
EOS
CASE STUDY
Volkswagen
Volkswagen produces and sells passenger cars and
light commercial vehicles and develops vehicles and
components for group brands including Porsche, VW,
Audi, Skoda and Seat.
In late 2022, Sheffield Hallam University published a report
highlighting concerns about the high risk of human rights
abuses in the Xinjiang region of China, particularly linked
to the automotive industry. Volkswagen Group had a longstanding joint venture with SAIC, which was implicated in
the report. Although the company had previously
conducted an internal investigation and found no
evidence of forced labour, MSCI applied a red flag to
the Volkswagen Group, due to a lack of third-party,
independent verification.
Under pressure from investors, the
company investigated the concerns
raised and in July confirmed it would
carry out an independent audit of
the plant to assess the situation.
In March 2023 we raised our concerns with the company and
it confirmed that it had a joint venture with SAIC in the area
inspecting, testing and approving cars for the Chinese market.
Under pressure from investors, the company investigated
the concerns raised and in July confirmed it would carry
out an independent audit of the plant to assess the
situation. In September 2023 the company published the
results of the audit and confirmed that the audit had found
no human rights abuses, Although this was sufficient for
MSCI to remove its red flag, we highlighted a number of
apparent inconsistencies with the audit and met with the
company in January 2024 to press for a fuller explanation.
6
VW buckles after years of pressure to sell up in Xinjiang | Reuters
We also asked the company to evaluate its other joint
ventures in the region. In February, the company stated that
it had carried out a review at other sites and found no
evidence of human rights abuses. We continued to request
further information and in September the company
published the full audit report.
This highlighted the difficulties faced by companies
operating in the area when carrying out fully independent
audits. This was due to local regulations requiring
government oversight, state-appointed interpreters,
restrictions on collecting data and a risk of reprisals
against workers and the companies carrying out the audit.
After increased concerns from investors and media
reports, in November 2024, the company announced
that the sites in the Xinjiang region had been sold,
citing economic reasons.6
We continued to request further
information and in September
the company published the full
audit report.
While this relieves Volkswagen of potential direct links
with forced labour in the region, the risk of issues in the
supply chain remains and we will continue to press the
company to demonstrate appropriate due diligence,
particularly in the high risk areas of its supply chain.
Justin Bazalgette
Themes: Climate Change,
Corporate Reporting
