Ingolstadt

Sustainability in the supply chain: both a challenge and an opportunity

Audi is present in more than 100 markets and produces at 13 production locations in 10 countries in order to be as close to its customers as possible. Accordingly, the company’s supply chain is highly complex. Audi therefore attaches great importance to extensive monitoring of its own value chain: The reduction of CO₂ emissions, careful handling of resources, and social responsibility are top priorities.

11/09/2020 Reading Time: 3 min

Power consumption, combined*: 28.3–27.5 kWh/100km (NEDC); 28.1–26.4 kWh/100km (WLTP)CO₂ emissions, combined*: 0 g/km

Power consumption, combined*: 28.3–27.5 kWh/100km (NEDC); 28.1–26.4 kWh/100km (WLTP)CO₂ emissions, combined*: 0 g/km

In order to live up to these goals, the company is developing environmental standards, campaigning continuously for better working conditions, and increasingly integrating new technologies to increase traceability in the supply chain. It is both a challenge and an opportunity, as Marco Philippi, Senior Director Procurement Strategy, and his colleague Johanna Klewitz, Team Lead Procurement Strategy, Sustainability, explain in the interview. 

The switch to electric mobility creates entirely new challenges within the supply chain. But at the same time, it also creates opportunities, and we intend to make use of them.

Marco Philippi, AUDI AG, Senior Director Procurement Strategy

Mr. Philippi, why is there an increased focus on sustainability in the supply chain at Audi?
Marco Philippi:
Because this is where roughly one quarter of all CO₂ emissions will be generated at Audi by 2025. The battery of an electric car comes with a huge backpack of CO₂ from upstream manufacturing processes. Our aim is to reduce it as best we can even before the car is handed over to the customer. There are also risks associated with the raw materials used. The switch to electric mobility thus creates entirely new challenges within the supply chain. At the same time, new opportunities also arise, and we intend to make use of them.

“It is our conviction that our suppliers play a key role in our success when it comes to sustainability.”

Johanna Klewitz, AUDI AG, Team Lead Procurement Strategy, Sustainability

How do you gather a network of more than 14,000 direct suppliers worldwide at one table to talk about greater sustainability?
Marco Philippi:
We have various approaches, ranging from supplier workshops and digital, connected cooperation with our suppliers all the way to clear obligations, for example using green electricity in cell production. We have a clear strategy that we are pursuing, and our partners are aware that they also bear great responsibility as our suppliers.

Johanna Klewitz: We already established a mandatory contract award criterion with our Sustainability-Rating (S-Rating) more than a year ago. It helps us to assess suppliers in the areas of social matters and environment. We collaborate exclusively with partners that share our values. It is our conviction that our suppliers play a key role in the success when it comes to sustainability at Audi.

Marco Philippi, Senior Director Procurement Strategy, and his colleague Johanna Klewitz, Team Lead Procurement Strategy, Sustainability
Marco Philippi, Senior Director Procurement Strategy, and his colleague Johanna Klewitz, Team Lead Procurement Strategy, Sustainability

With its passenger cars, the Volkswagen Group causes one percent of global man-made carbon emissions. At the same time, it was one of the first to sign up to the Paris Climate Agreement, with the vision of operating with net climate-neutrality by 2050. Are you on the right track to achieving your goal?
Johanna Klewitz: We are putting all our energy into this, in all areas of the company. For example, we achieved net savings of more than 150,000 metric tons of CO₂ through our aluminum recycling process at the Neckarsulm site in 2019. The aluminum offcuts from the press shop are fed straight back into the material loop in a closed cycle. As a result, we need less primary aluminum and therefore emit less CO₂. We rolled out the process at the Ingolstadt site as well this year, and the Hungarian site in Győr will follow next year. We are also looking at further materials that we can introduce into cycles.

Marco Philippi: In addition to our direct suppliers, our upstream chain is also seeing an extreme increase in importance. This is where the majority of the CO₂ emissions are generated. By collaborating closely with our partners, we aim to make our supply chain increasingly transparent. For example, our understanding of which measures we need to introduce in order to set the right course right from the start is improving every day. We want to provide active assistance to all players, support intermediate technologies, and take a step-by-step approach to achieve our vision.

Power consumption, combined*: 28.3–27.5 kWh/100km (NEDC); 28.1–26.4 kWh/100km (WLTP)CO₂ emissions, combined*: 0 g/km

Power consumption, combined*: 28.3–27.5 kWh/100km (NEDC); 28.1–26.4 kWh/100km (WLTP)CO₂ emissions, combined*: 0 g/km

The sustainability efforts at Audi refer to not only the reduction of CO₂ but also the careful handling of resources and compliance with human rights in the supply chain.
Johanna Klewitz: How we handle water as a resource is a good example here. To ensure sustainable water management, we analyze potential risks in our supply chain together with our suppliers. This includes identifying processes that require above-average quantities of water. We are establishing control mechanisms and preparing site-dependent concepts to secure the water supply for suppliers and our production network without this having negative effects on our environment. There are opportunities in 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.

Marco Philippi: Aside from environmental protection, our supply chain strategy also places a strong focus on social challenges. An Audi is made up of around 1,600 kilograms of different raw materials – that leaves not only an ecological footprint but also a social one. Let me return to the topic of aluminum as an example. Natural resources are required for the production of aluminum. When we mine bauxite, for example, we have to consider the locations of the mines and the concerns of the local residents. It is therefore not sufficient to only look at what happens at our direct suppliers. We have to take responsibility and take a stand with our standards as a company and as a relevant customer.

For us, sustainability means taking responsibility for our environment and the people. We act consistently and transparently. For our vision: Audi’s supply chain has a positive impact on people’s lives and the environment.

Marco Philippi, AUDI AG, Senior Director Procurement Strategy

How can you succeed down to the last detail with such a complex supply chain?
Marco Philippi:
By scrutinizing our management systems, adjusting and expanding them, and specifying criteria that promote humane working conditions in the supply chain. Maintaining a solution-oriented dialogue with our partners is key here. For example, we have chosen a “hot-spot approach” that examines 16 critical raw materials. The most relevant hot spot at present concerns battery materials, particularly cobalt. In close cooperation with the battery cell suppliers, we are pursuing a strategy of optimum transparency – from the extraction of the raw material to the manufacture of the finished product. Transparency is the fundamental requirement for managing the supply chain in accordance with our standards.

AI helps us to identify sustainability-related risks in our upstream chain in good time and allows us to intervene accordingly.

Johanna Klewitz, AUDI AG, Team Lead Procurement Strategy, Sustainability

Does this mean that the suppliers bear the sole responsibility?
Johanna Klewitz:
No. As we mentioned at the beginning, we can achieve a holistic approach within the supply chain only if we all pull together. This is why we are relying increasingly on innovations and new technologies such as artificial intelligence. AI helps us to identify sustainability-related risks in our upstream chain in good time and allows us to intervene accordingly.

Marco Philippi: This kind of approach to innovation can arise only through a continuous exchange with all stakeholders. The majority of the ideas were generated in joint workshops, hackathons, and other new approaches that we bundle in the “Audi Act 4 Impact” program. During the current coronavirus crisis, we have realized that we need further channels to reach out to our suppliers, for example. Within a short time, we established a digital learning platform where we offer online training on the S-Rating, for example. Together with our suppliers we can set things in motion and exert a positive influence here.

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