Over a year after Volkswagen wrapped its three-year U.S. compliance monitorship, the German auto giant is refusing to lean back. Chief Compliance Officer Kurt Michels shared how the company has intensified business partner due diligence at Compliance Week’s virtual Europe event.
“If you believe the monitorship was successful, and the monitor is telling you that you did a great job … if you are then relaxing and reducing your efforts, I believe you are making a big mistake,” said Michels during a fireside chat Tuesday.
The automaker underwent, in Michels’ words, “a very intense and very challenging time” during its monitorship, famously stemmed from the Dieselgate emissions scandal that made headlines in 2015. The company was under the microscope while the monitor team set up camp at its Wolfsburg headquarters to ensure accountability with legal obligations. It was also under a very harsh spotlight as customers everywhere recoiled from the company’s assault on the environment.
Now the monitorship is in the company’s rearview, but the lessons learned and best practices implemented have become the compass guiding its present and future business partnerships.
Michels discussed Volkswagen’s holistic approach to due diligence regarding new business partners (of which they have 12,000). He described a four-pillar model: The first pillar is proper business partner selection using a risk-based approach; the second is having very strong contractual clauses on anti-bribery risk/audit rights; the third is training; and the fourth is auditing.
“If you believe the monitorship was successful, and the monitor is telling you that you did a great job … if you are then relaxing and reducing your efforts, I believe you are making a big mistake.”
Kurt Michels, Chief Compliance Officer, Volkswagen
Sales and procurement are in the driver’s seat when it comes to new business partners; compliance provides the second pair of eyes, but the decision is made by the first line. Low-risk business partners can be onboarded without consultation from compliance, but business partners with medium or high risk exposure require compliance as part of the business process.
In June, German Parliament passed the “Act on Corporate Due Diligence in Supply Chains,” requiring companies to update due diligence procedures to improve compliance with human rights and environmental protection in supply chains. With this in mind, Volkswagen’s compliance program has intensified its efforts with due diligence to ensure zero “integrity issues.”
If a third party does not complete compliance training by an agreed-upon date, Volkswagen does not automatically sever the relationship. Rather, the company will look into why the training was flouted—a root-cause analysis of sorts—before determining whether to disconnect the business relationship.
Was it [down to] technical difficulties, or do they not believe compliance trainings are important?” Michels said. “If it is a mindset issue, then I’d question very intensively whether this is the right business partner for us.”
Depending on how many integrity issues are uncovered, onboarding a new partner can take anywhere from one to six months.
“We are working very hard to restore the trust of our consumers and to rebuild trust,” said Michels. “It’s hard work, but we’re working very hard every day to make this company better and better.”