Background of the Volkswagen Emissions Scandal

Ideally, the overall Volkswagen emissions scandal began in the wake of 2015at the time when the United States Environmental Protection Agency (EPA) had issued a notice of the violation of the Clean Air Act by the German based automaker the Volkswagen group. According to the Agency, the Volkswagen group had internationally programmed virtually all its turbocharged direct injection (TDI) diesel engines with an aim of activating the emissions regulator only at the time emission testing. Consequently, this caused the vehicles’ NO_x to be at par with the overall United States standards at the time of regulation testing despite the fact that it emitted close to 40 times more of the NOx in a normal driving routine (Riehm, Thomas, and Lukas). In essence, Volkswagen was responsible at deploying this particular programming software in almost eleven million vehicles across the world with about 500,000 in the United States between 2009 and 2015.

Primarily, a study was commissioned by the California Air Resources Board on the emissions disagreements lying between the Europeans and the US vehicle models particularly from the International Council on Clean Transportation. The investigation found out that there were additional emissions during live road tests on various diesel cars. After the news of the investigation which was followed by the regulations in various countries to investigate Volkswagen, the overall stock price dropped in value by about a third (Robertson). Essentially, the overall scandal raised some sort of awareness over the intense pollution levels particularly by the diesel-powered cars for a wide range of car producers which exceeded the acceptable emission limits. However, the general discussion was sparked based on the software-controlled machinery that was prone to cheating. As a result, the crisis left many people unemployed while those that had initially purchased the car for sale had to undergo some damages despite the fact that Volkswagen promised to shoulder some cost as compensation. According to various outlets, VW was likely to face up to a fine of $37,500 per vehicle (Jung, Kyujin, Kenneth, and Valero). Additionally, the company was likely to face civil penalties as well due to a deliberate cheated on the level of emission.

In essence, Volkswagen has been cheating for the past six years on the issue of emission testing particularly for the diesel cars across the world. Nonetheless, cheating especially on regulatory testing has no doubt a long history in the corporate American society. Notably, this scenario tends to happen more often in automobiles emissions control (Nemeth, Kristin, and Jorge). While this issue is under close scrutiny, in my opinion, there were worries whether the executives were going to interpret the whole issue as a cautionary tale that would involve punishment for a rather bad mistake in the long run. As a result, I think that most drivers would not be motivated to allow their cars to be fixed despite the fact that VW announced that it would be free. Apparently, this is because such changes were likely to reduce the overall performance, gas mileage as well as engine longevity.

Impact of the Volkswagen Emissions Scandal

One solution that the company should have put into consideration was for those owning the vehicles to present them at the testing while being given a certificate afterward indicating that the issue had been fixed. Additionally, a fair approach would be for the VW to make sure that they have provided a significant amount of cash to those that bring in their vehicles for repair as compensation. This would tend to not only motivate those that owned the cars for having the performance of their car reduced but also the compliance process.

Over the last couple of decades, the corporate social responsibility (CSR), as well as sustainability, has been a debated issue in the global corporate world. Additionally, there has been an increasing number of corporations who have started engaging themselves in responsible as well as sustainable business practices with an aim of creating social and business values in the society. Nonetheless, the fact that Volkswagen was caught cheating concerning emission is clear evidence that every year there is always a high profile company violating set standards or rather caught in ethical scandals (Moravcsik). Notably, such scenarios have often attracted the attention of the media and therefore damaging the overall public’s trust in the entire corporation as well as their social accountability. The impact of the corporate crisis that was resulted by VW is no doubt profound and lasting. As a result, the market value of VW dropped by close to 23 percent in 2015 after they had admitted diesel emission cheat. According to research, it was estimated that the total cost for the scandal amounted to about $8 billion. Additionally, the negative impact was on brand trust as well as reputation, employee morale and loyalty, customer satisfaction, and investors’ confidence.

Furthermore, there were various impacts on the external side of the VW operation. Apparently, the magnitudes of deception mounted by VW not only taint the overall reputation of the corporation and other companies in unrelated industries but as well undermine the trust that the public had on the business thus heightening customer’s cynicism regarding frauding (Hachenberg, Britta, Florian, and Dirk, 180). According to researches, business values are no doubt created in case there is a consideration to embed the aspect of social responsibility and sustainability in a country’s culture as well as fundamental business strategies. In case this is done right, there is a likelihood that a company would benefit as a result of a favorable and corporate image, an increased customer’s loyalty, high level of employees’ morale in a business, as well as enhanced organizational core competencies (Ruiz-Alba and Sánchez). As a result, the entire global community is likely to benefit from harnessing the power as well as the resources of various corporations with an aim of addressing pressing social and environmental problems.

Corporate Social Responsibility and Sustainability in the Global Corporate World

Being aware of the needs as well as expectations of stakeholders is one of the important foundations for the success of a particular firm. Notably, this is because most stakeholders are responsible for determining the overall development of the sales markets as well as the regulatory frameworks and reputation as a Volkswagen group. In most cases, VW seeks to maintain an ongoing conversation with its stakeholders in terms of a group level as well as locally in the entire region in which the company operates (Ewing). The main stakeholders attached to the VW include analysts, investors, customers, employees, neighbors, partners, suppliers, public authorities, scientists as well as non-governmental organizations. VW has strategized its corporation with stakeholders in various ways such as its relation at a group level. In this light, the company has a rather direct contact with its stakeholders particularly employees, customers as well as partners in a group level.

Apparently, this relation is mostly cultivated above all the brands that VW produces. At a group level, the company opts to bundle such process and therefore turned to a rather overarching approach with an aim of discussing a wide range of topics that are based on the Group. In essence, such a process includes having dialogues with different people such as politicians, non-governmental organizations academic institutions. The aim of this initiative was to make sure that the company gets to understand and respond to its stakeholder’s expectations thus promoting appreciation if the company’s position and actions.

The effect of VW emission scandal brought about various negative impacts ranging from political to the aspect of legal and regulatory (Balto). As a result, there were various revamping tests procedures by the EU with an aim of taking VW out of the lab as well as out of the road. On the other hand, there have been a number of regulations assessing the economic impact of economic costs as a result; the EU sets various regulations to prevent those that might violate the overall set standards in relation to emissions. Due to the emission scandal, the VW Corporation was fined close to $ 1.2 billion imposed by the German prosecutors for being found guilty of emission cheating. The VW assumed the responsibility of violating the set standards as stated by the regulatory filing.

There are various ethical issues that came out of the VW scandal.one of the ethical business question was whether there was to be a scrapping of all diesel that produced NO_x despite the fact that the vehicles are perfectly good to drive. In essence, making a car has a lot of pollution effect on the environment (Bachmann, Rüdiger, Gabriel Ehrlich, and Dimitrije Ruzic). Nonetheless, scrapping cars would mean that there would be a need to make others to replace the ones that have been scrapped. In this sense, there would be more pollution as a result of this move.

Reference:

Bachmann, Rüdiger, Gabriel Ehrlich, and Dimitrije Ruzic. “DP12504 Firms and Collective Reputation: the Volkswagen Emissions Scandal as a Case Study.” (2017).

Balto, David. “What the German Auto Scandal Teaches Us About the Consumer Welfare Standard.” (2017).

Ewing, Jack. Faster, Higher, Farther: The Inside Story of the Volkswagen Scandal. Random House, 2017.

Hachenberg, Britta, Florian Kiesel, and Dirk Schiereck. “Dieselgate and its expected consequences on the European auto ABS market.” Economics Letters 171 (2018): 180-182.

Jung, Kyujin, Kenneth Chilton, and Jesus N. Valero. “Uncovering stakeholders in public–private relations on social media: a case study of the 2015 Volkswagen scandal.” Quality & Quantity 51.3 (2017): 1113-1131.

Moravcsik, Andrew. “Faster, Higher, Farther: The Volkswagen Scandal.” Foreign Affairs 96.5 (2017): 183.

Nemeth, Kristin, and Jorge Morais Carvalho. ““Dieselgate” and Consumer Law: Repercussions of the Volkswagen scandal in the European Union.” Journal of European Consumer and Market Law 6.1 (2017): 35-35.

Riehm, Thomas, and Lukas Lindner. ““Dieselgate” and Consumer Law: Repercussions of the Volkswagen scandal in Germany.” Journal of European Consumer and Market Law6.1 (2017): 39-41.

Robertson, James Andrew. “The danger of Dieselgate: how Volkswagen’s diesel scandal critically damaged the wider market.” Annals in Social Responsibility 3.1 (2017): 68-69.

Ruiz-Alba, J., and M. Sánchez. “Trend Scenarios: Innovative Methodology and Tools.” Universitat Oberta de Catalunya (UOC), 2017.