Volkswagen Scandal: Handling Ethics And Sustainability In An Essay.

Volkswagen, shortened to VW (German) is a German automaker founded on 28 May 1937 by the German Labour Front under Adolf Hitler and headquartered in Wolfsburg. It is the flagship marque of the Volkswagen Group, the largest automaker by worldwide sales in 2016. The group's main market is in China, which delivers 40% of its sales and profits.

Volkswagen literally in German means "folk's wagon" (so in basic terms "people's car"), and the company's current international advertising slogan is just "Volkswagen", a reference of the name's meaning.

What is Volkswagen accused of?

It's been dubbed the "diesel dupe". In September, the Environmental Protection Agency (EPA) found that many VW cars being sold in America had a "defeat device" - or software - in diesel engines that could detect when they were being tested, changing the performance accordingly to improve results. The German car giant has since admitted cheating emissions tests in the US.

VW has had a major push to sell diesel cars in the US, backed by a huge marketing campaign trumpeting its cars' low emissions. The EPA's findings cover 482,000 cars in the US only, including the VW-manufactured Audi A3, and the VW models Jetta, Beetle, Golf and Passat. But VW has admitted that about 11 million cars worldwide, including eight million in Europe, are fitted with the so-called "defeat device".

The company has also been accused by the EPA of modifying software on the 3 litre diesel engines fitted to some Porsche and Audi as well as VW models. VW has denied the claims, which affect at least 10,000 vehicles.

In November, VW said it had found "irregularities" in tests to measure carbon dioxide emissions levels that could affect about 800,000 cars in Europe - including petrol vehicles. However, in December it said that following investigations, it had established that this only affected about 36,000 of the cars it produces each year.

This 'defeat device' sounds like a sophisticated piece of kit.

Full details of how it worked are sketchy, although the EPA has said that the engines had computer software that could sense test scenarios by monitoring speed, engine operation, air pressure and even the position of the steering wheel.

When the cars were operating under controlled laboratory conditions - which typically involve putting them on a stationary test rig - the device appears to have put the vehicle into a sort of safety mode in which the engine ran below normal power and performance. Once on the road, the engines switched out of this test mode.

The result? The engines emitted nitrogen oxide pollutants up to 40 times above what is allowed in the US.

How Volkswagen could handle the scandal of their polluted cars and their emissions in order to stop affecting its stakeholders?

Ethics can be designated as a vital component for both the group behaviour and for an individual and it lies at the heart of the responsibilities of an organization. Ethics deals with the organizations and the individual decisions and actions taken in the light of the moral values and principles. Whereas sustainability refers that organizations also have societal and ethical responsibilities that goes beyond the economic responsibilities of the organization (Crane & Matten, 2016). This study will emphasize on how Volkswagen could handle the scandal of the of their polluted cars and its associated pollution so that it can stop affecting its customers.

Stakeholder theory refers to a view of capitalism that entirely stresses between the interconnected relationship that exists between a specific business and the its communities, investors, employees, supplies, customers and the others that hold a stake in the organization. This theory presented an argument in which an organization must create values for not only the shareholders but also for all the stakeholders. In the year 1984, the stakeholder theory was presented by Edward Freeman and it emphasized on the business ethics and organizational management that addresses the values and morals towards managing and organization. The theory can be considered as a key consideration when the business ethics is studied. It has been highlighted that the stakeholders of a company or an organization are those that provide support to the organization when it ceases to exist (Harrison & Wicks, 2013). Such groups can include the governmental groups, financial institutions, media, local communities, environmental groups, political action groups, suppliers, employees, customers. This entire concept of stakeholders provided an ecosystem of related groups and a company or an organization needs to consider to keep them satisfied for the sustenance of the company in the long run. Freeman has described how a company must never loose of the individuals or the groups that are involved in its success. The stakeholder theory implies that the if a company treats its stakeholders badly then the company will eventually fail. Thus, Freeman says that a company cannot actually ignore its stakeholder and the succeed at the same time. However, a company can gain short term benefits but in the long run the company cannot survive (Jones, Wicks & Freeman, 2017).

From an analytical perspective, it is important to mention that the stakeholder approach helps in assisting the managers and the promotion of the analysis that helps in understanding the larger environment. The analytical perspectives also highlight how the standard operating procedures affect the stakeholders that are present inside the company including the stockholders, manager and the employees (Brower & Mahajan 2013).). Furthermore, the analytical approach of the stakeholder theory takes into account of the ones that are beyond the company including the financiers, suppliers and customers. Freeman has also suggested that the each and every company must fill a stakeholder map that has the explicit mention of the specific stakeholders. There must be an obligation that the managers of a company must not make any decisions without considering the impact on each and every section of the stakeholders. With the passage of time the decisions will also change and the specific stakeholder map will also vary (Brown & Forster, 2013).

Analysis

The analysis will focus on the consequentialist framework which focuses on the future aspects of the actions that are taken presently and it considers the people that will be affected both indirectly and directly. Under the consequentialist framework the utilitarian approach will be taken into account. The utilitarianism is the most common approach which is used in making the ethical decisions that takes into account of a large number of people. Mulgan (2014), has stated that the different types of the consequentialism ethics and the deontology ethics can be applied in the cases of ethical dilemma. Due to this the concept of consequentialism can be effectively applied to the Volkswagen company along with the utilitarianism approach. This is accomplished by the fact that whether the overall action is good for people or not. The concept of utilitarianism is based on the maximising and increasing the profits. The scandal involved several parties and they are the Volkswagen company, and the leaders, CEO, all the employees, the customers of Volkswagen, Environmental testing Agency, the people of the countries that were indirectly affected by the emission from the Volkswagen vehicle (Barrow, 2015). However, it is important to note that the actions of Volkswagen do not get justified through the concept of utilitarianism. The actions of Volkswagen do not to any extent justify the concept of Utilitarianism as there was no goodness or pleasure that got maximized in the long run. Whereas, in the end almost everyone that was involved with the scandal was very unhappy and the act was did not received any praiseworthiness (Hayry, 2013).

The entire case of putting the deceiving software was fully the responsibility of Volkswagen because they are the one that invented the software and wilfully installed the same in the vehicles. The software was invented with the sole motive of deceiving the people and the testing agencies when tests will be conducted in future. Volkswagen created or rather improvised the software so that the tests cannot detect the elevated rates of emission. The plan that the company pursued provided benefit for the company while it did not yield any benefit or good for the larger number of people and thus the decision did not justify the utilitarianism concept. Thus, it is the moral obligation for the Volkswagen company to punish such an act (Barrow, 2015). Thus, the concept of utilitarianism highlights that Volkswagen should be punished for the act the company and an example must be set which will deter other companies from repeating such an act. The highlighting fact is that Volkswagen is currently facing huge losses and the level of stock has dropped significantly which has affected Volkswagen negatively. Keeping the losses aside the company has spent large amounts of money so that they can rectify the cars that already has the deceiving software. Due to the scandal, the company has lost a big chunk of the market share for the diesel cars (Rhodes, 2016).

It was even mentioned by Kanabar et al. (2016) that the issue of scandal relating to emission and that too from one of the most famous automobile company (Volkswagen) clearly states that that big companies do not take the moral and the ethical issues clearly. The actions of Volkswagen also highlight the managerial skills and the behaviour earlier leaders and the leaders of the company.  The managers and the leaders entirely disregarded the ethical concepts and they went against the rules of ethics and morality and created the deceiving equipment that deceived not the just the environmental testing agencies but also the customers and the other stakeholders. It is important to note that the actions of Volkswagen are quite opposite to what utilitarian believe in. throughout the entire course of the scandal. The consumers will be facing the questions pertaining to the defective cars. The consumers are now facing the major question of what to do with their defective cars, while in the middle of all this Volkswagen agreed to rectify those cars. Large number of employees have lost their job due to billions of dolls are fine imposed on Volkswagen. The emission scandal has increased the levels of consciousness among the other automobile manufacturing companies with emphasis being put on the auditing of the company, management of risk and the increasing the levels of compliance. However, Volkswagen has created issues that can hamper each and every stakeholder involved in the process (Rogerson, 2017).

• According to the sustainability report 2014, it is important to note that the stakeholders of Volkswagen hold an important place which is considered to be vital for the success of the business. The stakeholders determine the development of the market for sales and it includes the various regulatory frameworks and the reputation with the stakeholders as a group. The Volkswagen company must try to maintain a proper dialogue with the stakeholders both at the local and the regional level. The major stakeholders will include the non-governmental organization, scientists, public authorities, politicians, partners, suppliers, neighbours, customers, employee, investors and analysts. Maintaining a proper relationship with the stakeholders will help Volkswagen to grow and have a larger market presence (volkswagenag.com, 2018).
• Volkswagen must put all their effort into rebranding the company and establish a sense of credibility within the company workers and the leaders. This option is fairly unlikely but Volkswagen can take the assistance from the independent verification agencies so that that the attainment of targets becomes a fairly easy and feasible to accomplish. Volkswagen also can sell one of its brand and post a bond. This is the costliest option and it must be only as a last resort option (Cavico & Mujtaba, 2016).
• Volkswagen can bring other brands like Porsche and Audi to the forefront which will focus more on the gasoline models rather than emphasizing on the diesel models. These two brands have remained untarnished by the diesel scandal. Thus, these 2 brands ca help the revival of the Volkswagen brand. The technologies that are used in the brands like Audi and Porsche can be used in the Volkswagen models. This option will be a cost effective strategy and it will envision the developing markets that are cost sensitive (Mansouri, 2016).

The previous managers of Volkswagen have entirely tarnished the image of the company in every sense. Thus, the role of the company would be to create a revised ethical organization that will support the morality and the moral behaviour of the Volkswagen company. Presently the company has entirely lost trust of the customers and the scandal has reduced the reputation of the company in the market. With the emission scandal, the company has lost both the corporate and the personal reputation and thus there is a need to regain the same reputation. The next leader needs to emphasize the work based on regaining the lost reputation (Lindebaum, Geddes & Gabriel, 2017).

Conclusion

From the above discussion it can be concluded that Ethics deals with the organizations and the individual decisions and actions taken in the light of the moral values and principles. Whereas sustainability refers that organizations also have societal and ethical responsibilities that goes beyond the economic responsibilities of the organization. The diesel scandal has led to consumers face the questions pertaining to the defective cars. The consumers are now facing the major question of what to do with their defective cars, while in the middle of all this Volkswagen agreed to rectify those cars. Large number of employees have lost their job due to billions of dolls are fine imposed on Volkswagen.

References

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Brower, J., & Mahajan, V. (2013). Driven to be good: A stakeholder theory perspective on the drivers of corporate social performance. Journal of business ethics, 117(2), 313-331.

Brown, J. A., & Forster, W. R. (2013). CSR and stakeholder theory: A tale of Adam Smith. Journal of business ethics, 112(2), 301-312.

Cavico, F. J., & Mujtaba, B. G. (2016). Volkswagen emissions scandal: a global case study of legal, ethical, and practical consequences and recommendations for sustainable management. Global Journal of Research in Business & Management, 4(2), 303-311.

Crane, A., & Matten, D. (2016). Business ethics: Managing corporate citizenship and sustainability in the age of globalization. Oxford University Press.

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Kanabar, V., Hefley, W., Messikomer, C., & Thomas, A. (2016). Integrating Ethics and Professionalism Learning Outcomes in a Project Management Course.

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Mansouri, N. (2016). A case study of Volkswagen unethical practice in diesel emission test. International Journal of Science and Engineering Applications, 5(4), 211-216.

Mulgan, T. (2014). Understanding utilitarianism. Routledge.

Rhodes, C. (2016). Democratic business ethics: Volkswagen’s emissions scandal and the disruption of corporate sovereignty. Organization Studies, 37(10), 1501-1518.

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sustainabilityreport2014.volkswagenag.com. (2018). Stakeholder Management | Volkswagen Sustainability Report 2014. Retrieved from https://sustainabilityreport2014.volkswagenag.com/strategy/stakeholder-management