International lawmakers have called on Volkswagen to divest its joint-venture factory in Xinjiang following the leak and discrediting of a company-commissioned social audit. In December 2023, Volkswagen informed investors that an environmental, social, and governance (ESG) audit found no evidence of forced labor at the plant in China’s Xinjiang region. However, a report analyzing the leaked audit stated that it was unable to adequately assess forced labor risks due to its flawed methodology and implementation.
Members of the Inter-Parliamentary Alliance on China (IPAC) from over 20 legislatures have urged Volkswagen to withdraw from Xinjiang due to the impossibility of conducting meaningful human rights due diligence in the region. They also called on index provider MSCI to reinstate a red-flag notice regarding Volkswagen until allegations surrounding the integrity of the audit are independently investigated.
The report, published by Washington-based think tank Jamestown Foundation, revealed that Chinese individuals with no demonstrable experience conducted the audit and failed to meet international standards. Staff interviewed during the process were only asked closed-ended questions without guaranteeing their anonymity.
The calls made by IPAC were echoed by the U.S. Congressional-Executive Commission on China, which found the report’s findings extremely troubling.
Volkswagen entered into a joint venture with state-owned car manufacturer SAIC in China back in 1984. The plant in Xinjiang’s Urumqi has been operational for around ten years. Following concerns raised by investors about human rights issues at a shareholder meeting in May 2023, Volkswagen commissioned an ESG audit of its Xinjiang plant.
The leaked report raises questions about Volkswagen’s corporate complicity and misleading statements regarding its audit findings. Researchers argue that if deemed reputable, this audit undermines global standards for conducting audits in regions like Xinjiang where forced labor is prevalent.
Xinjiang is known for operating one of the world’s largest systems of state-imposed forced labor through internment camps and coercive labor transfer programs targeting Uyghurs and other minorities.
Volkswagen claims that SA8000 served as a basis for their audit and that auditors had extensive experience auditing SA8000 compliance with Chinese and international labor law. However, critics argue that neither auditors nor their methods met internationally recognized standards.
As pressure mounts on Volkswagen to address these concerns surrounding its operations in Xinjiang, it remains unclear how they will respond or whether they will take any action based on these calls from international lawmakers.
