Dear Madam or Sir,
Volkswagen has announced that it will have the Volkswagen SAIC plant in Urumchi, China, audited. According to media reports, chief executive officer Oliver Blume announced during a conference call with investors on June 21, 2023 that Volkswagen plans “a transparent, independent external audit to provide full transparency to the public”.
In general, we welcome that Volkswagen takes the risk of potential human rights violations at the Volkswagen SAIC plant seriously. However, there is serious evidence of forced labor in relation to Volkswagen’s supply chains. In December 2022, Sheffield Hallam University published a comprehensive report that extensively documented the widespread use of Uyghur forced labor in automotive supply chains, including Volkswagen suppliers. In a reaction to this report, Volkswagen publicly emphasized that suppliers are audited within the framework of the group’s own Sustainability Rating (S-Rating) and that no forced labor was found at the plant in Urumchi, but without providing transparent information about the auditing processes of suppliers and possible consequences.
With regard to Volkswagen’s planned audit of the Volkswagen SAIC plant, we have reasonable doubts as to whether an external audit can now be an effective and sufficient measure in this specific case, which is why we would like to ask the following essential questions about your audit plans:
- Who or which company is to carry out the audit?
- What is the scope of the audit and which specific topics and risks are to be examined?
- How do you ensure the independence and significance of the results?
- How will it be ensured that employees can speak freely and without risk of government repression?
- Do the auditors speak Uyghur and Chinese, or do they rely on external translators? If so, where do the translators come from and how is their independence guaranteed?
- Are the auditors informed about the political context in which the audit will take place?
- Is the audit company aware of legal restrictions imposed by China’s recently passed counterintelligence law, which experts warn could criminalize corporate due diligence?
- Are the auditors aware that there is only one legal trade union in China, which is part of the Chinese Communist Party and must comply with the party?
- Does the audit include suppliers, both suppliers of the Volkswagen SAIC plant in Urumchi and suppliers from the affected region who supply other Vokswagen sites?
- What requirements do you place on the transparency of the audit?
- Will you publish the results of the audit in full?
- Will the questions and topics of the audit also be made public?
- Will activities within the scope of the audit be announced in advance?
- Will the audit be discussed with the joint venture partner SAIC in advance?
- What other measures is Volkswagen taking to preventively identify, minimize and eliminate the risks of forced labor at suppliers in China?
Our doubts about the effectiveness of an audit stem from the fact that the drastic repressive policies in the Uyghur region make it impossible to collect valid information on the ground. Leaked Chinese government documents and testimonies have made it all too clear that even the smallest infractions of the Chinese government’s arbitrary rules can lead to internment. Torture, physical and psychological violence and permanent mass surveillance fuel an atmosphere of fear in the Uyghur region. Interviews with workers, which are essential to the methodology of any labor or human rights investigation, cannot provide reliable information under these circumstances. No worker can speak openly to factory investigators about forced labor or other human rights issues without putting him/herself and his/her family at risk of brutal retaliation.
In addition, it is questionable to what extent the audit can be conducted independently if it requires the approval of the joint venture partner SAIC, which is owned by the Chinese state and thus the Chinese Communist Party. We therefore see a very high risk that the Chinese government will misuse the audit for its international disinformation campaign to conceal the actual conditions at the plant. For example, the Chinese government repeatedly invited international journalists to put on a staged show in the detention centers, far from the brutal and inhumane daily life that Uyghurs have to endure. Even the former UN High Commissioner for Human Rights, Michelle Bachelet, was not granted free and independent access to the Uyghur region by the Chinese government.
We are particularly concerned about the Chinese counterintelligence law that recently came into force. Experts warn that even the verification of corporate due diligence will be criminalized. due diligence will be criminalized. According to them, employees and auditing firms imprisonment or even the death penalty. The Chinese government is systematically trying to independence of international audit firms. For example, five employees of the U.S. corporate audit firm Mintz Group were arrested by Chinese authorities earlier this year and their Beijing office was closed. The Chinese government has also ordered Chinese state-owned enterprises to divest from the four major international audit firms, Deloitte, KPMG, EY and PwC, and to hire regional firms instead.
Due to the doubts about the efficiency and independence of their planned audit outlined in this letter, we would like to ask you to respond to our questions above by the end of July 2023.
We appreciate that you want to provide full transparency to the public. Therefore, this letter with our questions is also an open letter, which we have published here on our website. We therefore also ask you for public answers.
Member of the Board, Association of Ethical Shareholders Germany
Co- Director, Association of Ethical Shareholders Germany