The German carmaker Volkswagen has come under scrutiny for its joint venture factory in Xinjiang, China. An audit conducted by an auditing firm revealed that the audit did not meet key international standards, prompting dissatisfaction among dozens of international lawmakers who are now calling for Volkswagen to withdraw from Xinjiang.
According to a report by the Financial Times on Thursday, 50 parliamentarians from various countries signed a letter expressing their concerns over Volkswagen’s failure to meet international standards in auditing its Xinjiang factory, urging the company to exit the region.
The audit report uncovered that confidential worker interviews were broadcast to a law firm in Shenzhen, with only management personnel being questioned about issues related to forced labor. Despite pressure from human rights organizations and investors, Volkswagen stated it had conducted an audit of its Xinjiang factory last December. The factory is operated as a joint venture between Volkswagen and China’s state-owned SAIC.
The summary of the audit report was released at the end of last year, with the auditors acknowledging the challenges of gathering information in China but stating there were “no signs of the use of forced labor.”
Volkswagen claimed to have engaged a German human rights due diligence company, Loening Human Rights & Responsible Business GmbH, to conduct the audit using the Social Accountability 8000 (SA8000) standards based on international human rights principles. However, Volkswagen admitted to the Financial Times that the auditors only treated the SA8000 standard as a “baseline” and that a comprehensive review of all points mentioned in the standard was necessary.
It was also revealed that both Loening and the law firm in Shenzhen were not authorized to conduct SA8000 audits according to the International Organization Social Accountability International’s list.
Following the outcry, investors have demanded an independent audit of labor conditions at Volkswagen’s Xinjiang factory due to documented cases of abuse by rights organizations.
The Inter-Parliamentary Alliance on China (IPAC) released a statement on Friday urging Volkswagen to exit Xinjiang, stating that conducting meaningful human rights due diligence in the region was deemed impossible by experts.
The statement, signed by 50 parliamentarians from different countries including representatives from Christian Democratic Union, Greens, and Free Democrats, called on global index provider MSCI to reinstate evaluations until allegations surrounding audit integrity are independently investigated. MSCI had previously canceled assessments following Volkswagen’s statement last December, indicating that ESG-focused investors were prohibited from purchasing the company’s stocks.
Sarah Champion, a British Labour Party MP and Chair of the International Development Select Committee, emphasized the need for investigations not only into Volkswagen but also into the supply chains of most major products.
IPAC Co-Chair and British Conservative MP Sir Iain Smith announced plans to raise a parliamentary inquiry to review Volkswagen’s compliance with the UK’s Modern Slavery Act, which requires companies supplying the UK market to disclose actions taken to ensure modern slavery does not exist in their businesses or supply chains.
In response, Volkswagen stated, “If the UK government requests more information, we are happy to comply.”
IPAC is a group of like-minded legislators who believe that only through unity in holding the Chinese Communist Party accountable can democratic nations uphold rules-based systems. They view China under CCP rule as becoming increasingly authoritarian domestically and aggressive abroad, posing a significant challenge for democratic countries to formulate unified responses to China’s rise that transcend party politics and international boundaries.