Integrated thinking in action

A spotlight on the BMW Group

Case study
 Case studies from the

Value Reporting Foundation

The Integrated Thinking & Strategy Group (a special interest group of the Value Reporting
Foundation’s Business Network) brings together some of the world’s most innovative companies
so that they can collaborate, learn from each other, challenge each other’s thinking and share leading
practices between themselves and those who follow them.

Integrated thinking is engrained in the discipline of making a deliberate and coordinated effort to connect
the organization’s strategy, governance, performance and prospects. It is the active consideration by an
organization of the relationships between its various operating and functional units and stores of value
– which the Value Reporting Foundation refers to as ‘capitals’ in the International <IR> Framework –
that the organization uses or effects to create value over the short, medium and long term.

It is used by businesses to improve decision-making, accountability and communication. It is therefore

essential to the development of strategy and provides a valuable connection to the board.

The project aims to assess how integrated thinking is embedded within organizations through a series
of interviews to understand:
• What led the organization to embed integrated thinking
• How they used integrated thinking to shape their strategy
• How integrated thinking has helped them deploy their strategy
• What the benefits have been.

2 Integrated thinking in action A spotlight on the BMW Group

 Overview
30-second snapshot into integrated
thinking at the BMW Group
The BMW Group is one of the most successful manufacturers of automobiles and motorcycles in
the premium segment worldwide. With BMW, MINI and Rolls-Royce, the BMW Group owns three of
the best-known premium brands in the automotive industry, and holds a strong market position in the
premium segment of the motorcycle business.

The Group sets itself clear goals in terms of sustainable, individual mobility, resource-efficient value
creation, the continued development of its workforce potential and its contribution to society. Operating
on a global scale, in 2020 the BMW Group employed a workforce of 120,726 people and consolidated its
position as one of the world’s most attractive employers.

Sustainability is an integral part of the Group’s business model and plays a vital role in ensuring its
viability going forward. Informing stakeholders about the BMW Group’s business performance in a single
integrated report has the objective to provide a clear insight into the BMW Group, making its activities
transparent, accountable and measurable for readers.

3 Integrated thinking in action A spotlight on the BMW Group

Deep dive into integrated thinking
at the BMW Group
10 minute read

This case study summarizes the journey of integrated thinking at the BMW Group and was developed through the conversations
that Tanja Seiler, Investor Relations, Magdalena Podoska, Sustainability & Mobility, Christian Fischl, Sustainability & Mobility,
and Leif Steeger, Group Standards & Reporting had with Professor Cristiano Busco, LUISS and Roehampton University,
and Dr. Irma Malafronte, Roehampton University.
 Deep dive
What led the BMW Group to embed
integrated thinking?
The BMW Group has published sustainable value reports since 2001, initially every two years and
annually since 2012. Prior to this period, the Group had a long tradition of publishing environmental
reports, disclosing the impact of its operations on the environment, including mitigating measures.

Since 2005, the BMW Group has applied Global Reporting Initiative (GRI) standards to report on sustain-
ability matters. Since 2008, it has voluntarily complied with the highest GRI application level. In 2015, the
General Assembly of the United Nations (UN) announced 17 Sustainable Development Goals (SDGs).
The Group identified the SDGs to which it can make a direct and thus the greatest possible contribution
with its own sustainability goals.

After the Board of Management redefined the company's central sustainability goals in 2020, including
reducing the lifecycle CO2 emissions per vehicle by at least a third by 2030 and measuring the progress
of BMW’s journey towards carbon neutrality by 2050 using science-based targets, the decision to publish
an integrated report came as the next logical step. Integrated thinking and reporting is a journey and,
for the first time, the BMW Group combined its Annual Report and Sustainable Value Report into a
single Integrated BMW Group Report, following the International <IR> Framework.
BMW Group represents the first premium
manufacturer publishing an integrated Integrated thinking leading to integrated reporting is a dynamic process for the BMW Group, as it
report. establishes a dialogue underpinned by content, and enables the organization to report in the most
Press release / 2021 effective way. For stakeholders, this means being able to find and categorize the information they
are looking for both quickly and reliably.

5 Integrated thinking in action A spotlight on the BMW Group

 How did the BMW Group approach
integrated thinking?

The BMW Group Report 2020 shows that our business model and sustainability cannot be separated.
We manage the BMW Group according to both financial and non-financial parameters and report
these in a transparent manner every year. As a premium manufacturer, we seek to set a good example
for the industry and take responsibility.”

Dr Nicolas Peter / member of the Board of Management of BMW AG responsible for Finance

The BMW Group’s integrated thinking and reporting journey led the organization to set up a cross-
functional team that works closely together, rather than several teams working on the annual report and
on the sustainability report. In 2020, the BMW Group combined its Annual Report and its Sustainability
Report (formerly the Sustainable Value Report) into a single document. The subsequent publication of the
Group’s first integrated report is the result of integrating sustainability strategy into corporate strategy.

6 Integrated thinking in action A spotlight on the BMW Group

 How has integrated thinking helped the
BMW Group articulate its strategy?
Sustainability is at the heart of the BMW
Group’s broader strategy, encompassing
all relevant aspects, from the supply chain The starting point for the BMW Group’s corporate strategy is to act in a consistent manner on a
to production and the product life cycle.” customer-oriented and sustainable basis. Products, brands and services are being developed with a
Norbert Reithofer / Chairman of the Supervisory Board, clear focus on innovative technologies such as low-emissions drivetrains, digitalization, connectivity
BMW Group
and autonomous driving.

Integrated thinking has helped the BMW Group to pursue its sustainability goals. The Group is taking
responsibility and placing this sustainability at the core of its corporate strategy and has included
sustainability as a prime factor in its corporate decision-making processes. This integrated approach
removes the need to pursue a separate sustainability strategy.

Figure 1
BMW Group Strategy
For a detailed view of the model please consult
The BMW Group Strategy

7 Integrated thinking in action A spotlight on the BMW Group

How has integrated The BMW Group’s strategy comprises four key elements, which are summarized in a strategy
thinking helped the arrow that points towards the future.
BMW Group articulate its
strategy? Position
What does the BMW Group stand for? The BMW
Strategic approach
Where is the BMW Group heading? The BMW Group
Group stands for first class individual mobility and focuses on customers and meets their needs by
contributes to the sustainable development of our combining pioneering technologies, emotional products
planet. They reconcile economy, ecology and society. and personalized customer support to create a unique
As a result, customers enjoy outstanding products and overall experience.
demonstrate responsibility.
Cooperation
Direction How does the BMW Group ensure cooperation?
What is the BMW Group’s driving force? The BMW The BMW Group’s values are the basis for cooperation.
Group offers thrilling products – today and for future By working hand in hand internally and with the external
generations – secures independence through high partners, they achieve maximum effectiveness, and
profitability, and uses powerful innovations and passion together bring success to the company.
to shape the future of sustainable mobility.

Long-term thinking and responsible action are an integral part of the BMW Group’s corporate identity.
Indeed, the Group’s business model is intrinsically linked with the principle of sustainability, which is also
reflected in the strategic targets. Through the integrated report, financial strategic targets are presented
together with non-financial targets, for example CO2 emission reduction¹.

We don’t just do sustainability at BMW:

We are making BMW sustainable.”

Oliver Zipse / CEO, BMW Group

¹The BWM Group has accelerated CO2 reduction in the use phase. This means 50% reduction in global CO2 use-phase emissions by 2030
(from the 40% reduction in the BMW Group Report 2020).

8 Integrated thinking in action A spotlight on the BMW Group

 BMW Group Combined Management Report
50
Report 2020 General Information and Group Profile

Strategic targets

> 10 %
EBT MARGIN
GROUP

8 -10 %
EBIT MARGIN
AUTOMOTIVE SEGMENT

≥ 40 %

2025 2030
RETURN ON CAPITAL EMPLOYED
AUTOMOTIVE SEGMENT

80 %
REDUCTION OF CO ² EMISSIONS
PER VEHICLE IN PRODUCTION
(BASE YEAR 2019)

> 40 %
≥ 25 % REDUCTION OF CO ² EMISSIONS
MINIMUM PROPORTION OF ELEC- IN VEHICLE USE PHASE
TRIFIED AUTOMOBILES TO TOTAL PER KILOMETRE DRIVEN
DELIVERIES (BASE YEAR 2019)

≥ 20 %
22 % REDUCTION OF CO ² EMISSIONS
PROPORTION OF WOMEN IN THE SUPPLY CHAIN
IN MANAGEMENT POSITIONS (BASE YEAR 2019)
IN THE BMW GROUP

This is a simplified depiction. Detailed explanations of KPIs and its corresponding

assurance level are provided in the relevant chapters of the report.

Figure 2
For a detailed view of the model please consult
page 50 of the BMW Group Report 2020

9 Integrated thinking in action A spotlight on the BMW Group

 How has integrated thinking helped
the BMW Group deploy its strategy?

Integrated thinking supported the BMW Group’s integration of its sustainability strategy into its
corporate strategy. This built upon the Group’s solid foundational work, as the Group has repeatedly
set itself ambitious sustainability targets and assumed a pioneering role in this area over decades.
For example, they were the first organization in the automotive sector to appoint an environmental
protection officer back in 1973.

The BMW Group was also the first premium manufacturer to bring a fully electric vehicle to the market.
The all-electric BMW i3 launched in 2013, effectively setting the benchmark for sustainable mobility going
forwards. In 2020, the Group also achieved its carbon emissions targets for the new vehicle fleet, thanks
to its expanding fleet of electric vehicles.

In 2021, the Group developed a new balanced scorecard through integrated thinking, where sustainability
data is qualitative as well as quantitative. One of the Group’s targets is to achieve over 40% reduction in
CO2 emissions during vehicle life cycle assessments by 2030, compared to 2019. A further aim to at least
halve CO2 emissions per vehicle from 2019 levels. The BMW Group is also targeting its own manufacturing
plants and sites to reduce CO2 emissions by 80% and by 20% in its supply chains. Another important
strategic target is ensuring compliance with environmental and social standards in the Group’s supply
chains.

10 Integrated thinking in action A spotlight on the BMW Group

How has integrated Integrated thinking has enabled the BMW Group to gain a holistic view of its value creation process.

thinking helped At the Group, value creation is a comprehensive process involving a broad range of factors, some of

the BMW Group deploy which interact in complex ways. These factors may be of a financial or non-financial nature and relate

its strategy? to both tangible and intangible assets that are geared towards creating additional value using a minimum
of resources. These input factors form the basis that drives the BMW Group’s overall performance.

Inspired by the value creation model of the <IR> Framework, the factors on both the input and the output
side are divided into six different types of capital in the BMW Group's value creation model, which can
be distinguished in the diagram on the following page.

The Group upholds their core values, which are supported by integrated thinking and help drive innovation:

Responsibility
We take consistent decisions and commit to them personally. This allows us to work freely and more effectively.

Appreciation
We reflect on our actions, respect each other, offer clear feedback and celebrate success.

Transparency
We acknowledge concern and identify inconsistencies in a constructive way. We act with integrity.

Trust
We trust and rely on each other. This is essential if we are to act swiftly and achieve our goals.

Openness
We are excited by change and open to new opportunities. We learn from our mistakes.

11 Integrated thinking in action A spotlight on the BMW Group

 BMW Group Combined Management Report
57
Report 2020 General Information and Group Profile

Financial capital How the BMW Group creates value Financial capital

216,658 61,520 1,253 4,830

Total assets Equity capital Dividend total Profit before
(€ million) (€ million) ( proposal to the financial result (EBIT)
Annual General (€ million)
Meeting) (€million)

Human capital
Human capital
120,726 279 Output
Workforce at Training and education
12,244 82
end of year expenditure (€ million) Wages/salaries/ Employee
social insurance satisfaction
contributions (in %)
Intellectual capital (€ million)

1,561 6,279 Intellectual capital

Employee ideas
implemented in
R&D expenditure
(€ million) 18.2 6.3
conjunction with First-year benefits R&D ratio
CRE8 Ideas from implemented (in %)
Management employee ideas
(CRE8) (€ million)

Relationship capital Relationship capital

79 55.5 60 35
Proportion of Purchase volume
Proportion of Proportion of
production-relevant (€ million)
value creation suppliers in the
purchasing volume within
from suppliers CDP Supply Chain
the CDP supply chain
(in %) programme with
programme (in %)
an assessment of
at least B (in %)

Produced capital
Produced capital
31 thereof 13 2.33 192,662
Number of plants Input Deliveries to Deliveries of
plants producing
electrified customers electrified vehicles
vehicles (in million units)

Natural capital
Natural capital
− 56.7 − 53
2.12 100 Improvement Development
Energy consumption Proportion of This diagram shows an illustrative overview of key performance indicators (KPIs) disclosed in resource CO 2 emissions EU new
per produced vehicle electricity from in the report. Detailed explanations of KPIs and its corresponding assurance level are provided consumption and car fleet since 1995
(in MWh) renewable energy in the relevant chapters of the report. emissions from (in %)
sources (in %) vehicle production
(in %, average)
Further information is available at: report.bmwgroup.com

Figure 3
For a detailed view of the model please consult
page 57 of the BMW Group Report 2020

12 Integrated thinking in action A spotlight on the BMW Group

 How
BMW Group
has integrated
To Our Stakeholders
Integrated thinking has aided transparency, and the BMW Group maintains a regular dialogue with all of

thinking helped its stakeholders. As the Group operates on a global scale within a complex environment subject to crucial32

the BMW Group deploy

Report 2020 Dialogue with Stakeholders interdependencies, its activities have an external impact and can affect the interests of many individual

its strategy? stakeholders, as well as various categories of stakeholders.

THE NEXT STEPS: STAKEHOLDER GROUPS AND FORMS OF DIALOGUE

Dialogue, conferences and technology workshops with investors and analysts Capital market
The BMW Group intends to continue interacting with
Dialogue in the context of industry initiatives, joint events, training courses,
its stakeholders throughout 2021. Apart from consider- presentations, supplier risk assessments Suppliers
ing ways to develop and expand its own existing formats,
Participation of company experts in committees and working groups, memberships Networks
it will also continue to participate constructively in public of initiatives and associations and associations
formats during the coming year. Available to answer questions from policymakers and provide information to political Political
decision makers on relevant topics from the company’s perspective decision makers
Further plans include broadening the scope of in- Visiting universities and colleges, talks, discussions, dialogue events
BMW Group
ternal dialogues with employees from 2021 onwards, in dialogue with students Research
building on the success of this format at the BMW Group Dialogue within the context of press trips, press releases, information events
Dialogues in 2020. The aim is to make employees aware on new products, test drives, trade fairs Mass media
of the expectations of external stakeholders on the one Dialogue with sales organisations and coordinating units of importers Business partners
hand, while at the same time enabling employees to Discussions with local residents, plant tours, press engagements Local stakeholders
participate in ongoing discussions and developments Face-to-face meetings / dialogue, responding to enquiries Civil society and NGOs
on the other.
Dialogue with employees and managers, employee surveys, idea management,
internal media Employees
The BMW Group will also continue to engage in con-
Surveys (including a corporate reputation study), social media, trade fairs, mass media Customers
structive dialogue with investors and analysts focused on
Socially Responsible Investments (SRI). In addition to the
daily discussions held on this subject, the BMW Group’s GRI 102-40, 102-43
Figure 4
participation in SRI roadshows and conferences in global
For a detailed view of the model please consult
financial centres is again scheduled for 2021.
page 32 of the BMW Group Report 2020

The extent to which the coronavirus situation will

continue to impact direct interaction with stakeholders
in 2021 remains to be seen. However, the BMW Group
has fared well with its digital formats so far and has
developed a range of options for maintaining dialogue
13 with stakeholders via alternative concepts and formats. Integrated thinking in action A spotlight on the BMW Group
 How has embedding integrated
thinking benefited the BMW Group?

Integrated thinking has helped the BMW Group to view sustainability, social impact and economic
and business success as mutually dependent. From a business perspective, these result in
opportunities, but also risks that must be minimized. The Group considers these factors in two
ways: corporate business has an impact on ESG factors and the economic performance (inside-out)
but also vice versa – environmental issues and climate change serving as two of several examples
that have a significant impact on business and the decisions the Group makes (outside-in).

For the BMW Group, it is essential structurally to integrate these various influencing factors into its
management in order to make intelligent decisions that are sustainable in the long term. Implementing
a strategic goal set that links non-financial and financial goals to quantify mutual influences is key.
This requires structuring the organization to bring together functional units that are responsible for the
financial and non-financial aspects of the business to work together in an integrated way.

Overall, there are some personnel and process costs, but the Group has documented value generation,
more transparency, better communication to stakeholders, and lower cost of capital among the main
benefits of the integrated thinking journey.

14 Integrated thinking in action A spotlight on the BMW Group

The Value Reporting Foundation is a global nonprofit organization that offers
a comprehensive suite of resources designed to help businesses and investors
develop a shared understanding of enterprise value — how it is created, preserved
or eroded over time. The resources — including the Integrated Thinking Principles,
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in combination, depending on business needs. These tools, already adopted
in over 70 countries, comprise the 21st century market infrastructure
needed to develop, manage and communicate strategy that creates
long-term value and drives improved performance.

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