Good chain reaction – Greater sustainability together with suppliers

More than 14,000 direct suppliers: Sustainability in the supply chain is both a challenge and an opportunity – and an important strategic goal.

03/18/2021 Copy& illustrations: AUDI AG Talking Sustainable Business Reading Time: 7 min

Talking Sustainable Business – Key Facts

  • As part of the Volkswagen Group, Audi is committed to the goals of the Paris Climate Agreement
  • The goal of reducing CO2 in the supply chain contributes to the vision of achieving net carbon neutrality by 2050
  • Connected with partners worldwide: Audi has over 14,000 direct suppliers in more than 60 countries

Sustainability in the supply chain – this is both a challenge and an opportunity. Audi is present in more than 100 markets. The company’s supply chain is therefore widely branched. It is also subject to constant change and is highly complex due to the wide array of process steps and materials. “We interact with more than 14,000 direct suppliers from more than 60 countries,” says Marco Philippi, Head of Procurement Strategy. “That adds up to a large responsibility, but at the same time it offers enormous potential. If we succeed in steering the network in the right direction, then this not only has a positive effect on Audi, but also on our entire sector.”

Percentage of raw materials processed by Audi in vehicles; presentation based on own analyses.
Percentage of raw materials processed by Audi in vehicles; presentation based on own analyses.

“If we succeed in steering the network in the right direction, then this not only has a positive effect on Audi, but also on our entire sector.”

― Marco Philippi, Head of Procurement Strategy

“We take this duty seriously and work exclusively with partners who share our values.”

Johanna Klewitz, Coordinator for sustainability in the supply chain in Procurement Strategy

In 2020, Audi delivered 1,692,773 vehicles despite the coronavirus pandemic – each consisting of around 12,000 parts. “As a major industrial enterprise, we are very conscious of our responsibility for the environment and society. For Audi, the concept of being consistently sustainable means focusing holistically on processes that are as environmentally friendly as possible and on social working conditions,” says Marco Philippi. After all, even if Audi manufactures many parts itself, a large part of the value creation takes place on the supplier side. “Our globally distributed supply chain plays a key role.” And sustainability requirements are clearly defined for any suppliers and partners who want to collaborate with Audi.

“We take this duty seriously and work exclusively with partners who share our values. This is because we firmly believe that our suppliers play a key role in the sustainability performance of Audi,” says Johanna Klewitz, coordinator for sustainability in the supply chain in Procurement Strategy. The company’s commitment to ensuring responsible supply chains follows a clear strategy that can be split into three focal areas: environment, people and innovation.

On-site inspections carried out Group-wide

822

Number of suppliers that have provided information (SAQ)

More than

13,000

Sustainability rating for suppliers

A rating for more comparability and transparency: The sustainability performance of the Volkswagen Group’s suppliers has been recorded since July 1, 2019, using the so-called S-Rating (Sustainability Rating). By filling in a self-assessment questionnaire (SAQ), suppliers report on how they act sustainably in terms of social and environmental aspects and corporate ethics. In addition to the answers provided in the questionnaire, documents and certificates confirming the information are required. If the results of the SAQ are not satisfactory, independent sustainability assessors visit the suppliers to carry out an inspection and judge whether the supplier “can be awarded a contract” or “cannot be awarded a contract.” There are no gray areas. Suppliers have the opportunity of identifying potential for optimization and implementing improvements. Audi provides support here in the form of targeted training programs and workshops. In 2020, over 950 employees at supplier companies took part in online training. In addition, in 2020 the company established an information hub for suppliers on the topic (www.s-rating.audi). Why? Because solution approaches are varied.

S-Rating

Sustainability

S-Rating

With the S-Rating, we verify your commitment to the environment and socially responsible conduct. You will find all the information about the S-Rating and how to participate here.

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Environment: more than just individual measures

“Through the systematic electrification of the model range, a large part of the CO₂ emissions arise right here.”

Marco Philippi, Head of Procurement Strategy

“The switch to electric mobility creates entirely new challenges within the supply chain. But at the same time, it also creates opportunities, and we want to make use of these,” explains Marco Philippi. “Through the systematic electrification of the model range, a large part of the CO₂ emissions arise right here.” Up to 2025, the supply chain and upstream production processes will account for almost one quarter of all CO₂ emissions at Audi. To counteract this, the company launched an Audi CO₂ program in the supply chain back in 2018, in which measures are identified for reducing CO₂ emissions together with suppliers. These measures not only contribute significantly to reducing the environmental impact of the brand’s electric cars; the Aluminum Closed Loop project also plays a major role in reducing CO₂ emissions. Valuable primary raw materials are conserved at the same time with the intelligent closed loop.

As regards 2021, careful use of water is another example of the work being undertaken at Audi to conserve resources. “For our Water Stewardship Program, we work together with our suppliers to analyze potential risks in our supply chain – from both ecological and social perspectives. In this context, we identify processes for which excessively large amounts of water are required,” explains Roland Dieling, who is part of the sustainability in the supply chain team. Site-specific concepts are to be developed together with the suppliers so that we can ultimately meet the demands of the Water Stewardship Program. “There are opportunities in potentially closed cycles here as well. However, in contrast to CO₂ emissions, sustainable water management works only at the local level because the conditions on site are crucial for success.”

“For our Water Stewardship Program, we work together with our suppliers to analyze potential risks in our supply chain.”

― Roland Dieling, Team sustainability in the supply chain

The chemical recycling of mixed plastic waste also harbors great potential in terms of intelligent closed loops in the supply chain and the efficient use of resources. This is why the Karlsruhe Institute of Technology (KIT) and Audi launched a pilot project in 2020 as part of the THINKTANK Industrial Resource Strategies. The objective is to recycle mixed automotive plastic waste in a resource-conserving closed loop.

Saving of metric tons of CO₂ as a result of the Aluminium Closed Loop

Saving of metric tons of CO₂ as a result of the Aluminium Closed Loop

Net saving of metric tons of CO₂

More than:

165,000

Net saving of metric tons of CO₂ in the supply chain in 2020

More than:

335,000

ASI certified aluminum: Audi leads the way

Value Creation & Production 01/12/2021

ASI certified aluminum: Audi leads the way

AUDI AG has been awarded the “Chain of Custody” certificate from the Aluminium Stewardship Initiative (ASI), representing a milestone for the company.

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People: improving working conditions globally

“We have to take responsibility and as a company, and as a relevant customer, take a firm stand as regards our standards.”

Sarah Schwellinger, Expert for human rights duty of care in the supply chain

Audi continuously strives to improve working conditions for people, for example when handling critical raw materials in the supply chain. Sarah Schwellinger, expert for human rights duty of care in the supply chain at Audi, says: “Aside from environmental protection, our supply chain strategy also places a strong focus on social challenges. There are some 1,600 kilograms of different raw materials in an Audi. This leaves not only an ecological footprint, but a social one as well.” The Volkswagen Group’s Code of Conduct for Business Partners summarizes the requirements Audi places on all of its partners.

In this regard, the experts at Audi consider not just its direct suppliers: “We have to take responsibility and as a company, and as a relevant customer, take a firm stand as regards our standards,” says Sarah Schwellinger. “We usually have indirect influence – sometimes even direct influence – on all the people involved in the supply chain, their work, lives and families.” It is important to the company to take its responsibility seriously. There are numerous examples of this, such as the Sustainability Rating with its on-site inspections, the activities of the company in the area of human rights, the formation of strong alliances and cooperation in initiatives.

Innovation: promoting transparency and identifying sustainability risks

“Thanks to the closer integration of Artificial Intelligence (AI), for instance, we want to continually increase transparency in the global and complex supply chains.”

Susanne Lenz, Expert for sustainability in the supply chain

Apart from the direct suppliers, the upstream chain is also critical. “By collaborating closely with our partners, we want to make our supply chain increasingly transparent. This gives us a continuously better understanding of the measures we have to take to set the right course from the outset,” explains Susanne Lenz, a member of the sustainability in the supply chain team.

The figure of around 14,000 direct suppliers is already impressive, but the topic becomes even more complex when the upstream chain is considered. Here Audi uses the latest technologies, for example to identify sustainability risks early on and intervene appropriately. “Thanks to the closer integration of artificial intelligence (AI), for instance, we want to continually increase transparency in the global and complex supply chains,” says Susanne Lenz. “As an example, if AI detects critical new reports in media in relation to sustainability, we are informed and can act accordingly. Negative reports about suppliers or raw materials manufacturers are thus noticed at an early stage and we can process these systematically via our Supply Chain Grievance Mechanism where necessary,” says the expert. This kind of approach to innovation can arise only through a continuous exchange with all stakeholders. Many of the ideas come from joint workshops and hackathons, which Audi is consolidating with other new approaches in the Act4Impact program.

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How is Audi shaping the future? You will find answers in the Audi Report 2020, the first combined annual and sustainability report of AUDI AG.

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