Sustainability at QS

From the CEO

QuantumScape was founded with the mission to revolutionize energy storage to enable a sustainable future. More specifically, our goal has been to build the world’s best batteries, as measured by energy density, power density, charge time, cycle life and safety.

As we continue to evolve from a prototype-focused battery technology company to one that is closer to bringing the first commercial solid-state lithium-metal battery cell to market for electric vehicle applications, we find ourselves at a pivotal moment in our journey. This year, rather than providing a full report as in past years, we have chosen to share a newsletter update about our sustainability practices. This approach reflects the dynamic nature of our business as we continue our transition from prototype to product and adapt to new opportunities, including our recent agreement with PowerCo, which has the potential to completely shift our business model toward licensing our cutting-edge battery technology instead of manufacturing it ourselves. Such changes are influencing how we set and pursue our sustainability goals. Our mission to bring a disruptive solid-state lithium-metal battery to the world and advance the transition to a sustainable future remains our ultimate focus. This update aims to keep you informed of our progress and the steps we are taking toward this shared goal.

Dr. Siva Sivaram

CEO, President and Director

Sustainability Update

The transportation sector is a significant source of global greenhouse gas emissions. Recognizing the environmental toll of gasoline-powered vehicles, nations and organizations around the world have committed to electrifying transportation, but we believe that widespread EV (Electric Vehicle) adoption hinges on significant improvements in battery technology.

Our focus is on electrifying the automotive powertrain, an application that we believe represents both an important part of the solution to the emissions problem as well as an opportunity to create tremendous value over the coming decades. We also recognize that our solid-state battery technology has applicability and can create value in other markets, including stationary storage and consumer electronics, and we intend to explore opportunities in those areas as appropriate. Our focus on this mission, and on sustainability more broadly, promotes the long-term interests of our stakeholders, while strengthening our board of directors’ and management’s accountability.

Sustainability at QuantumScape is a priority, from senior leadership to each employee, as we believe achieving operational excellence is intrinsically tied to operating our business responsibly and sustainably. As a leader in the development of next-generation solid-state lithium-metal batteries, we focus on sustainability topics such as the reduced environmental impact of our product, improved workplace health and safety, and strengthened employee development. Our board of directors’ primary duty is to oversee our corporate strategy, which includes oversight of how environmental and social issues may impact the long-term interests of our stakeholders. In addition, our nominating and corporate governance committee provides direct board oversight on Sustainability and indicators that are connected to our strategic business initiatives. We formed a sustainability working group at the direction of our board of directors to evaluate our engagement with sustainability topics and develop our comprehensive strategy. Our most recent ESG (Environmental, Social, and Governance) report, published in September 2023, is available on our website. We encourage all our stakeholders to read this update, which outlines the progress made in various sustainability, human capital, and governance areas.

Environmental Stewardship

Environmental sustainability is the reason we do what we do. EVs play an important role in the transition away from fossil fuels, and we were founded with the goal of driving EV adoption by creating a better battery that helps make the transition from combustion engines to EVs easier for drivers. When designing our products and processes, managing natural resources responsibly and sustainably, and minimizing environmental impact are always front of mind — anything less would defeat our purpose. We seek to maximize our positive environmental contributions, not only in the use phase of our products, but across the product lifecycle, also meeting the demands of our environmentally conscious partners and customers.

Product Impact

We are at the beginning of a forecasted once-in-a-century shift in automotive powertrains, from internal combustion engines to EVs. While conventional lithium-ion battery technology has been sufficient to drive limited adoption of EVs, there are fundamental constraints of this technology that we believe must be overcome to fully supplant combustion engines used for transportation.

Our solid-state lithium-metal battery technology is designed to overcome the limitations of conventional batteries through our key innovation — a proprietary solid-state ceramic separator. This separator is designed to not only allow us to eliminate the graphite/silicon host material from the anode, but also to manufacture our cell entirely anode-free. Relative to conventional lithium-ion batteries, we believe our batteries, once in the market, have the potential to deliver better energy density, faster charge time and improved safety.

Sustainable Design and Lifecycle Management

While lithium-metal batteries can play a crucial role in the fight against climate change, we are conscious of the potential negative environmental impacts in the battery lifecycle. Although we are still developing our products before bringing them to market, sustainable product design is a priority and has been contemplated in the design of our battery. We believe we can further strengthen the environmental value of our technology by designing our batteries to do more with less material, have a longer useful life, and retain utility for potential second-life applications.

QuantumScape’s anode-free architecture is designed to eliminate the need for host materials such as the graphite and silicon as well the liquid electrolyte found in the anodes of conventional lithium-ion battery cells. This reduces the need to extract natural resources and removes the energy use, air emissions, water consumption, and waste associated with manufacturing conventional lithium-ion graphitic anodes. According to the European Federation for Transport and Environment (EFTE), graphitic anode production represents 20% to 30% of the global warming potential of conventional lithium-ion battery manufacturing. One ton of graphite production releases approximately five tons of carbon emissions. The World Bank similarly projects graphite production to be the largest contributor to greenhouse gas emissions resulting from lithium-ion battery minerals production. Eliminating graphite from the anode would represent a major step toward more sustainable batteries.

We believe the graphite anode and polymer separator we eliminate from our design are some of the least recyclable parts of a conventional lithium-ion battery cell. In contrast, when our battery reaches its end of life, we believe many of the material constituents will be recyclable and can be returned to useful applications, helping to build a circular resource economy.

According to EFTE, solid-state batteries produced using sustainably sourced raw materials have the potential to reduce the CO₂ emissions from battery manufacturing by nearly 40%. Our lithium-metal battery technology is manufactured anode-free in its discharged state and does not require the manufacturing of lithium-metal foil as an anode material, which may account for as much as a third of the global warming potential of competing solid-state approaches.

Social Responsibility

Our employees, customers and suppliers are essential to our mission and business goals, and we take responsibility for their interests. Our social strategy prioritizes growing a diverse, talented and engaged workforce, ensuring the health, safety and welfare of employees, customers and supply chain workers, and protecting our business, employees, customers and vendors from data security and cybersecurity threats.

We have aligned with three SDGs where QuantumScape’s social initiatives and practices have the greatest contribution. Our mission is strengthened by the impact we have on our stakeholders. Creating a safer EV battery is core to our product design and the value we offer our customers. To further support our corporate goals, we intend to continue to be a safe, responsible and diverse organization. We make continual progress toward reaching SDG 3: Good Health and Well-Being, SDG 8: Decent Work and Economic Growth, and SDG 10: Reduced Inequalities.

Diversity, Equity and Inclusion

We continue to focus on proactively eliminating unconscious bias in our hiring and promotion processes and setting the foundation for year-over-year improvements in diverse representation. Some of our actions to achieve this included:

Delivering in-person unconscious bias training for our senior leaders
Implementing a job leveling framework to ensure candidates are assessed against a consistent set of criteria
Making certain that our commitment to equal hiring and promotion opportunities is substantiated with equal pay for equal work by conducting an annual internal pay equity analysis to identify and correct any weaknesses

Occupational Health & Safety

The health and safety of our employees is mission critical. We maintain a supportive organization and work culture that encourages personal health and work-life balance for our employees and contractors. Our Environmental, Health and Safety (EHS) department leads the programs that address workplace health and safety concerns through engineering controls, policies, procedures, training, monitoring and audits.

We heavily emphasize a proactive safety culture aligned with the following principles:

Safety is our priority and one of our enduring values
Safety is a personal commitment for which employees are empowered to take ownership for identifying and correcting issues pertinent to their job functions
A mindset that all incidents are preventable
Issues are viewed as opportunities instead of problems, and we share learnings with others
We share a commitment to coaching each other and being coached
We feel responsible for our own safety and that of our co-workers, and are willing to go beyond the call of duty on behalf of the safety of others

Data Protection and Security

QuantumScape’s information security program is geared toward helping us defend our information assets, including our intellectual property and the personally identifiable information of our employees. Our information security program strategy focuses on protecting information assets from the cultural, managerial and technical root causes of data breaches.

Corporate Governance

To execute on our mission and business strategy, we believe it is imperative to institute a robust governance structure that supports our internal controls, policies and procedures. This approach requires strong leadership from our board of directors and management team. By setting the tone at the top, we build a workplace culture grounded in ethics, integrity and accountability

The board of directors’ oversight of our corporate strategy includes aligning our sustainability strategy to support corporate goals and consideration for how environmental and social issues impact the long-term interests of our stockholders. The nominating and corporate governance committee provides direct oversight of sustainability and other governance-related matters. Sustainability at QuantumScape runs from the most senior levels to every individual team member and is embedded in how we conduct ourselves, develop our products and run our day-to-day operations to serve the best interest of the business and our stakeholders.

Our board of directors believes that the board should be a diverse body with members that have a mix of viewpoints, experiences and attributes such as professional background, skills, race, ethnicity, gender, education, age, and geography, as well as other individual qualities and attributes that contribute to the total mix of viewpoints and experience represented on our board. Members of our board of directors possess expertise in relevant areas that include battery and energy technology, the automotive industry, manufacturing operations and scale up, finance, risk management and human resources.

Supply Chain Management

Like other EV battery manufacturers, QuantumScape uses mined precursor materials, which require careful consideration as we, and the wider battery industry, scale up to meet increasing demand. Our product development focuses on using earth-abundant materials that will allow us to move into high-volume production. Our battery is being designed to use many of the materials and processes that are standard across today’s battery manufacturers, so we expect to benefit as the lithium-ion industry solves its supply challenges. While our separator material is unique in the industry, it is made from readily available inputs used in many other industries.

As we look to the future, our supply chain strategy prioritizes:

Scaling the procurement of necessary input materials and effectively scrutinize these materials and our partners’ practices in accordance with our new Supplier Code of Conduct
Identifying industry-leading partners to simplify product development and reduce reliance on in-house solutions

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