Volkswagen AG (VOW3) Earnings Call Transcript & Summary

Ladies and gentlemen, we warmly welcome you to the Fifth Annual ESG conference for investors and analysts. ESG is an integral part of Volkswagen. We have an exciting lineup for today, covering important aspects of the E, the S and the G. There will be 2 combined Q&A sessions. If you would like to participate, please ask your question in the chat. We ask you to please take a moment to read our disclaimer. We would now like to kick off today's event with a keynote from our CEO, Oli Blume.

Dear ladies and gentlemen, it's a pleasure to welcome you to this year's ESG Group Annual Conference. I have now been in my new role as CEO of Volkswagen Group since over 8 months. It's a great honor to steer this company through its transformation. When I manage a company, whether it's Porsche or Volkswagen, I do it according to 5 base principles: brands, products, people, entrepreneurial spirit and sustainability. And team spirit, fairness and passion are the foundation for all of it. With our NEW AUTO strategy, we have laid the right groundwork, transparent and accountable implementation of the strategy is now a great importance to me. Looking forward, I have drawn up a 10-point plan of concrete programs operated out of the group Board of Management. These programs focus on our financial robustness, sustainability, the capital market, the advancements of our products, software and technologies in regions like China and North America. I view the capital market as a core stakeholder, raising the value of our assets sustainably to reward our stakeholders is a key priority of mine. In our transformation towards electric and autonomous driving, we need the best people, future proof products, access to capital, resilient supply chains and the trust of stakeholders. That is why I'm passionate about ESG. In my role as CEO of Porsche AG, we have been driving ESG improvement for many years. We delivered proof points like the early implementation of e-mobility and circular economy solutions. I welcome transparency in reporting, open dialogue and external input from stakeholders like the capital market or our Sustainability Council. Let us have a look on the individual aspects of ESG. First, environment. We are deeply committed to the Paris Climate Agreement. Our group possesses the technical competence and innovation strengths to develop sustainable mobility solutions and value chains. Our key levers include electrifying the vehicle fleet, charging this green energy, improving battery technology, and extensive use of recycled materials and renewable energy in production. We got off to an early start on e-mobility and are striving for a group-wide BEV share of around 20% by 2025 and 50% by 2030. Our ultimate goal is to be carbon neutral by 2050. Also in the face of our current energy crisis, we are sticking to these topmost goals. To decarbonize our products and societies fast, we need cooperation on a global scale, especially policymakers must decide the right framework. Now let's look into social. We strive to be good corporate citizens and take responsibility to improve the lives of communities and societies as a whole, including our more than 670,000 employees. The important thing for me is to treat everyone with respect. I'm convinced that sustainable success can only be achieved with diverse teams. Together, with our workforce, we are adapting to our rapidly transforming business models. We are significantly investing in skill transformation to ensure that our employees have future-proof workplaces. In Salzgitter, for example, our employees are moving from the production of combustion engines to batteries. Protecting human rights with our group and throughout our supply chain is crucial. This is why we have recently appointed a dedicated human rights officer, Kerstin Waltenberg, who will report directly to the Board of Management. Regarding governance, I'm fully aware that there are elements of our governance that can be viewed critically. On the 1 hand we have certain boundaries that are not likely to change. For example, the Volkswagen [ lore ] or our shareholder structure. In relation to our governance of dual roles, we have implemented proven systems to ensure that no conflicts of interest arise. I am convinced that my 2 CEO roles complement each other perfectly. For me, personally, linking to 2 roles is a crucial, well-considered decision for the long-term success of the Volkswagen Group and Porsche. I'm closely involved in the processes and technologies of a company in order to be in a position to make the right strategic decisions in the group and harness synergies. Our compliance whistle blowing and risk management systems have been implemented worldwide according to best practice and where possible, externally certified. Regarding integrity, we have involved our whole organization in our integrity program, which sets the values by which we operate. To wrap up, for me strong ESG is a key factor for success, and we are committed to improving our performance. I look forward to engaging with you in the future and value your opinions. I hope you enjoy this year's conference.

Thank you, Oli. To me, as heading the IR team, there were the 2 key messages I took away. First one, the capital market is a core stakeholder of Volkswagen. And the second one, ESG is crucial to the success of the Volkswagen Group in the future. But also -- Oli talked also about decarbonization, and this is why I welcome our first speaker today, Ralf Pfitzner, dear valued colleague, who will take us through the decarbonization strategy of Volkswagen in the coming years. Ralf, the floor is yours.

Thank very much, Rolf, and good afternoon, ladies and gentlemen. It's a pleasure to be with you in my role as Group Head of Sustainability. And as you heard from our CEO, ESG matters more than ever before. On the 1 hand, for the resilience of our company, for proper risk management, but also for realizing new business opportunity. And that's what we stand for at Volkswagen, because we believe sustainability is and should be an integral part of our business and nothing set aside in a separate department. So we view sustainability from a strategic perspective, and I'm quite happy to show you here how we integrate sustainability. You may be very familiar with our NEW AUTO strategy being launched last year and the tech modules on mechatronics, the platforms, how to scale up the systems, on software, on the battery and charging business as well as our relatively new business, on mobility solutions, taking Europcar acquisition as one of the highlights recently. We have additional sustainability initiatives anchored in our NEW AUTO strategy. It's firmly named ESG decarbonization and integrity. And we really integrate these aspects in all tech initiatives, but even beyond in the other departments of the company as well. So I'm going to talk in the next 15 minutes about mainly decarbonization, but before I do that, I'd like to briefly highlight our priorities in terms of ESG overall. Because as you are aware, sustainability/ESG is a very, very broad topic and the crucial part is really to focus on these things that matter, where we do have an impact on our stakeholders, and we will also have our stakeholders, investors, customers, requests and requirement coming into us, how we react to them. So basically, disaggregating ESG in the 3 parts, we have more or less 2 top priorities in each bucket. On the environmental side, we have decarbonization, climate change mitigation as first and foremost priority. Second 1 is resource efficiency, namely circle economy. You heard Oliver Blume talking about circular approaches in Porsche and we're driving that further down also at Volkswagen Group entirely. Then on the ES side, it is supply chain responsibility and resilience, including the human rights topics and same accounts then for diversity, which is important on the Board level regarding gender diversity, but also in the entire workforce and in management, but not only gender diversity also internationalization, for example. People and transformation, you will later on hear a separate presentation from my colleague, Thymian Bussemer. So I'm not going deeper into that one. And last but not least, integrity being part of the G pillar as of utmost important for us, not only because of the diesel scandal, which we survived through, so to say. So before I go into decarbonization as core topic right now, it is important to mention from the integration part that what gets measured gets done. And it's also about how we set incentives. And I would like to briefly inform you that as of last year, we also included ESG criteria as part of the annual bonus of the top management. So that was introduced last year. And if you look at the ESG performance criteria here in the middle of the slide, it comes from the environmental side with our decarbonization index. It includes the social side on the opinion index/diversity index plus has another factor on compliance and integrity. So it's integrated as of today, on top level and we are also working, bringing down ESG criteria further down in management incentives for all managers. Now about sustainability, moving to decarbonization as core topic. We've been 1 of the first/the first large OEM committing through the Paris Agreement back 2018. So our ultimate goal is being carbon neutral net zero by 2050, including the entire portfolio over its life cycle. 2050 is a long way to go. It's important to have that goal, but we also set intermediate goals. So the next step milestone for us is the year 2030, where we set the goal to reduce carbon emissions of our passenger portfolio over the entire large cycle by 30% versus 2018 by 2030. And the good news is that already last year, we have seen significant improvements in the so-called decarbonization index, reducing average emissions by car by 1.7 tonnes compared to the previous year. What is important to mention this is externally verified and certified by the so-called science-based target initiative, and we are quite grateful that this year, we got, so to say, an upgrade in terms of the commitment level that our production-related goals are meanwhile, according to a 1.5 degrees pathway. So the best level possible in terms of fulfilling the Paris Agreement requirements. What is also important to mention is that we follow a clear hierarchy in terms of how we want to achieve that goal. The best emissions are those, who don't occur at all. So avoiding emissions is the best one. Second one, we're moving to renewable energies all across the life cycle. And then we do have additional aspects of CO2 offsetting, carbon credits using for compensation. This is, for example, something we do with the handover of our MEB models in Europe, which are handed over as carbon-neutral cars to our customers by compensating nonavoidable supply chain emissions. So there is a clear hierarchy. And a bit of education, if I may. Looking at this 30% goal and the levers how to achieve it. For sure, first and foremost, is the portfolio transformation, which you heard from Oliver Blume, and I'm going to talk in a bit about that, too. So that's a real big lever. The other 1 is that we have to tackle all life cycle phases. If you look at the 2018 baseline, basically for an ICE portfolio, 2/3 of life cycle emissions over 200,000 kilometers come from burning fossil fuels. So that's 2/3. Another 13% roughly comes from the fuel supply chain. So what happens in the oil and gas industry. Total is up to nearly 80% of life cycle emissions coming from the fuels. Another 13% comes from the materials in the supply chain. If you look at ICE portfolio and only 2%, quite tiny little part comes from what happens in our manufacturing units in our factories all across the globe. So that's the 2% part. And then we have some remaining parts from recycling and other support process. If we move to the electric world, obviously, the tail pipe emissions shrink very much. They go down to zero in a fully electrified portfolio. On the other hand, the fuel supply chain, namely electricity gains of importance, because it matters if you saw electricity from coal, from gas or from renewables. So we're working on really bringing more renewables into the grid that are able to power our battery electric vehicles. And the supply chain part will get more important if you imagine another roughly 400 kilos coming from the battery itself. It's a lot of materials associated with energy and emissions. So the battery supply chain brings additional challenges for the supply chain overall, and we're working on that, too. So a few words about the portfolio. We have seen from last year to this year already, a significant increase. So it's going to continue. By next year, basically, we expect to double the overall percentage share on a global portfolio from 5% to roughly 10%, 11%. And by 2025, we expect to be at least at 20%. Oliver Blume in his statement already said the global target is to achieve roughly 50% by the year 2030. In Europe, we will be more advanced, probably also in the U.S., other regions are lagging a bit behind. So that's the important part the portfolio. And why I'm talking about the portfolio, it is because a battery electric vehicle, if you take the decarbonization view on CO2 emissions, already as of today, is roughly 25% more CO2 efficient than an ICE. So we have compared the Golf 8 with an ID 3 in a certified life cycle assessment. And even with the European grid mix, which still contains some fossil fuels, in terms of electricity generation, we have this 1 quarter. If we then move further down the road in terms of the use phase for our battery electric vehicles and imagine customers purchasing a green energy contract from Elli, then you cut the life cycle emissions in half. So really 50% less compared to an ICE -- compared to BEV powered by average grid electricity. And then moving further down into the supply chain, we are able to further reduce emissions by forcing our suppliers to reduce green energy for battery manufacturing, and we are moving further down the road in terms of green steel and the likes in the future, plus certain economy approaches. So that's the view on an individual car as an example. And to bring all these things now together, and this is already the last slide where we made -- might take a moment to have a look at it. As I said earlier, for decarbonization, we are really tackling the entire life cycle of our vehicles. We start in the supply chain, we have set the requirements for cell manufacturers where we purchase the battery cells from to use green energy. Now as we have founded the PowerCo to supply our future cells in Europe and globally for ourselves, the PowerCo intends to build up to 6 giga factories with 240 gigawatt of capacity by the year 2030. All these factories will be powered by 100% renewable energies. We've just been talking with the colleagues about the Spain, Valencia factory on the negotiations with the local utility and the on-site generation of green electricity. So this is up and running and in the making to assure these 100% renewable power. We're also moving into the value chain, not only for battery cells, but for the materials for the battery cells, so for cathode and anode production and just announced a bit more than a week ago, a joint venture of the PowerCo with a Belgium-based material supply, Umicore, to dig deeper into the battery, material value chain to provide us with the appropriate materials, again, with a low carbon footprint. What we do in-house in our factories, we have set the target to reach 100% renewable energies by 2030, globally, China with a bit probably a different time frame as the Chinese energy market is not yet liberalized. We -- in Europe, we target 100% renewable energy in the external power supply already by next year. And the good news is that we right now are at approximately 95%. And on top of that, we have already 9 carbon-neutral sites globally and more to come in the next years. If you look at the use phase, first of all, the energy supply, I've been talking about the portfolio change so far. The 50% targeted global share, Volkswagen Group in Europe, roughly 60% BEV share. And we are not only targeting the portfolio change, but also to bring more renewables into the grid, which is basically not our responsibility, but we believe it makes sense to drive the energy transition and energy transition and mobility transition only can go hand in hand. So for example, as part of our activities, we have last year signed a contract with the largest independent PV plant in Germany, in Mecklenburg-Vorpommern, supporting this solar PV plant in Tramm-Göthen and really taking off basically the green energy properties. On the tail pipe side, we're expanding on the 1 hand via Elli, but also by Electrify America and in the future also on the green energy side with CAMS, the green charging for our customers. And as mentioned before, right now, as of today, since -- meanwhile 2 years since the ID.3 is on the market, we're handing over this vehicle as a carbon-neutral vehicle to our customers. So if they choose to take a green energy contract from Elli, for example, then they have 100% carbon-neutral mobility. In terms of end-of-life recycling and I've just been visiting the Salzgitter pilot plant yesterday, we're targeting roughly at least 90%, even more 95% closed loop recycling for used batteries after they hopefully have had a second life in other applications, but the target is really to close the loop, reducing material consumption and reducing carbon emissions. Last but not least, it's important to mention that we can't do that alone. The energy transition and the mobility transformation have to go hand in hand. And therefore, for example, we have joined forces with a dozen of other European leading companies, founded the so-called CEO Alliance for Europe's Recovery, Reform and Resilience, supporting the EU Green Deal and driving the transformation. We have a couple of utilities in that. We have also automation companies and others in that group of companies. Partnering on the charging side is important, because also we can't build those infrastructures all alone. We're partnering with Enel in Italy, with Iberdrola in Spain, and with BP in U.K. and elsewhere to provide the energy to our customers. And the last word about the supply chain, materials are gaining importance. I've been talking about the battery value chain, but also steel matters for cars and our colleagues from the truck business from Scania, they are partnering with H2 Green Steel in a certain shareholding agreement. And H2 Green Steel is building greenfield carbon-neutral steel manufacturing, so there will be a source for providing CO2 neutral or low carbon steel to us. And same have we done on the group level so far with Salzgitter steel here, signed an MOU for provision of carbon-neutral/green steel for us. So we're working along the entire value chain to decarbonize our operations and the supply chains and the use case of our customers. And that's, in a nutshell, the decarbonization strategy current status. I have to say thank you and looking forward to the Q&A session.

Very good. Thank you, Ralf, for this very comprehensive overview on where we stay on the decarbonization side. Leads us to the next topic perfectly, because a lot of what Ralf and his team has done is the base is actually for our green finance strategy going forward. And here, we are right in the middle of the topic. So let's dive in into the topic of green financing. As you can see here, the green finance framework, which the group has published back in 2020, yes, was very much concentrating on the investments into battery electric vehicles and everything what we need in order to produce battery electric vehicles. So the -- we had a clear target. We had to concentrate on the green bond principles laid out from the ICMA. And here, we fall under the category of clean transportation. We also looked at the UN social Sustainable Development Goals and picked here the #9, 11 and 13 category, the 1 which is looking on the sustainable cities, the other 1 looking here at climate change mitigation. And last, not least, on the innovation changes, which is, in particular, related to the charging topic. Last not least, we were looking at the contribution to the use environmental objectives and therefore, we're in the position to build and come up with a comprehensive framework, which was then the basis for the Green Finance Framework. So largely oriented into the past, here we looked here at the years 2017 to 2020 and looked which of the investments we did fell exactly under the categories described before. And you see here that we started off on a light footing with about EUR 250 million of CapEx, which was eligible for that topic for the green project. And then we build it slowly up to EUR 750 million in the year 2018 and ultimately coming up with about EUR 1.5 billion in 2020. In total, that summed up to EUR 3.6 billion of eligible framework -- of the eligible framework portfolio. And on this framework, we were able now to issue -- we had basically 2 major drawdowns to issuances. One was in September 2020. A bond actually sliced in 2 tranches totaling EUR 2 billion with a maturity 2032 and the other 1 with a maturity 2028. The second issuance was done as of recent, totaling EUR 1.5 billion. It was done back in June. Also sliced in two tranches with maturities, '25 and '27 million, totaling EUR 1.5 billion. So that we came up in total with EUR 3.5 billion usage of the EUR 3.6 billion green bond finance framework. Usage is therefore 97% and 100% of the investments financed by these green bond frameworks were related to the past. On top of looking into the bond market and what we could finance via the bond market, we also looked at the banking market and had then the first sustainable link loan issued in 2021 with a tenure of 3 years. So it matures in 2024. It's used for general corporate purpose. And we thought it's a good idea to base it on the CO2 emissions of our fleet based on a particular year, which is measured with WLTP cycle, which is valid in the European Union. And you can see here from that slide that we basically have 3 scenarios. The 1 is obviously that we would miss the emission regulation target. And then we basically pay a charge, a surcharge, a premium, a step-up coupon. We are within the limits and the bandwidth was laid out with 15%, then we are basically neutral and stay to the agreed coupon or we get a credit in case we are better than the envisaged target under the WLTP. And there has been a step down in the coupon we are eligible to pay to the prospective syndicate over the tenure of the lifetime of the linked loan. So when we take the bond framework, we did the EUR 3.5 billion. We had the sustainable linked loan EUR 1.8 billion in total, EUR 5.3 billion. And we can summarize it largely that the last green bond framework was very much oriented to the past. So what have we already done, which can be eligible for green financing. And now for the future to come and for the new green bond framework, we are setting up at the very moment, we want to look into the future. So it should be based on the EU taxonomy and on the ICMA Green Bond principles as of 2021. So how would this look like. So first of all, we needed a framework, which allows us to exactly say what kind of revenues and what kind of CapEx and R&D is eligible for the green funding topic. And here, the -- I admit highly debated EU taxonomy at least gives us a framework under which we can operate and under which we can categorize the respective revenues. As you know, the companies must report environmentally sustainable contribution under this EU taxonomy. And there are basically 3 economic activities they have to report on the sales revenues, the capital expenditures and the OpEx, which is related to those activities. Volkswagen was the only company in the automotive sector and only 1 of the few companies across all sectors, which reported already taxonomy alignment voluntarily in 2021. And I think this is really due to a great team effort of our colleagues in the accounting team under the leadership of [indiscernible] and really congratulations on that. Because the new taxonomy that was not only that we ourselves are very convinced that the calculated amounts are correct. No, we got also from our auditors, reasonable assurance that the numbers which were derived are definitely in line with also what the auditors what think is accurate. So how did we pursue? We looked first at the environmental objectives, in particular year. The climate change mitigation and climate change adoption, which already valid until 2021 and then looked at the future categories, sustainable use and protection of water and marine resources. We looked at the pollution prevention and control at a transition to the circular economy. And last not least, to protection and restoration of biodiversity in the ecosystem. So we derived from that the taxonomy eligible revenues, CapEx and OpEx we have. And then we looked at the 3 criteria, a substantial contribution to at least 1 of these criteria mentioned before, do not significant harm to any of the environmental objectives, which are around; and then obviously, the minimum safeguards to comply with OECD, the UN rules and the rules of the International Labor Organization for fundamental conventions. So if all these 3 criterias are cumulatively positive, then the economic activity is environmentally sustainable. If not, obviously not. So this is now the outcome of the analysis. And you can see that in total, within the Volkswagen Group, we have about EUR 54 billion of taxonomy-eligible activities. However, ranking it or slicing it further down to the 3 categories, substantial contribution to climate change mitigation, do not significantly harm to any of the other objectives, and compliance with the minimum safeguards, this number came down to EUR 14.2 billion, representing roughly 26% of the EUR 54 billion. And then we went even a step further and said, look, we do not only want to look on what is taxonomy eligible, but let's look at the BEV-only portion. And the BEV-only portion you can see here is on the CapEx side totaling about EUR 3.8 billion and on the R&D expenditure side, roughly EUR 3.5 billion. Taking this all together, the new green bond finance framework could be as high as EUR 7.2 billion. That would be true for the whole Volkswagen Group. Of course, we have then to look at what the difference entities are doing in order to determine how big the green bond framework will become for the future. But this is largely actually how we proceeded. So to sum it up, we believe that green debt instruments are really an effective tool to channel investments into projects which demonstrate an impact to climate and have a positive impact on climate and let us stick to the Paris accord as well as to the United Nations Sustainable Development Goals. We target to increase our green debt instruments in the coming years significantly. All our future green bond transactions will be based on the EU taxonomy and the respective align CapEx and they are also in the future to rise significantly. And last not least, obviously, we want to stay in regular contact with you, our bond holders, stakeholders, stay in a frequent dialogue, tell us where we can do better, where we are doing good. And keep this continuous dialogue so that we can learn from each other and help to make this planet a more sustainable place worth living. With that, I'm very happy actually to directly lead over to a topic which has already been raised by Ralf to a dear valued colleague, Thymian Bussemer, who will tell us a little bit more on how we transform the workforce.

Thank you, Rolf. I have already one. Good afternoon to anyone or good morning or good evening wherever you are. Thanks for having the chance to elaborate here a little on the issue of workforce transformation and what Volkswagen is doing in this realm. I think the basic observation is that there's an imbalance between our current business models and our workforce structure. So the NEW AUTO strategy foresees a decline in revenues, we do on the ICE base, the internal combustion engine. We see a rise of turnover and revenues and profit pool in realm of battery empowered vehicles. And we see a new business field entering our business, which we almost hardly had before, software-based turnover. So those are the 3 major profit pools of Volkswagen of the future. If you look at on the right-hand side of the chart, on the structure of our workforce, we see that almost half of our current employees still work in the so-called direct area. They are highly skilled workers, but they work on the shop floor and manufacturing. What we see is that our industry becomes more and more knowledge intensity, constantly rises. You see that R&D exponentially growing and you see that the codes and software really becomes a central enabler of the car of the future, which, of course, means that we need people with skills in this realm. This means that workforce transformation becomes a central strategic objective for Volkswagen in the forthcoming decade. The product strategy affects needed skills and the quantity of work. We don't see a unidirectional process of decline in the size of the workforce, rather side-by-side process of role relocation and dismantling -- this process has to be structured. It has to be managed. And I mean that this is important as simply shown by the fact that our labor costs at Volkswagen Group almost amount to 20% of turnover of the entire company. This is the reason why -- especially the HR department, but with the help of the Sustainability Council, has done a lot of systematic research on employment effect of the Volkswagen Group. We have published scientific article on the effect of digitization in the knowledge work. We have done a rather huge study with very well renowned Fraunhofer Institute on the employment effect of electromobility. We have just completed study for which we have been 1.5 years in the field on how work and qualification at 2030 at Volkswagen will look like. And we are advising as well the federal government of Germany in managing the transformation process of the automotive industry. This is a little example of the results of our research. Here, you see the employment effects of the new mix because we did not stop to produce ICE vehicles right now, this will be a process of years. So in the mix, according to our planning of ICEs and battery and powered vehicles, we will lose -- I'm not talking about jobs, this is important, I'm talking about work volumes. So hours of work. We will lose something like 12% of revenue volume. If you look at the prognostic mix of electric powertrain to ICE powertrain, we see we lose 60%. And with the gearboxes, it's almost 70%. So bearing in mind half of our workshop is still in those direct areas. It's really a field of concern. We answer with organizing the biggest cultural and skill shift in the history of Volkswagen. We really want to mobilize our entire workforce to make them aware of the changes to make them open for acquiring new skills, finding new workplaces, which are in line with our future profit pools -- profit puts, sorry about that. And we, in HR, as we are the 1 who are centrally organizing this process all over the world in all plants, in all entities. We have learned that we really need a paradigm shift in our strategic approach. We learned we can't do any longer type of strategy right in focusing just around HR, we need a group people strategy, which holistically takes into account all people and culture issues, which are relevant in this big ongoing transformation process of Volkswagen. Here you see the most upper layer of our strategy as 4 core goals. We have defined ME for VW Group. This is the micro level about the individual employee. Teams, this is the area, those teams are the very core of our company, consists of teams or groups of 5 to 15 people working every day closely together. They are the very cultural and social core for the company, all of us at VW Group, we say this is a family goal. We have a very strong company culture at Volkswagen, the brand of Volkswagen as well in the group. There is a sense of belonging and we systematically want to play that strength in the future. And we are aware we are not alone on the world. So we at Volkswagen Group and the world around as this is having Volkswagen peacefully aligned to its stakeholders. We have now already listed almost goals, every target area has the goal, excellent employee experience. I think that well being at work is a very crucial factor. Best-performing teams in our industry, really essentially, perfectly performed, outstanding culture, I already mentioned that, and sense of belonging and aligned to the society and environment. Under this goal system, of course, we have a huge, very complex structure with which we refined those goals and roll them out everywhere in the group. I just brought here some of the guiding questions to the goal area. So on the Me level, what motivates me to do my job and how do I sustain my fitness to work? On the team level, what helps us to achieve the best team performance? On the all of level, what makes Volkswagen unique and why do we love to work here? And the outer goal, how do we convince our customers and stakeholders that Volkswagen is corporately responsible? As you can see here, we learned in our research that those goals boost very positively the ESG profile of Volkswagen, that the capital market rates diversity very high and sees it as a key indicator that you do know better than I. You learned as well that if, in terms of culture, there is a strong tone from the top. If people learn that a CEO, a Board really cares about having a healthy, a good culture in the company, that boost performance. We know, of course, that the trust -- trusting into each other, but trusting into leadership is a boost, which leads to an increase in engagement. And we do know as well that a strong employee experience or good employee experience, has a positive impact on the performance. So what do we concretely in the Volkswagen Group. I just want to focus on 2 things: 1 instrument. We are currently group-wide, we have established and which we do roll out group-wide. It's a strategic workforce planning approach, rather complex process, because it's linked to many negotiations between business divisions, estimations of experts, statistic calculation, but this is where we goal to come to 2-sided analysis. That is the future workforce supply simulation. So how many people with what skills do we have on board? And the workforce demand planning according to our production planning, how many people with what skills do we need. In the strategic workforce planning growth, those 2 sites are being fitted into each other. The result is a GAP analysis, which helps us to identify qualitative and quantitative surpluses and gaps, and it's our very, very basic instrument for workforce planning. Helps us to lean which skills do we need to bring into the company from outside. What type of graduates do we need? Do we have potential to shift teams between different plants? If they are rather closely located together which, in certain cases, you have the case. So it really -- 1 could say before we're kind of blind at least with regards to an overall picture of how this workforce development will relate itself to the demand. This instrument greatly helps us to bring light to this question. So the second answer, and this is already in my last slide is, of course, education and skilling. We have just launched the product which is called Degreed, a 24/7 learning platform divisioned in many, many stores. Each job family find there its own store and give every employee the chance to learn future critical knowledge in a safety determinated way. You can access it any time. There are no boundary and you don't need to apply. It's not time bound. It's very easy to renew the content, because it's a digital platform. So this, I think, really in terms of transformation, very important instrument, because I said, we rely on the safe initiative of people to reskill, to actively care about their future jobs. Second thing are 2 very innovative projects. The Faculty 73 and 42 Wolfsburg, those are 2 IT schools, 1 is an internal one, the other 1 is external. Where besides the fact that they provide excellent IT knowledge crucial for the automotive industry, there are no formal boundaries for accessing it. It only works by assessment. The assessment is very hard. But if you master it, you are in there. And this means, those are mechanisms. And it's very for direct workers, so shop floor workers to requalify master to enter in 1 of those institutions. They have the chance to move from the occupation on the shop floor into the knowledge work of which, we allow -- that we need much more of this in our transformation process. Well, this was it from my side. Thanks for listening.

Very good. So thank you, Thymian, yes, for this insightful presentation on the -- how we transform our workforce. We start with the first Q&A session, I would suppose. And we have about 15 minutes. So please don't be shy. Put your question into the chat, so that we can have a vivid discussion here on the floor.

And what I can see is there is already -- first question is coming in. The first 1 is from Morgan Stanley, and I think it's for you, Ralf. The question is, is the company using internal carbon price to manage its projects, investments? What is the price currently? And how is it updated with the market?

An excellent question, to be honest. And let me begin with saying, well, we would be stupid if we would not follow a cost abatement curve also with regard to measures on decarbonization. As I mentioned, we have this goal set, reducing life cycle emissions 30% by 2030 versus 2018. In order to sort these measures, what we do when we follow our cost curve, so we apply in our planning round internal carbon pricing for all those measures who go into the vehicle project. And the good news somewhat is also in terms of cost efficiency, that right now, we have measures that are around EUR 10 to EUR 15 per tonne, and they already bring quite a lot of substantial carbon reduction. We have a cost curve behind it, also the upper limits, which we are targeting by 2030. For confidentiality reasons, I won't disclose the outlook of carbon pricing, which we are having in mind for 2030. But it's a steadily following curve of measures. We start with the cheap ones, with the best ones and then gradually move up the curve until we achieve our goal.

Thank you, Ralf. And the next question would be for Thymian. Thymian, the question is, how is employee retraining organized at plants converting from ICE to BEV?

Well, we have taken a lot of care. And I have been at many assemblies and plants which wasn't clear that they would be converted. So we really try to create a positive mood of the workforce towards e-mobility. We brought products there. They had a chance to dismantle and reassemble those electric cars. They really had a chance to learn what it's all about as a new product. And of course, then there was a systematic training, so I think, Zwickau, which was the first plant, which was converted, we reskilled almost 8,000 people there. So it's a very systematic, well planned process, but the planning of the company gives us a chance. Because you have enough timing ahead in advance to go the systematic way. And so according to my impression until now, it has been very well. And people there are really enthusiastic about that they have future-proof attractive product.

Was there any direct feedback from the employees trained on the training tools and on the training itself?

Yes, of course, this was evaluated. And I'm not too much into details after all what I heard. And if I travel to the plant, the feedback is very positive about the way we have done it.

Very good. Okay. Then the next question is again for you, Ralf. So you are very high in favor. It's a bit more critical one, again from Morgan Stanley. For we did not sign up for the COP26 to only sell zero emission cars and vans by 2035, could you please explain the rationale and if anything, could change under the new CEO with regards to this matter?

Yes. Another great question. I'm happy to allude a bit on that. So we have been intensely discussing that zero emission vehicle declaration, which was launched at COP26. And we have a key principle that we only signed commitments/these letters or things if we believe we can achieve it credibly. And this declaration, well, it goes towards OEMs, but also other parts of the declaration go to countries, communities and so forth. In this specific case, we said, well, really achieving 2035 already zero emission vehicles in all major markets globally, we don't believe this can happen, especially with regards to different paces in the shift. For Europe, I think it's more or less no brainer. U.S. might be achievable too. If you look at China, there is a question mark if this is really feasible by 2035 in a credible way. And there are a couple of other leading important markets such as South America. So in a nutshell, we decided as long as we can really fully credibly sign on to this, let's better not do it. We are working really heavily on the transformation, accelerating the speed. But it's -- in this case, we decided not to sign it. And if political boundaries also on country level change, I think we might reconsider that. And 1 word also the transformation then makes most sense if we have also green energy in these respective countries, powering a battery electric vehicle with lignite produced electricity doesn't really make sense. So there's also some trade-offs to be considered.

Very good. Thank you, Ralf. The next question, I think, would be to myself. It's about the green finance framework. And it says, would you consider doing a social bond within the green financial framework? Or are the sums too small? I think we -- as you could see from the presentation at the very start, obviously concentrate on what counts most and that's here the battery electric transformation we are going through, in particular with the sums you have seen, looking at the 20% target in 2025 and then the 50% target in 2030. On the other hand side, I always wonder why Volkswagen in particular, on the S side is not scoring higher given for all what we do here for the employee workforce, in particular, in Germany. I know that we are a global company and that you can be very critical on some of the activities which are outside of Europe. But on the other hand side, when I look how -- what we invest in training into the workforce, when you look at the whole transformatory topic we have here on the workforce side. So long story short, would not rule out. That at a certain point in time, we could also consider doing a social bond. The green bond framework would allow for it. But for the time being, we are very much concentrating on the best. With that, I would go through the list here. And yes, there is another 1 for you, Ralf. So the question is, could you have more -- could you give more color on the use of sustainable renewable fuels? Will any brand focus on this technology specifically?

Yes, heavily debated also in the public and probably the author of this question might have also followed the development in Porsche. So renewable fuels or let's phrase it, it's basically about e-fuels, I think, and probably some bio-ethanol questions around countries like Brazil or so. Well, first and foremost, we have electrification strategy, and this is in place, and we fully rely on the electrification of the portfolio. So nothing should basically endanger this. Second one, Porsche invests in a small scale in Chile in producing renewable fuels or e-fuels based on wind power and electrolysis and so forth. I think it's a good showcase. And if you look at some, let's say, legacy cars and especially those who will basically survive forever, it makes sense to have a certain amount of fuels powering them based on alternative fuels. I don't believe this is something for the mass market. If we talk about passenger cars, we need e-fuels. We need these fuels for aviation. We need them for shipping. We need them for high-temperature appliances -- applications in industry where you can't electrify processes. So there will be a demand. It's important to scale them up, but I don't believe they play a major role in passenger costs.

So you can basically say it's complementing our...

It's complementing, but I rather believe it will stay in a niche, and it's probably not our job to scale these.

Okay. Very good. Ralf, I'm sorry, you're in very high favor here.

It's about sustainability.

Exactly. So the question here comes from Santander. Do you have both intensity and absolute emission objectives, including Scope 3?