Volkswagen shareholders demand more scrutiny in East Turkistan

According to Reuters, two of the automaker's investors said that Volkswagen should regularly check its operations in China to ensure that its supply chains are safe and comply with human rights laws, after a review of its jointly owned site in East Turkistan found no sign of forced labor.

The demands made by Union Investment and Deka Investment on Wednesday reflect ongoing concerns about Volkswagen's (ETR:) involvement in East Turkistan, where human rights groups have documented abuses including forced labor in concentration camps.

Beijing denies committing such violations.

The result of Volkswagen's audit comes at a time when Germany is carefully readjusting its relations with China, its largest trading partner, to reduce its exposure to a market that is also considered a regular competitor.

Volkswagen said on Tuesday that the long-awaited audit, conducted by the German company Loening human Right & Responsible Business GmbH and two Chinese lawyers from a company in Shenzhen, found no evidence of forced labor.

However, Luning noted that the audit was limited to the site, which is a joint venture with SAIC Motor, adding that the situation in East Turkestan and the challenges in collecting data for audits are well known.

The Association of important shareholders in Germany, which represents small investors on environmental, social and governance issues, said the audit raises more questions than answers.

“If one audit is very difficult and can only take place without freedom of expression and trade union rights... then further audits cannot be considered an effective procedure, said Tilman Massa, co-director general of DKA.

There is no “one-time exercise.”

While the audit was described as a step in the right direction, Henrik Buntzen, who heads sustainability, environmental and social standards, and governance at Union Investment, said Volkswagen had not yet reached its goal.

“There is still a lot to be done: in China, audits should not remain a one-time process, " he said. An effective complaint management system must also be put in place”.

He also said that Volkswagen's governance, which has drawn criticism from some small shareholders, remains the Achilles heel of Europe's largest automaker.

Ingo Speich of Deka Investment, who, according to LSEG data, owns 99 million dollars worth of Volkswagen preferred shares, welcomed the audit results but demanded more transparency in Volkswagen's supply chain.

"The pressure from investors has worked. Volkswagen has followed the example set by BASF, which has already started audits in China at a very early stage, he said.