In order to achieve future CO2 targets - in particular under real driving conditions - different powertrain technologies will have to be introduced. Beside the increasing electrification of the powertrain, the utilization of the full potential of the internal combustion engine will be essential. In addition to further optimization steps on the combustion processes, reduction of mechanical losses and thermal- and energetic system consideration the Variable Compression Ratio (VCR) is probably the single measure with the highest potential. VCR systems are expected to gain a considerable share in next generation turbocharged SI engines in certain vehicle classes. The basic principle of the AVL VCR system explained in the paper is a 2-stage variation of the connecting rod length and thus the compression ratio. The concept allows modular integration in the architecture of existing engine families without significant modifications, with just minor adaption of the production lines and thus represents a highly attractive solution in regard of CO2 and cost. Beside the working principle and the current development status, the paper describes the thermodynamic concept, switching strategy, component verification, as well as the single-cylinder and multi cylinder engine test bed results. Dependent on the vehicle class, the load profile and the power rating a CO2 reduction between 5% and 9% in the WLTC is achievable.