The automotive industry is undergoing a significant transformation, with sustainability and electrification emerging as central pillars for its future. As cars contribute to more than 20% of national greenhouse gas emissions, the demand for cleaner, more sustainable alternatives is driving innovation.

Electric vehicles -EVs- are at the forefront of this change, offering substantial potential to mitigate emissions and reduce the carbon footprint of transportation. This report delves into the sustainability efforts of leading automotive brands -Tesla, Volkswagen, BMW, and Ford- evaluating their performance in key areas such as ecological impact, energy consumption, recycling rates, supply chain transparency, and long-term sustainability goals.

Introduction to Volkswagen

Volkswagen, a global automotive powerhouse headquartered in Wolfsburg, Germany, is aggressively transitioning to an electric future, aiming to make electric vehicles (EVs) affordable and accessible to the mass market. In 2023, the company generated USD 348.5 billion in revenue and produced 9.3 million light-duty vehicles, including internal combustion engine (ICE) vehicles, plug-in hybrid electric vehicles (PHEVs), and battery electric vehicles (BEVs).

Volkswagen has set ambitious sustainability targets, including a 50% reduction in scope 1 and 2 emissions by 2030 and a 30% reduction in downstream scope 3 emissions by 2030, compared to 2018 levels. However, with only 8% of its total vehicle sales comprising low-carbon vehicles in 2023, it faces significant challenges in scaling up its low-carbon business models and achieving its emission reduction goals.

Despite these challenges, Volkswagen’s focus on electrification and emission reductions positions it as a key player in the global automotive industry’s transition to clean energy.

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Criteria

Carbon Footprint, High

Volkswagen is committed to achieving carbon neutrality by 2050, with significant steps already taken toward reducing vehicle CO₂ emissions, targets a 30% reduction by 2030. The company delivered 771,100 electric vehicles in 2023, a 34.7% increase from the previous year. It is also expanding its renewable energy use in production, with a goal of reducing production-related emissions by 45% per vehicle by 2025. Volkswagen is investing in Zero Impact Factories, innovating EV battery technology and plans to develop 40,000 fast-charging points by 2025 to support EV adoption, aligning with the EU Taxonomy for sustainable business practices.

Ecological Impact, Medium

Volkswagen’s ecological impact is a mix of progress and challenges. Notable achievements include saving over 850,000 metric tons of CO₂ through its Aluminum Closed Loop and reusing 77,090 tools in 2023. Volkswagen’s environmental compliance system and goTOzero (their environmental mission statement) aim to reduce impacts across product life cycles, and the company supports biodiversity conservation.

However, sourcing raw materials for EV batteries remains a challenge. The company has faced greenwashing accusations due to its past emissions scandal, which undermines its environmental credibility.

Energy Consumption, Medium

Volkswagen’s production plants operate on 100% renewable energy, utilizing energy-saving technologies such as robotics and heat recovery. Since 2010, energy requirements per vehicle have decreased by 21%. Volkswagen is also supporting the expansion of renewable energy sources, including wind and solar projects, such as a 170 million kWh solar plant in Germany, and aims to use renewable energy for its operations and customer services.

Freight Density, Medium

Volkswagen optimizes logistics using circular economy principles and digitalization to reduce transportation and emissions. The company plans to operate 40,000 fast-charging points by 2025 across Europe, China, and the USA. Volkswagen also prioritizes rail logistics, aiming to increase rail transport with green electricity, and is introducing electric trucks in its logistics network. Additionally, the company is rolling out LNG ships (ships transporting liquefied natural gas) and exploring vegetable oil biofuels for sustainable shipping.

Recycling Rates, High

Volkswagen is advancing decarbonization and resource efficiency with investments in low-carbon technologies, such as the Dual-Rotor Motor, generating 15% of its revenue from low-carbon businesses. The company is reducing reliance on primary raw materials by using recycled and renewable materials from high-voltage batteries at its Salzgitter facility and precious metals from used catalytic converters and promoting closed loops. Since 2010, Volkswagen has cut waste per vehicle by 75.9%, reinforcing its commitment to circular economy practices.

Saving Levels, Medium

Volkswagen is advancing decarbonization and resource efficiency with investments in low-carbon technologies, such as the Dual-Rotor Motor, generating 15% of its revenue from low-carbon businesses. The company is reducing reliance on primary raw materials by using recycled and renewable materials from high-voltage batteries at its Salzgitter facility and precious metals from used catalytic converters and promoting closed loops. Since 2010, Volkswagen has cut waste per vehicle by 75.9%, reinforcing its commitment to circular economy practices.

Specific Product Monitoring, High

Volkswagen uses lifecycle analysis (LCA) to track the environmental impact of its electric vehicles (EVs) and partners with SK TES (“global leader in sustainable technology lifecycle solutions for the commissioning, deployment and retirement of technology assets”) for battery recycling. It also employs the Mobility Impact Analyzer (MIA) to assess sustainability in new mobility solutions and ensures chemical compliance through its governance model, with regular audits to meet environmental standards.

Supply Chain Waste, Medium

Volkswagen places significant importance on sustainable sourcing and reducing supply chain waste. In 2023, the company trained 7,791 suppliers on sustainability, with 79% of its revenue coming from suppliers with positive sustainability ratings. The company works to ensure human rights and environmental protection across its supply chain through audits, risk analyses, and training.

Sustainability Scorecards, High

Volkswagen tracks sustainability with detailed scorecards and aims for an 80% reduction in Scope 1 and 2 emissions by 2030. The company’s annual nonfinancial report includes ESG activities and projections. ESG performance is managed through materiality analyses, with Board remuneration linked to KPIs.

Volkswagen holds a C+ ESG rating from ISS, a stable “medium risk” from Sustainalytics, and follows the EU Taxonomy for sustainable financing. The company aims to reduce Scope 1 and 2 emissions by 50% and Scope 3 by 30% by 2030.

Water Management, Medium

Volkswagen is also focused on water conservation, with several plants implementing closed-loop systems that significantly reduce freshwater consumption. The Pune plant, for example, reuses 99% of its water, reducing freshwater use by 75%, while the LEED Platinum-certified Chattanooga plant recycles 95% of process water. The company aims for wastewater-free production and continued reductions in freshwater usage across its sites.

Conclusion

Volkswagen is advancing sustainability through carbon reduction, resource efficiency, and electrification.

While notable progress has been made, including increased EV production and a shift to renewable energy, challenges remain in areas like sourcing raw materials for EV batteries, scaling low-carbon vehicle production, and improving supply chain sustainability.

Related to other brands

Number of criteria met by each brand:

ESCP Business School Team

Research developed by five curious international ESCP Business School students who have worked together to successfully complete their consulting project. They analysed four brands in four different categories -24 brands: electric cars EV, dairy products, computers, personal care, luxury apparel, fast fashion-, according to 10 environmental criteria.

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