EU taxonomy
The European Union is increasing its focus on climate change mitigation. The “European Green Deal” and the goal of becoming the first carbon-neutral continent by 2050 are an expression of the EU’s great ambition and provide the framework for a broad package of measures.
The EU taxonomy represents the bloc’s next logical step on this path and, at the same time, is one of the central measures in the aforementioned package. Its goal is to redirect capital to sustainable investments while fostering transparency and the long-term in financial and economic activity. To this end, the EU Taxonomy Regulation1 and the associated delegating acts, some of which have not yet been drafted, define criteria to make companies’ sustainable business operations uniformly measurable and comparable. At the same time, the EU taxonomy goes beyond the climate change mitigation aspect to require additional compliance with social aspects, for example.
Voluntary reporting by the Audi Group
The Audi Group is a fully consolidated Volkswagen Group company and is therefore not required to provide a separate report in accordance with EU taxonomy criteria. However, from 2021 onward, Audi will be fostering transparency by publishing a voluntary report of the key figures relating to the EU taxonomy, thus reflecting the priority Audi gives to ESG (environment, social and governance) criteria. Sustainability has a central role for the Four Rings and this is to be demonstrated visibly.
For the 2021 fiscal year, the EU requirements only specify the publication of information about taxonomy-eligible activities. However, the Audi Group is already publishing information and the corresponding key figures relating to both taxonomy-eligible and taxonomy-aligned activities for this period.2
What makes an economic activity taxonomy-eligible or taxonomy-aligned?
What makes an economic activity taxonomy-eligible or taxonomy-aligned?
An economic activity is considered taxonomy-eligible if it is listed in the EU taxonomy and can potentially contribute to realizing at least one of the following six environmental goals:
- Climate change mitigation
- Climate change adaptation
- Sustainable use and protection of water and marine resources
- Transition to a circular economy
- Pollution prevention and control
- Protection and restoration of biodiversity and ecosystems.
The assessment of these criteria for the Audi Group and the corresponding results are described below.
Step 1: EU taxonomy-eligible
Step 1: EU taxonomy-eligible
The Audi Group’s business model covers the development, production and marketing of vehicles and the associated activities. Within the meaning of the EU Taxonomy Regulation, activities in these areas are suited to making a substantial contribution to the environmental goal of climate change mitigation through the expansion of clean or climate-neutral mobility.3
Under the “climate change mitigation” environmental objective, the Audi Group allocates all the itemized activities to the economic activity “Manufacture of low-carbon technologies for transport.”4 This applies to all cars and motorcycles produced, irrespective of the drive technology, and includes genuine parts as well.
In Audi’s current estimation, hedging transactions and individual activities of subordinate importance, which are reported as other sales revenue in Audi’s consolidated financial statements, should not be assigned to an economic activity and are therefore not deemed to be taxonomy-eligible.
Other activities which are directly connected with the aforementioned vehicle-related business and, in Audi’s estimation, should also be assigned to this economic activity, are not currently classified as taxonomy-eligible. On the basis of the requirements published by the EU, it was not clear which economic activity they should be assigned to in accordance with the EU taxonomy. These activities particularly include the sale of engines and powertrains, as well as parts deliveries and production under license by third parties, which are also reported as other sales revenue.
Step 2: Fulfillment of screening criteria
Step 2: Fulfillment of screening criteria
The key performance indicator for fulfilling the screening criteria is the CO₂ emissions of the vehicles produced by Audi. In our vehicle-related business, we have detailed the vehicles manufactured by us by model and powertrain technology and analyzed the CO₂ emissions associated with them in accordance with the WLTP. In this way, we have identified those vehicles among all of our taxonomy-eligible vehicles that meet the screening criteria and with which the substantial contribution to climate change mitigation is measured. These include all the Audi Group’s fully electric vehicles (BEV). Until December 31, 2025, they also include passenger cars and light commercial vehicles with CO₂ emissions of less than 50 g/km. This encompasses the majority of the Audi Group's plug-in hybrids (PHEV).5
During the reporting period, the following Audi model series fulfilled the criterion of CO2 emissions equal to 0 g/km:
- BEV: Q4 e-tron, e-tron, e-tron GT
During the reporting period, the following Audi model series fulfilled the criterion of CO2 emissions of less than 50 g/km:
- PHEVs of the model series A3, Q3, A6, A7 and most of Q5.6
For fulfilling the screening criteria, a CO₂ threshold of 0 g/km already applies to motorcycles. None of the motorcycles in the Ducati product range currently meets this requirement. At the same time, development work already started on fully electric motorcycles in the 2021 fiscal year.
Audi e-tron GT quattro: Power consumption (combined*) in kWh/100 km: 21.6–19.6CO₂ emissions (combined*) in g/km: 0
Information on fuel/power consumption and CO₂ emissions with ranges depending on the selected equipment of the vehicle.
Only consumption and emission values according to WLTP and not according to NEDC are available for the vehicle.
Audi RS e-tron GT: Power consumption (combined*) in kWh/100 km: 22.1–19.8CO₂ emissions (combined*) in g/km: 0
Information on fuel/power consumption and CO₂ emissions with ranges depending on the selected equipment of the vehicle.
Only consumption and emission values according to WLTP and not according to NEDC are available for the vehicle.
Audi e-tron GT quattro: Power consumption (combined*) in kWh/100 km: 21.6–19.6CO₂ emissions (combined*) in g/km: 0
Information on fuel/power consumption and CO₂ emissions with ranges depending on the selected equipment of the vehicle.
Only consumption and emission values according to WLTP and not according to NEDC are available for the vehicle.
Audi RS e-tron GT: Power consumption (combined*) in kWh/100 km: 22.1–19.8CO₂ emissions (combined*) in g/km: 0
Information on fuel/power consumption and CO₂ emissions with ranges depending on the selected equipment of the vehicle.
Only consumption and emission values according to WLTP and not according to NEDC are available for the vehicle.
Step 3: Compatibility with other environmental goals (do no significant harm – DNSH)
Step 3: Compatibility with other environmental goals (do no significant harm – DNSH)
Ecologically sustainable economic activities within the meaning of the EU taxonomy must not only contribute to at least one of the defined environmental goals but may also have no negative impact on the other environmental goals. The DNSH criteria for economic activities define the minimum requirements which must be fulfilled in order to exclude any significant harm to any of the other environmental goals.
In the year under review, the DNSH criteria for the economic activity “Manufacture of low-carbon technologies for transport” for the Audi Group were analyzed at the higher level of the Volkswagen Group. For the vehicle-related business, the analysis was performed at the level of the individual production sites which manufacture or will in the future manufacture Audi vehicles that fulfill the screening criteria named under step 2 above or will do so in the future in accordance with the five-year plan.
The Volkswagen Group’s Annual Report presents the key interpretations and analyses used by the Volkswagen Group to examine whether any substantial harm has been done to the other environmental goals. The result of these assessments is that the Audi Group’s vehicle-producing sites fulfilled the DNSH criteria in the year under review.7
Step 4: Minimum safeguards
Step 4: Minimum safeguards
The minimum safeguards consist of the OECD Guidelines for Multinational Enterprises, the United Nations Guiding Principles on Business and Human Rights, the Fundamental Conventions of the International Labour Organization (ILO) and the International Bill of Human Rights.
The Volkswagen Group has conducted human rights risk assessments for all Audi Group companies; this included all sites that were also examined under the DNSH criteria. For the risks identified in the analysis, the companies received risk-specific measures to be implemented by the end of 2021.
Audi Group key figures in accordance with the EU taxonomy
The following paragraphs present the taxonomy-eligible key figures for revenue, capital expenditure and operating expenditure for the Audi Group as well as the taxonomy-aligned key figures for the 2021 fiscal year.
As a general rule, revenues are directly assigned to an economic activity because a direct connection to the vehicles can be established in accordance with the screening criteria.
Capital and operating expenditures without a direct connection to vehicles are broken down using an allocation formula in order to fulfill the screening criteria. The allocation formulas used were based on the long-term sales plan and the planned capacity and capacity utilization at the individual sites. The data and planning figures used are part of the medium-term financial planning for the next five years agreed by the Board of Management and Supervisory Board of the Audi Group.
Revenue of the Audi Group in 2021 totaled EUR 53.1 billion. Of this amount, EUR 42.7 billion, or 80.6 percent, was attributable to the economic activity “Manufacture of low-carbon technologies for transport” and therefore classified as taxonomy-eligible. This mainly includes the sales revenue from new and used vehicles, including motorcycles, from genuine parts, from extended warranties, and from the rental and lease business.
Of this amount, EUR 6.8 billion, or 12.8 percent, fulfilled the screening criteria (see step 2). Because it satisfies the DNSH criteria and minimum safeguards, this proportion of sales revenue can be classified as taxonomy-aligned. In the case of fully electric models only, this applied to EUR 4.1 billion or 7.6 percent of Audi Group revenue.
Thus, of the Audi Group’s total sales revenue in fiscal year 2021:
- taxonomy-eligible sales revenue: EUR 42.7 billion or 80.6 percent
- taxonomy-aligned sales revenue: EUR 6.8 billion or 12.8 percent
In accordance with the EU taxonomy, capital expenditure covers additions to intangible assets, property, plant and equipment, leasing and rental assets, and investment property.
In fiscal year 2021, additions in the Audi Group amounted to
- EUR 2.1 billion from intangible assets
- EUR 1.9 billion from property, plant and equipment
- EUR 12.0 million from leasing and rental assets and investment property
Thus, in accordance with the EU taxonomy, capital expenditure totaled EUR 4.0 billion.
All capital expenditure attributable to the vehicle-related business was associated with the economic activity “Manufacture of low-carbon technologies for transport.” No substantial capital expenditure was assigned to the other activities in the vehicle-related business (especially engines, powertrains and parts deliveries) that were initially not included. Taxonomy-eligible capital expenditure therefore amounted to EUR 4.0 billion.
The substantial contribution was calculated by first determining all capital expenditure with a direct connection to vehicles that fulfill the screening criteria.
This capital expenditure was assigned entirely to taxonomy-aligned expenditure. Capital expenditure that was not clearly attributable to a particular vehicle was taken into account on a proportionate basis using allocation formulas.8
Capital expenditure relating to vehicles that meet the screening criteria amounted to EUR 1.6 billion. Taking into account the DNSH criteria and minimum safeguards, 41.3 percent of total capital expenditure was taxonomy-aligned in 2021.
Thus, of the Audi Group’s total capital expenditure
- taxonomy-eligible capital expenditure: EUR 4.0 billion or 100 percent
- taxonomy-aligned capital expenditure: EUR 1.6 billion or 41.3 percent
In the case of fully electric vehicles (BEV), a total of EUR 1.3 billion, or 33.5 percent, is included in the taxonomy-aligned capital expenditure, of which:
- EUR 0.6 billion from additions to capitalized development costs
- EUR 0.6 billion from additions to property, plant and equipment
In accordance with the EU taxonomy, operating expenditure covers non-capitalized research and development costs, expenditure for maintenance and repair, and short-term leases.
All operating expenditure attributable to the vehicle-related business is associated with the economic activity “Manufacture of low-carbon technologies for transport” and was therefore classified as taxonomy-eligible.
The material contribution was calculated by first determining all non-capitalized development costs with a direct connection to vehicles that fulfill the screening criteria. Non-capitalized development costs that were not clearly attributable to a particular vehicle were taken into account on a proportionate basis. For this and other operating expenditure, the Audi Group used the same allocation formula as was used for capital expenditure.
Thus, of the Audi Group’s total operating expenditure:
- taxonomy-eligible operating expenditure: EUR 2.5 billion or 100 percent
- taxonomy-aligned operating expenditure: EUR 0.8 billion or 33.4 percent
EU taxonomy indicators reflect Audi’s progress in implementing its electromobility roadmap
In 2021, the Audi Group already reported a taxonomy-aligned share in revenue of 12.8 percent and aims to increase this share successively. To this end, Audi is consistently switching its product range to electric vehicles in all core segments. With taxonomy-aligned capital expenditure, especially for development and property, plant and equipment, accounting for more than 40 percent of total capital expenditure in 2021, Audi is today already laying the foundation for a sustainable future as defined by the EU taxonomy. By 2026, Audi will already be introducing only new fully electric vehicles to the global market. As of 2027, the company will offer electric models in all core segments.
Making environment, social and governance factors integral at Audi
However, Audi’s activities go far beyond the electrification of vehicles. Already today, net carbon-neutral production9 has been achieved at several sites (Mission:Zero). Using the decarbonization index (DCI),10 Audi is focusing on CO₂ emissions along the entire value chain. Since 2019, a positive sustainability rating (S rating) has been a prerequisite for awarding contracts to suppliers and makes a significant contribution to sustainability in the supply chain.
Audi is convinced that a sustainable business model is measured by the perception of its social responsibility and good governance. Therefore, the company has defined ESG as a keypillar of the “Vorsprung 2030” strategy. Increasingly, ESG criteria will be integral components of corporate and product decision-making and management remuneration. For example, since 2022, taxonomy-aligned sales revenue has ranked alongside the DCI as one of Audi’s ESG management targets.
EU taxonomy reporting one element of greater ESG transparency
In order to achieve greater transparency and comparability with its competitors, Audi is not only making voluntary EU taxonomy disclosures in its combined annual and sustainability report but will in future be subject to ESG assessment by an independent rating agency. For more detailed information on the EU taxonomy, please also read the Annual Report of the Volkswagen Group.
