11670 SVR 2010 Engl Sustainable Operations

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01.1 Strategy and organisation 0601.2 Risk management 1001.3 Corporate Governance and Compliance 1101.4 Stakeholder dialogue 1401.5 Sustainabil ity in the supply chain 1601.6 The year 2010 18

SUSTAINABLE OPERATIONS

Sustainable operationsfor lasting success


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Environment (e.g. climate change), conflict minerals, human resources issues ( e.g. demographic change),

industry sector risks (e.g. fuel price developments, increasingly stringent emissions legislation and targets)

Gaining transparency over the supply chain and ensuring every one of our growing number of suppliers adheres

to social and environmental standards, in the BRICstates as elsewhere

Meeting a wide range of stakeholders information needs

Preventing corruption and strengthening compliance controls

CHALLENGES

SUSTAINABLE OPERATIONS. With its corporate Strategy Number ONE,the BMWGroup plans to become the leading producer of premium produand premium services for individual mobility. In our view, premium includesthe idea of sustainability, which is why we are working to establish sustainabusiness practices along the entire value chain and throughout all processeKey elements in our sustainability management are our environmental motoring system, our ongoing dialogue with stakeholders, and the integrationof sustainability criteria into every aspect of our corporate development.

01 Action point

Corporate StrategyNumber ONE

Sustainability strategy

Areas of focus

Challenges

Key performanceindicators (KPIs)

Progress / Forecast

AREAS OF FOCUS

Anti-corruption and compliance work Page 11

Corporate governance Page 11

Corporate success Page 18

Environmental and social standards in the supply chain Page 16

Risk management Page 10

Stakeholder dialogue Page 14

Sustainability management Page 07


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Continued development and further detailing of parts

of sustainability strategy

Sustainability as a purchasing criterion in the selection

of suppliers

Continued development and implementation of the

sustainability strategy across all divisions by the end

of 2012

Establish sustainable business practices along the

entire value chain by the end of 2012

KEY PERFORMANCE INDICATORS (KPIs)

PROGRESS IN 2010 FORECASTPage 77 et seq.

Page 72

Revenues

Return on Capital Employed

Listings in Sustainability Indices

Industry leader in Dow Jones Sustainability Index

Listed in FTSE4Good and FTSE4Good Environment Index

oekom Prime Status: the BMWGroup is the third most sustainable company in the DAX30 index

Profit before tax

For a complete overview of key figures, targets fulfilled and new objectives, see objectives, facts and figures section on page 71 et seq.

euro 60,477millioneuro 50,681 million in the previous year

19.6%

3.3 % in the previous year

euro 4,836millioneuro 413 million in the previous year

Sustainableoperations


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In 2001, the BMWGroup signed a voluntary agreementto abide by the ten principles of the UNGlobal Compactand the Cleaner Production Declaration of the UNEnviron-

mentProgramme (UNEP). We have also made a clearcommitment to the UNs Millennium Development Goals(MDG), contributing in particular to goals No. 6CombatHIV/AIDS, malaria and other diseases and No. 7Ensureenvironmental sustainability.

In 2005, the BMWGroup joined forces with employeerepresentatives to draw up its Joint Declaration on HumanRights and Working Conditions at the BMWGroup. Indoing so, it reaffirmed its commitment to adhere to thecore labour standards of the International Labour Organ-isation (ILO). We also abide by the OECDs principles formultinational corporations and by the Business Charter

for Sustainable Development issued by the InternationalChamber of Commerce (ICC).

Organising and managing sustainability

One important goal of our sustainability strategy is tomanage the issue of sustainability centrally and establishit as a core strategy within our organisation. For this rea-son, our Sustainability and Environmental Protectiondepartment has been directly incorporated into our Cor-porate Strategy unit since 2007. Its responsibilities in-clude the continued enhancement of our sustainability

strategy and the strategy and management of busineenvironmental and social sustainability.

The long-term direction of our sustainability strategyestablished in our Sustainability Board meeting. Invoall of our Management Board Members, the Sustainability Board convenes twice a year to assess the companys progress. Meanwhile, responsibility for its operimplementation of measures in the individual divisiof our company lies with our Sustainability Circle. Tmeets at least twice a year and is chaired by our Susability and Environment representative. Its responsbilities include the identification and evaluation of rand opportunities relevant to sustainability. The Sutainability Board is additionally responsible for theexchange of information and the coordination of r

vant activities across division boundaries. It also ovsees the continued enhancement of our sustainabilstrategy.

In 2010, much of the work done by the SustainabilityCircle and Sustainability Board focused on the continenhancement of our corporate sustainability strategythe individual divisions. It also concentrated on the BGroups position on climate issues, the verification oconcepts for holistic reporting procedures, and oppotunities for the utilisation of renewable energies.

www.unep.fr/scp/cp

www.unglobalcompact.orgwww.unglobalcompact.de

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UNGlobal Compact

Importance for stakeholders

Importance for the BMW

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Materiality analysis

Diversity within the

BMWGroup

Biodiversity

Consumer protection

Utilisation of renewable materials

Road safety

Product recycling

LCAproducts / components

Product security Environmental andsocial standards in thsupply chain

Climate changeCO2emissions

Energy supplies /renewable energies

Alternative drive train technologiesElectromobility

Sustainabilitymanagement

Health of employees

Preventing corruptionDemographic change

Work-life balance

Eco-friendly productionMobility concepts

WaterSocial responsibility

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Since the beginning of 2009, sustainability has becomean established corporate goal in the BMWGroups bal-anced scorecard. As a result, every one of our projectsis assessed with relevant criteria in mind. Today, sustain-

ability criteria are taken into account along the entirevalue chain. And when it comes to operative implemen-tation, we apply established environmental (ISO14001and EMAS), quality assurance (ISO9001) and occupa-tional safety (OHSAS/OHRIS) management systems. Inaddition, with sustainability now forming an integralpart of our division and personal target agreements,aspects such as the 30% reduction in resource consump-tion we are currently working to achieve also influenceour salary assessment system.

Any interim goals we are aiming for or have achieved aspart of our sustainability strategy are communicatedobjectively, transparently and continuously, both to our

team in-house and to the external public. Alongside ourSustainable Value Report, our performance in the sus-tainability rankings of independent agencies contributesto our communications in this area. Our goal is to be thetop performer in every ranking published by any of themajor rating agencies.

BMWGroup is once again the worlds most sustain

automotive producer

One of the most important ratings in the world is the

Jones Sustainability Index World and Europe. In 201the BMWGroup was able to secure its position as thdustry leader in this ranking for the sixth time in sucsion, meaning external analysts rate us as the most stainable automotive producer in the world. We havebeen listed in the FTSE4Good, another major index fsustainable businesses, for the last ten years and featin its sister index, the FTSE4Good Environmental Indsince 2007. Moreover, the Munich rating agency oenamed us as the third most sustainable company listin the German DAX30index. Its analysis focused onway social and environmental criteria have been integrated into management structures, processes and pr

ucts. With oekoms evaluation, the BMWGroup nowjoys oekom Prime Status, an accolade conferred onlleading companies in the various industries. Meanwthe annual assessment by the Carbon Disclosure Pro(CDP) rated the BMWGroup third among automotiproducers in the Industry Group Automobiles & Cponents of the Global 500in 2009.

As well as these ratings, a set of key performance indtors (KPIs) is in place that enables empirical compariwith other companies and allows us to assess our pformance. An overview of the relevant KPIs is proviin the introductions to each chapter of this SustainabValue Report.

Consistent integration of sustainable practices

We want to continue developing our leading positiothe worlds most important sustainability indices. Tous do so, we have set up a series of measures and critfor the individual divisions of our company. We havemade consistent efforts to establish our sustainabilitstrategy in our subsidiaries and across our global dealenetwork in 2010. Moreover, we have approved a propackage that is designed to promote social sustainaband with an efficient target system now in place, we work effectively as we set the direction the companytake towards greater sustainability. We have also assthe opportunities available for our facilities around t

world to make use of renewable energies. But more tanything, we have made sure our employees know aour sustainability strategy and involved them in traincourses and events. In total, more than 4,000membof our staff attended courses on sustainability durinreporting period not including the courses that for

Sustainability Board

Comprises the entire Board of ManagementChairman: Chairman of the Board of Management

Responsible for strategic alignment

Sustainability Circle

Comprises heads of department from all divisionsChairman: BMW Group Sustainability

and Environment RepresentativeResponsible for preliminary work to support decision-making

Specialist divisions

Implement measures and processesneeded for BMW Group to

achieve its goals

Responsibility for sustainability issues in the BMWGroup

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part of our yearly quality, environmental and occupationalsafety training programme. In addition, some 230appren-tices attended a Sustainability course, and around 1,700managers completed the Managing Business training pro-gramme, which includes a module on sustainability.Approximately 2,450associates joined the Sustainabilityon Tour events that took place between August 2009and September 2010.

In 2011to 2012, we will focus on continuing our efforts toestablish the sustainability strategy at all of our facilitiesand divisions. Numerous packages of concrete measuresare to be approved for specific divisions, such as Sales,Development, Purchasing and Production. (To find out

more, see our objectives, facts and figures section, which starts on page 71).

Main awards won by the BMWGroup in 2009 / 2010

Awards for sustainability reporting

Corporate Register Reporting Award 2010

Best Report: fourth place

Best Carbon Disclosure: second place

IW/ Future Ranking of Sustainable Value Reports 2009 (large businesses): third place

Carbon Disclosure Project: third place in the Industry Group Automobiles & Components of the Global 500 with 78 points; listed inCarbon Performance Leadership Index

Sustainability awards for individual BMWGroup models are listed on page 25.

The BMWGroups positions in sustainability rankings. Listings on sustainability indices 2009 2010

Sustainability rating agencies Assessment and result

Imug / Ethical Investment Research Services Evaluated (for result see FTSE4Good)oekom Research Industry focus: Automobile 2010: second place (Status Prime B)

KO-TREND KO-TRENDCertificate: Outstanding Corporate Responsibility(Highest-scoring carmaker)

Sustainalytics (formerly Scoris) DAX30 Sustainability Rating 2009: first place

Sustainable Asset Management (SAM) SAMSector Leader, SAMGold Class (see also DJSI)

Vigeo Evaluated (for result see Advanced Sustainable Performance Indices)

Sustainability indices Listing and result

Advanced Sustainable Performance Indices (ASPI) Listed

Carbon Disclosure Leadership Index (CDLI) Listed (2009)

Dow Jones Sustainability Index (DJSI) World and STOXX Global Supersector Leader of Automobiles & Parts 2009 / 2010

E. Capital Partners International (ECPI) Index Family Listed

Ethibel Sustainability Index (ESI) Excellence Global and Europe Listed

FTSE4Good Index Global and Europe Listed

FTSE4Good Environmental Leaders Listed



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01.2 RISK MANAGEMENT.Responsible risk management and consistent utilisation of the opportuities available are at the core of our business practice. Our Group-wide risk management systehelps us recognise risks early on so that we can take appropriate action to deal with them succefully.

In todays global economy, increasing connectivity andfiercer competition are multiplying the risk of incalculablechain reactions and knock-on effects. Our established

risk management system enables us to recognise theserisks early on so that we can tackle them successfully.Comprising a decentralised network of risk representa-tives working at Group level, our system operates atevery level and in every area of the company to raiseawareness of relevant risks and of what can be done to dealwith them in a professional manner. Every risk identifiedby one of our specialist departments is recorded in ourRisk Management Circle and, unless critical, evaluated bythe Management and Supervisory Boards. Our activitiesin this area are controlled centrally by our Finance Div-ision, with regular internal audits ensuring all measuresare suitable and effective.

Risks arising from environmental issues and resourceconsumption are reported by our Sustainability andEnvironmental Protection representatives. And with sus-tainability as a central strategic principle of our com-pany, every project presented to the Management Boardis verified first and foremost for its sustainability, amongother things. The BMWGroups Risk Management teampays particular attention to the following developments:

Political, social and economic risks

Political tensions, terrorist activities, natural disasters andpandemics can all have a negative impact on economiesand capital markets, and consequently on social develop-

ment.

Industry-specific risks

Rising fuel prices and ever more rigorous fuel consump-tion and emissions standards for automobiles are placingincreasingly tough demands on our engine and productdevelopment. However, in the context of climate changeas well as rising energy prices and changing customerre-quirements, the BMWGroup also identifies opportunities.

Climate risks

When choosing a new site for a facility, we analyse theeffects of climate change in the region and the risk factorsassociated with it.

Supply chain risks

When we choose a supplier, our Supplier RelationshipManagement department verifies not only the companysviability in terms of business and technology but also itssocial and environmental credentials. The process is sup-ported and monitored by our Compliance Committee. In

addition, BMWGroup Purchasing is currently mappareas around the world that are at risk of natural disaIts findings will help us select the right locations an

supply routes.

Risks arising from dwindling natural resources

The increasing scarcity of natural resources makes thefficient use and the search for alternatives essentialDwindling reserves are also causing industry to makgreater use of recycled materials.

Personnel risks

The population in Germany is ageing and shrinkingwith lasting effects on the employment market. Alrecompetition for employees with key qualifications igrowing tougher.

During the global financial crisis, our risk managemsystem proved its worth. Individual functions, such averification of standard risk costs in financing contrahave now been optimised on the basis of our experiegained during the crisis. We have also integrated sesustainability risks into the process, including physicand regulatory risks to our reputation relating to theenvironmental and social standards of our suppliersSupplier Relationship Management department has tified and established sustainability as being an equaimportant criterion for the supplier selection processchapter 01.5). In addition, exchanges with other companies, regular training courses, workshops and info

tion events within our risk management network haenabled us to prepare ourselves and our employees meet new risk requirements.

In the future, as our corporate processes become incringly complex, we will focus on strengthening the inplay between those responsible for our risk manageand strategy on the one hand and our partners in socon the other.

UNGlobal Compact

BMWGroup Annual Report

2010. For further details on

the risk management system,

please see pages 6 3 69

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01.3 CORPORATE GOVERNANCE AND COMPLIANCE.Responsible and lawful conduct is fundameto the success of the BMWGroup. This approach is an integral part of our corporate culture anis the reason why customers, shareholders, business partners and the general public place thtrust in us.

Corporate governance

The BMWGroup manages its business in accordance withprinciples of responsible corporate governance geared

to long-term value creation. In 2002, it confirmed its com-mitment to these principles in its own Corporate Govern-ance Code. Based on the German Corporate GovernanceCode (GCGC), this document was updated following thepublication of the revised GCGC.

Compliance and anti-corruption

The Board of Management and the employees of theBMWGroup are obliged to act responsibly and in com-pliance with applicable laws and regulations. However,legal violations can never be ruled out completely. Inorder to ensure protection against compliance-relatedrisks, the Board of Management created a Compliance

Committee in 2007, mandated to establish a worldwideCompliance Organisation throughout the BMWGroup.The establishment was completed in 2009.

The BMWGroup Compliance Committee is responsiblefor managing and monitoring the full spectrum of activ-ities necessary to ensure legal compliance. It is also taskedwith informing the Board of Management about all com-pliance-related issues. The BMWGroup ComplianceCommittee operates through the BMWGroup ComplianceCommittee Office, which is allocated in organisationalterms to the Chairman of the Board of Management.

The BMWGroup Compliance Organisation comprises

the entire set of measures taken to ensure that the BMWGroup and its staff act in a lawful manner. It is supple-mented by a whole range of internal Policies, Guidelinesand Instructions, which in part reflect the applicable law.

The BMWGroup Legal Compliance Code is at the core ofthe BMWGroup Compliance Organisation and is avail-able for all members of staff to consult.

More than 11,000managers and staff have received train-ing worldwide in essential compliance matters since theintroduction of the BMWGroup Compliance Organisation,in 2008. In addition, in-depth training is also providedto certain groups of staff. In 2010, for example, a European

Union related training programme was prepared (Com-pliance Advanced Competition and Antitrust Law).

In order to avoid legal risks, all members of staff are ex-pected to discuss matters with their managers and withthe relevant departments within the BMWGroup, inparticular Legal Affairs, Corporate Audit and Corporate

Security. Additional support for staff and the externapublic can be obtained from the BMWGroup ComplContact. Possible violations of the law can be reporte

anonymously via the BMWGroup SpeakUPLine. Alquiries are documented and followed up by the BMWGroup Compliance Committee Office using an electcase management system.

On top of that, a reporting system has been establishwhich enables compliance-relevant issues to be repoto the BMWGroup Compliance Committee, both onregular basis, and on an ad-hoc basis. The first full secompliance reporting was completed in 2010.

The Board of Management consistently keeps track and analyses compliance-related developments and

trends. In autumn 2010, the Board of Management dcided to expand the existing range of compliancemeasures. This included additional measures aimedavoiding corruption, strengthening controls and intrducing regionally structured compliance manageme

It is essential that employees are aware of and complwith applicable regulations. The BMWGroup does ntolerate violations of law by its employees. Culpablelations of law result in employment-contract sanctioand may involve personal liability consequences forthe employee involved. In order to avoid this, the BMGroups employees are kept fully informed of the tooand measures used by the BMWGroup Compliance

Organisation via various internal channels the mimportant being the Compliance website within theBMWGroup intranet.

Compliance is also an important factor in terms of saguarding the future of the BMWGroups workforce. this in mind, in 2009the Board of Management andthe national and international employee representatbodies of the BMWGroup signed a set of Joint Princifor Lawful Conduct. In doing so, all parties involvedgave a commitment to the principles contained in thBMWGroup Legal Compliance Code and to trustfuloperation in all matters relating to compliance.


2010. For further details oncorporate governance, please

see pages 140 165


2010. For further

details on compliance, please

see pages 140 165

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compliance

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SOLIDARITY AMONG EMPLOYEES, SHAREHOLDERSAND CORPORATE MANAGEMENT

9December 1959could be considered a new beginningfor the Bayerische Motoren Werke. A deep corporate crisishad swallowed up large parts of the companys finances.In an apparently desperate situation, the managementcould see no alternative but to sell the company to theStuttgart-based producer Daimler-Benz AG. In a turbulentshareholders meeting on that day, however, small share-holders and BMWdealer representatives objected to theplan, putting an end to the proposed acquisition.

Major shareholder Herbert Quandt was impressed bthe companys will to survive. In close collaborationswith Works Council Chairman Kurt Golda and the cpanys new Board of Management, he worked out a pthat would secure the future autonomy of the BayeriMotoren Werke. Presented to shareholders on 30Nober1960, this concept for the future was to pave the for the rapid rise of the BMWbrand in the 1960s. Thnew beginning was accompanied by a new-found se

Celebrating the 50thanniversary of the BMWGroups milestone shareholders meeting

50years ago, something very special came into being.Following a severe crisis, a successful campaign to restruc

tureour company resulted in an unprecedented bondbetween employees, shareholders and the executivemanagement. This marked the start of two developmentsa strong feeling of solidarity on the one hand and a sharedsense of responsibility for our corporate autonomy on theother. We look back over 50years of autonomy and develoment since Herbert Quandt gained a majority share at theshareholders meeting in 1960.

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of solidarity among employees, shareholders and themanagement without which the BMWsuccess storywould have been unimaginable.

Just a few years later, the company faced another challenge.The oil crisis of 197374caused car sales to plummet be-fore soaring again shortly afterwards. Thanks to the strongsense of identity and flexibility of its employees, the com-pany was able to weather the crisis and usher in a newera of growth.

In the early 1980s, BMWsaw itself confronted with the

same question as other manufacturers: how to produceeconomically in a high wage country like Germany?

A On 30November 2010, celebrations mark the50thanniversary of the shareholders meeting

B BMWVision EfficientDynamicsC In the foreground from left to right: Dr. Norbert Reithofer,

Chairman of the Management Board; Prof. JoachimMilberg, Supervisory Board Chairman; Stefan Quandt,shareholder and Supervisory Board Deputy Chairman.In the background: Manfred Schoch, Works CouncilChairman and Supervisory Board Deputy Chairman

Corporate management

Employees

Shareholders

Success factors

In order to resolve the problem, the management anWorks Council developed a groundbreaking workingmodel. This decoupled machine operating times from

personal working times at the BMWplant in RegensKnown as The Common Sense Contract, the new arangement represented a major competitive advantafor the BMWGroup.

The two big tests of the 1970s and 80s led to construcollaborations between the Board of Management, tWorks Council and the companys major stakeholdeunder the auspices of long-standing Chairman of thBoard Eberhard von Kuenheim. To this day, the fairnamong these company partners that was establishedthen continues to characterise collaborations betweencision-making bodies at the highest level.

In 1999to 2000, the competitive position of the BayerMotoren Werke was at risk once again, this time duthe Rover acquisition. The Supervisory Board, the Bof Management and employee representatives set aboselling the Rover Group. This allowed the BMWGrand its employees to realign their business activitiesuccessfully under the three premium brandsBMW,and Rolls-Royce.

The company also responded quickly and flexibly toglobal financial and economic crisis of 20082009. Oagain, its Management and Works Council pulled together. A spell of short-time work in early 2010was

lowed by all-time production highs in the fourth quaof that year at some of the BMWGroups plants.

With Strategy Number ONE, launched in 2007, the BGroup realigned its business activities to provide suablesolutions for the wide-ranging challenges of invidual mobility in the future. Its vision is to be the leaprovider of premium products and premium serviceindividual mobility by the year 2020.

B

C



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01.4 STAKEHOLDER DIALOGUE.As a globally active corporation, we are in constant dialogue with awide range of stakeholders at home and abroad. Our communications with them enable us toidentify trends early on, strengthen our commitment to society, and work better to achieve ousustainability goals.

Customers, business partners, employees and the media,decision makers from politics and science, NGOs and in-vestors. Together, these groups place significant demands

on the BMWGroup, both on a local and a global level.Many of our sustainability targets can only be reached viaclose collaborations with our partners from politics, so-ciety, the sciences and industry. All the while, the capitalmarkets and society at large are developing a growinginterest in information and in the dialogue about sustain-ability.

The dialogue we are leading with our stakeholders is on-going and takes place on a range of different platforms.We see it as a constant learning process that helps us torecognise relevant trends and shifts and to work togetherto find solutions.

Our main contact for our stakeholder dialogue regardingissues of sustainability is our Communications department.This collects enquiries to be discussed with experts in therelevant specialist departments. In addition, a range ofcommittees and channels allow specialist divisions of thecompany to contact relevant stakeholder groups directly.At BMWGroup sites around the world, local publicrelations representatives communicate with local stake-holder groups, while the dialogue for inter-site net-works, such as the one between Oxford, Hams Hall andSwindon in the UK, is coordinated either centrally bya single site or by the regional or national headquarters.

E-mobility as a subject of the national stakeholderdialogue

In July 2010, 16experts from the capital markets, NGOsand the BMWGroup met for the second BMWGroupStakeholder Roundtable in Munich. Among the keyissues on the agenda were electromobility and sustain-able mobility concepts for the future. The former hadalso been the subject of discussions one year earlier,when experts from BMWNorth America met with repre-sentatives of five of the most influential NGOs. Issuesaffecting the BMWGroup are additionally discussed ona quarterly basis in valuable meetings between membersof the Union of Concerned Scientists, PEWClimate, theSierra Club, the Safe Climate Campaign and NRDC.

On a national level in Germany, we have joined the Na-tional Platform for Electromobility (20092010), whichwas established by the German Federal Government. Wehave also taken part in several events relating to youngpeople and exploring issues of education and mobility. InBerlin, the BMWGroup organised a number of so-calledgreen tables to discuss issues such as sustainable business

(November 2009), vehicle technology and traffic safe(February 2010), environment management and recy(April 2010), sustainability in the supply chain (Sept

ber 2010) and the future of mobility (November 201Guests included representatives of parliamentary pain the Bundestag and of the relevant ministries and N

Further stakeholder dialogues involving BMWGrourepresentatives also took place at other locations. Thinclude Berlin, where discussions focused on e-mobilas a driver of the economy, and other places across Euand the USA. Other discussions on issues such as susable mobility and education have involved numeroutional and international politicians.

In 2010, investors and analysts were once again keen

find out more about our sustainability strategy. Sustaability is now firmly established on the agendas of oinvestor relations roadshows and discussions. It has been the subject of conferences on socially responsiinvestment and of sustainability conferences and roashows.

In dialogue with neighbours, co-workers and the

Internet community

Communications departments at our various sites resto questions and possible problems of local stakehoand provide information on relevant plans, such asupcoming construction projects. In Leipzig, for instadiscussions in advance of a proposed wind farm con

struction project were intense and involved all the revant parties.

Many of our plants also take active steps to encouragstronger sense of community. Our facilities in Municand Spartanburg, for example, have made rooms avaable for neighbourhood projects to use.

One fundamentally important point in this regard islocal stakeholder dialogues can focus particularly stroon local situations. Whether in Germany, China, IndSouth Africa or the USA, no two sets of circumstanceever the same, so the local dialogue must meet local quirements.

At the end of March 2010, we launched our Facebooplatform called BMWGroup View. Unlike the brandcific platforms for BMWand MINI, BMWGroup Viewaddresses a wider audience with an interest in our copany. We use it, among other things, to discuss issuesustainability but also to provide a useful source of iformation for many of our stakeholders. By 4July 20

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more than 40,300Facebook members had linked up withBMWGroup View.

Internally, when it comes to finding out what our em-ployees think of their working environment, personaldevelopment opportunities, corporate culture, and of theBMWGroup as an employer, we hold regular employeesurveys. The most recent was launched in spring 2011and has already delivered results, which were presentedto employees in the early summer of this year. The nextemployee survey is scheduled to take place in the firsthalf of 2013.

Dealer, employee and other stakeholder surveys

How does the public view our sustainability activities?And what reporting methods do our stakeholders prefer?

What sustainability trends and topics are relevant forthe BMWGroup?

Throughout the period covered by this report, questionslike these have been explored in a total of five stake-holder surveys. In autumn 2009to spring 2011, we heldan online survey at www.bmwgroup.com/responsibilityto which 166people responded. In November 2010, wesurveyed 26BMWGroup dealers in seven different coun-tries and found that most of them identified fuel con-sumption and product safety as being of primary import-ance in the eyes of BMWGroup customers. In December2010, we questioned 16European investors and analysts(75% of whom had an SRIsustainability focus) to find out

their views on the BMWGroup sustainability strategy.And between February and April 2011, we interviewed20sustainability experts from research, the sciences, thecapital markets, NGOs, politics and legislator groups.Respondents from Germany, the USA, the UK, India,China, South Africa and Switzerland rated the BMWGroup as very good overall. (For more detailed results,see page 14.) Of those surveyed, 70% responded posi-tively to the companys management approach regardingissues of sustainability, and 60% rated our product re-sponsibility as outstanding. Some respondents identifiedpotential for us to improve the way we monitor our cor-porate social responsibility and to do more in termsof electromobility and CO2emissions reductions. They

also expressed a desire to see more intensive personalcommunications.

During the course of 2011, we will continue to work onmeeting their wishes.

MEMBERSHIPS AND RESPONSIBILITIES

As an active member of numerous specialist com-mittees and organisations, we work to promote th

philosophy of sustainability in business.

Association of the German Economy (vbw)

Confederation of German Employer Organisatio

(BDA)

econsense the Forum for Sustainable Develop

ment of German Business

European Research Group on Environment and

Health in the Transport Sector (EUGT)

European Automobile Manufacturers Associati

(ACEA)

Federation of German Industry (BDI)

German Association for the Automotive Industry

(vda)

German Chamber of Industry and Trade / Chamb

of Industry and Trade (DIHK/ IHK)

Gesellschaft zur Altlastensanierung in Bayern

mbH (GAB) (site remediation company)

Global Compact Network Germany

Sonderabfall-Entsorgung Bayern GmbH (GSB)

(special waste disposal company)

World Business Council for Sustainable Develop

ment (WBCSD)

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www.wbcsd.org

www.globalcompact.de

www.eugt.org

www.acea.be

www.vda.de

http://www.bmwgroup.com/responsibilityhttp://www.econsense.de/_ENGLISH/index.asphttp://www.wbcsd.org/http://www.globalcompact.de/index.php?id=30http://www.eugt.org/http://www.acea.be/http://www.vda.de/en/index.htmlhttp://www.vda.de/en/index.htmlhttp://www.acea.be/http://www.eugt.org/http://www.globalcompact.de/index.php?id=30http://www.wbcsd.org/http://www.econsense.de/_ENGLISH/index.asphttp://www.bmwgroup.com/responsibility


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01.5 SUSTAINABILITY IN THE SUPPLY CHAIN.Our passion for premium quality and products is onwe share with more than 12,000 suppliers around the world. When selecting and verifying whodo business with, sustainability is just as important as innovativeness and cost factors.

Our products and services, our leading position in themarket and the acceptance we find among our customersare not least the result of collaborations with our suppliers

around the world. Some 12,000of them in 70differentcountries make a major contribution to the success ofthe BMWGroup. Many of them are our long-standingpartners. With all of our suppliers, we work to developa common understanding of product and productionquality. Even in the earliest stages of the supplier selectionprocess, we make sure new candidates meet the sameenvironmental and social standards we have set ourselveswhen they become our business partners.

With supply and value chains spanning a multitude ofsub-suppliers around the world, ensuring sustainability

represents a major challenge especially in view of the

limited opportunities available to influence second andthird tier suppliers. Any contact we have with them ispurely indirect, via our first tier suppliers. But new vehicleand production concepts such as those being establishedunder our BMWi sub-brand are opening up new oppor-tunities in the supply chain, which we must recogniseand capitalise on. At the same time, we continue to striveto make our supply chain the most efficient and sustain-able in the automotive industry. In 2010, we began toincrease our focus on integrating this topic into selecting,monitoring and training our suppliers. Over the longerterm, we aim to work only with partners that comply withthe same principles as we do, namely those of the ILO,the UNGlobal Compact, UNEPCleaner Production

Declaration, OECDGuidelines and the ICCCharter.

Outside the BMWGroup, we are implementing our com-mitment to sustainability with econsense, the forum forsustainable development of the German economy. Asa leading member of the Supply Chain project group, weare working on a systematic method for verifying suppliersustainability across all sectors of industry.

Within the BMWGroup, responsibility for the develment of a sustainable supply chain lies with our Puring Division. Other specialist divisions, such as the m

department for Sustainability and Environmental Prtion and our department for Parts Quality Managemare supporting the implementation of sustainabilityteria along the value chain. In addition, the BMWGrSupply Chain Academy has been sensitising our Purchasing teams to issues such as human rights and envmental protection as aspects of sustainability since thfourth quarter of 2010. Managers receive training in subject through our Managing Business training couwhich incorporates a module on sustainability.

Our global network of International Purchasing Off(IPOs) identifies and trains local suppliers to work w

the BMWGroup. They also support our future partnin building up the processes needed for them to fulfenvironmental and social standards we have set.

Our partnership with our suppliers is characterisedopen dialogue, transparent enquiry and nominationprocesses, and the most stable, lasting collaboratiopossible, even during periods of crisis. In Novembe2010, we held a forum for which we invited 400of omain suppliers to an information event in Munich. Amthe issues on the agenda was a stronger focus on aspof sustainability in the BMWGroups supply chain.

1. Supplier selection process takes sustainability

into accountSince 2008, we have urged our suppliers to provide imation on how they fulfil sustainability criteria. In 2the catalogue of questions we had been using was extended to include small businesses and service proviIn total, 27questions explore conditions at specific,dividual production facilities of our first tier supplierdelivering information about ISO14001environmemanagement systems, recyclability in product develoment, and waste disposal concepts. By June 2011, aro1,000suppliers had voluntarily provided the informwe asked for.

When selecting our suppliers and making final nom

ations, we consider only those companies that have vided the full and complete set of sustainability infomation and have not breached any of the BMWGrouexclusion criteria, which relate to aspects such as chilabour. Under this system, we are making sustainabias much of a priority as the classic supplier require-ments, such as reliability, innovativeness and economvalue.

SECURITY AND HUMAN RIGHTS

From production materials to vehicle components,

our suppliers are contractually bound to comply with

human rights legislation. Moreover, work is currently

under way to integrate similar obligations into our

global terms and conditions for the purchasing of

services. In countries such as South Africa, local

departments annual in-house courses on human

rights keep security staff up-to-date.

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www.ilo.org

www.unglobalcompact.org

www.unep.fr/scp/cp

www.oecd.orgwww.iccwbo.org
http://www.econsense.de/_ENGLISH/index.asphttps://b2b.bmw.com/http://www.ilo.org/http://www.ilo.org/http://www.unep.fr/scp/cphttp://www.oecd.org/http://www.iccwbo.org/http://www.iccwbo.org/http://www.oecd.org/http://www.unep.fr/scp/cphttp://www.ilo.org/http://www.ilo.org/https://b2b.bmw.com/http://www.econsense.de/_ENGLISH/index.asp


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One visible sign of the increasing importance of sustain-ability in the supply chain is the BMWGroup SupplierInnovation Award, which we will award to outstanding

suppliers for the first time in November 2011. Amongthe selection criteria for prizewinners will be social, envi-ronmental and business performance.

2. Voluntary agreement and monitoring

Sustainability requirements have been an establishedcomponent in our general purchasing conditions since2003. Requirements are based largely on recognisednational and international conventions. When signing acontract with the BMWGroup, each supplier is makinga binding agreement to abide by these criteria and under-take everything possible to ensure that they are adheredto along the upstream value chain.

As part of our supplier requalification process, we carryout sustainability checks on around 200suppliers every

year. We also visit our major suppliers two to three times ayear, as we carry out their Supplier Performance Review.To ensure our monitoring system delivers quantifiableresults, we approved a series of KPIs that will be appliedas of 2011. These indicate the degree to which a supplieris implementing our criteria. They also quantify risk andincidents of serious deviations from our standards.

3. Escalation and supplier training

If a supplier breaches any sustainability criteria, we initiatea standardised three-stage escalation process. This beginswith a request to the supplier to issue a statement andrefer to the BMWGroups Terms and Conditions of Pur-chasing and ends, in the worst case, with the termination

of our partnership with the offending supplier. However,we do provide a wide range of training and assistancefor our suppliers.

Forecast

In 2011, we will link the findings of our sustainabilitysurveys with the supplier evaluation systems we use toassess suppliers of direct and indirect materials. This will

enable us to monitor the sustainability of their activiconsistently. We will also formalise the feedback weduring supplier visits and from working with individsuppliers. To help us to make continuous improvemto our own in-house requirements, we will integratetainability criteria into training courses at the M Purcing Academy in 2011.

HOLISTIC CARBON ACCOUNTING FOR THE BMW i

For its forthcoming megacity vehicle, the BMWGrohas for the first time established a set of example

environmental accounting criteria along the entire

value chain (see also page 08). In total, around

70 suppliers will be delivering components for the

electrically powered vehicle, which will be the resu

of a completely new production process. More

than 50 % of the aluminium incorporated into the

BMWi3 is environmentally friendly aluminium,

which has been obtained largely from recyclates

using carbon-neutral hydroelectric power.

MATERIAL OPTIMISATION ALONG THE

VALUE CHAIN

How environmentally compatible are the materials

we use to make our cars? How can we make themmore easily recyclable? What environmental standa

are there? And what will future legislation specify?

These and other questions are among the issues t

BMWGroup seeks to resolve along its value chain

As early as the component development stage, w

refer our suppliers to the requirements set out in

REACH, the EUregulation on chemicals. With the

help of a certified process, we use virtual cars to

simulate the recyclability of components. Auxiliar

and process materials such as paint and adhesive

also undergo rigorous verification processes. This

enables us to ensure that the materials and com-

ponents we deploy along the value chain are eco-

logically sound.

SUPPLY CHAIN MANAGEMENTAWARD 2010BMWMotorrad has developed an award-winning supplier riskmanagement system. As part of its more general integrated,consistent and collaborative supplier management system, thisrisk management aspect earned it the recognition of the inter-national business consultancy PRTMManagement Consultants,the specialist logistics journal LOGISTIKHEUTEand Supply ChainManagement Institute (SMI) of the European Business School.

http://ec.europa.eu/

environment/chemicals/reach/

reach_intro.htm

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Our Financial Services business volume also continuedto grow, totalling euro 66,233million (+8.2% comparedwith the previous year). This was enabled by the attrac-

tive range on offer and by the global economic recovery.On 31December 2010, our Financial Services divisionwas administrating 3,190,353leasing and financing con-tracts with dealers and retail customers.

BMWGroup revenues rose to euro 60,477million fromeuro 50,681million in the previous year. Our profit be-fore financial result climbed to euro 5,094million fromeuro 289million the previous year. Profit before tax to-talled euro 4,836million compared with euro 413millionone year earlier. Net value added increased by 42.7% tostand at euro 14,902million, the bulk of which (48.8%)is applied to employees. Gross value added reached euro

21,580million (+21.7%).

Last years success is attributable in part to the recoveryof the global economy, but another important factorhas been our Strategy Number ONE. This comprises anumber of initiatives to increase profitability as well asadditional measures for our Efficient Dynamics package.

The BMWGroups robust financial position has earnedit the recognition of rating agencies of international re-pute. Our good creditworthiness is reflected in the first-class ratings we have achieved. On 22July 2011therating agency Moodys announced that it would be raisingBMWAGs rating from A3to A2. This changes our short-

term P-2rating to P-1, the highest short-term ratingpossible. The outlook remains stable. Standard & Poorsshort-term rating for the BMWGroup is A-2, the long-term rating is A, with a stable outlook.

Global impulses for growth

During the course of last year, we were also able to im-proveour competitive position. Investment volumestotalled euro 3,263million, marking a slight drop onfigures for the previous year. However, research anddevelopment expenditure rose to euro 2,773million,compared with euro 2,448million the previous year.

One of our most important investments last year was in

the expansion of our USplant in Spartanburg. Here, pro-duction capacity is set to total 1,000units per day, or upto 240,000vehicles a year. With these investments worthUSdollar 750million and the launch of BMWX3produc-tion in Spartanburg, natural hedging will offer us greaterprotection from exchange rate fluctuations.

In Tiexi, China, not far from Shenyang, June 2010sathestart of construction work for a new plant. The prorange of this new facility will include the BMWX1.

choosing Tiexi, we attached great importance to ecoloand social criteria (see page 42). From 2012onwardsproduction capacity in the dynamic market of Chinatotal 150,000units. In addition to this, we have enhaour sales network across China and other burgeoninBRICmarkets by establishing a further 100dealershi

Meanwhile, our German plants benefited from invesments totalling euro 1.5billion in 2009and 2010.November 2010saw construction work commence tprepare our plant in Leipzig for production of our mcity vehicle. By 2013, the BMWGroup will invest someuro 400million in buildings and equipment for larg

scale series production of vehicles that we will launconto the market under our new sub-brand, BMWi (spage 28).

01.6 THE YEAR 2010.After the global financial crisis of 2009, the year 2010 turned out to be an extremely positive year for the BMWGroup. Revenues and profits reached record levels, and in Aand the USAin particular demand for our premium vehicles increased significantly. Around thworld, we sold 1,461,166 units, marking a 13.6 % rise year-on-year. Motorcycle sales rose by 9.to a total of 110,113 units.

BMWGroup

Annual Report 2010

Page 72 et seq.

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