Business and Sustainability — Volkswagen excess emission scandal

Keywords: Sustainability, Corporate governance and Business ethics theories, Reflective Learning, Sustainability and Sustainable development, Shareholders activism, Sustainability Strategies and Leadership, Business Ethics and Sustainability Assignment Writing  

Ferrell & Fraedrich (2014) described that deception is known as intentionally causing and making someone have the false belief about a certain subject. Moreover, lying is making a false statement with the intention to deceive others. Moreover, actively concealing or withholding information usually constitutes the deception. The three wide categories which summarize the sustainability are human, earth and environment (Turker, Toker, & Altuntas, 2013).

The sustainable systems involve environment system which includes avoiding the exploitation of resources, social fairness which means equal distribution of opportunities as well as economically sustainable systems which mean providing the product without social imbalances and minimise the damage to earth (Preuss, 2013).

Hoffman et al (2014) added that the range of ethical human behaviour such as lying and deception, unfair environment resources utilization as well as the impact of the technology has restrained the ability of the earth to absorb human social actions as well as create false beliefs for the people.

This essay examines the sustainability as well as business ethics issues surrounding the recent scandal of excessive emission at Volkswagen. The deceptive information, economic sustainability mistreatment and resource exploitation have damage the people trust and excessive pollution to damage the ecology. The manipulation was to jeopardize the sense of attachment through the feeling of importance and deceptive information result in deflated sense of information (DesJardins & McCall, 2014; Jennings, 2014).

This report analyses and evaluate the recent scandal of emission at Volkswagen in the light of the sustainability, corporate governance and business ethics theories. The first section of the  report examines the learning and skills development from the module. The next section critically evaluates the issues and problems occur at Volkswagen in the selected theories to examine problems and their consequences for the company.

Module Overview — Reflective Journal

The business and sustainability module has developed a stronger understanding on a range of sustainability issues, business ethics, corporate governance as well as corporate social responsibilities. The role of the companies to contribute towards the sustainable development and important of the contribution toward the environment and society is elaborated (Steger, 2015). The need of the issues such as cleaner production, eco-efficiency and life cycle assessment impact has highlighted a new and responsible approach to the company practices (Baumgartner & Korhonen, 2010).

The significance and important of the environment sustainability and the cost of achieving the environment targets was well understood through exploring the least cost theorem (Allen & Peloza, 2015). For example, the concept of the resources sharing in the industry, which helps the firms to minimise the cost and achieve better return, has raised the understanding on the need of energy efficient system and their role in resource utilization. The business cost of the externalisation and their potential return for the business as well as the resource sharing and ecology efficiency of the business (Jacobsen, 2015;Boons & Howard-Grenville, 2009).

The corporate social responsibility (CSR) under the Len of the Carroll pyramid highlighted that the importance of the economic, social and ethical role of the organisation towards various stakeholders (Garriga & Mele, 2013).

The freeman stakeholder model has provided deeper perspective and insight on the power and interest of the various stakeholders. The triple bottom framework helped to develop a rigorous understanding on the economic, legal and ethical role of the organisation in the society (Preuss, 2013; Allen & Peloza, 2015).

The emergence of the high-profile corporate scandals and scandals of the senior executive was much debated and this module allowed understanding the role and responsibilities of the management were elaborated and examined using the corporate governance part in the company management.

Almeida et al (2013) discussed that the corporate governance highlighted the need of the transparency as well as accountability of the various stakeholders. The important learning was how corporate governance highlights the need of the transparent and compliance-based reporting by the company. The importance of the sustainability, business ethics as well as corporate social responsibility (CSR) evaluated using multiple real life scenario and case studies that helped to understand the social, economic and environment role of the company (Carroll & Buchholtz, 2014; Guha & Alier, 2013)

Business and Sustainability — Emission scandal of Volkswagen

Section A

Sustainability and Sustainable development

Sustainability involves utilising the resources in such manner that it meets the needs of the present and future generation. According to Tricker (2015) the eco-efficiency ensure, the firm’s products meet the need of the customers and minimise the impact on the environment and community. Hence, the need is to provide a product which minimises the impact on the ecology is fundament and develop positive relations with stakeholders (Christen & Schmidt, 2012).

However, examining the emission problems of the Volkswagen company has failed to provide the eco-efficient product as well as the product provided by the company was a deception to the community. The high level of the nitrogen oxide has significant negative impact on the society. Therefore, Volkswagen breached the trust of the stakeholders as well as the ecological impact is much higher.

Boons & Howard-Grenville (2009) studied that the sustainable systems involve environment system which includes avoiding the exploitation of resources, social fairness. Volkswagen diesel car should be fitted with the right equipment in order to minimise the effect on the environment. The process of the reducing the emission effect in the diesel cars is based on the fitting the urea tanks which convert the smoke into nitrogen and water.  Conversely, the deceptive information provided by the Volkswagen has failed to fit the cars with right technology and resulting emitted a much higher level of the emissions.

Therefore, Volkswagen product and processes failed to achieve the sustainability which increase in emission, damaged the environment and deliver negative effect throughout the lifecycle of the product (Visser, 2015).

Christen & Schmidt (2012) evaluated that the business cost of the externalisation and their potential return for the business as well as the resource sharing and ecology efficiency of the business. Volkswagen failed to use the right technologies in order to reduce the environment impact, efficiently deploy the resources and reduce the resource consumption to achieve the economy efficiency. Volkswagen passed on the inefficient cars with higher emission level has the negative effect on the society and increases the social and environment cost of consumption.

Almeida et al (2013) added that Life-cycle assessment is an important framework for the companies to analyse their cost and benefits associated with the product based on the externalities, social benefits and cost associated to implement the environment programmes. The life-cycle assessment of the Volkswagen TDI car suggests that it has delivered the negative impact, on the whole, supply. The resources procurement, production and consumption cost made up a high level of emissions and significant impact on the society.

Value chian involves the activivtes throuh which company add value to the product by converting imput into finished goods to achieve better level of profits (Bititci & Carrie, 2013). Moreover, Dincer et al (2014) suggest that business sustainability practices should be based on the trust of the customer and integrated across the value chain of the company. However, the recent practices of the Volkswagen have raised the problem of trust among the stakeholders because of the deceptive and misleading information.

The narrative of the Volkswagen on the sustainability has become vague and lost value and trust because of the dodgy emission tests. The negative effects associated with the car over its life cycle include damage and inflammation of the airways, breathing problems, heart problems as well as respiratory problems for the people (Bose, 2012).

La Porta et al (2016) studied that the impact of the deception by Volkswagen has affected the industrial symbiosis and the industry efforts to achieve the sustainability and reducing the environment footprint has lost its grounds. Volkswagen has generated an economic return over the years and this has kept them satisfy. The shareholders of the company have kept the profitability as a top priority and have less interest in the practices of the company. The immediate reaction of the of the company shareholders was that they rushed to sell the shares after the scandal and ignored the potentials issues and identification of the malpractices at the company.

In order to manage the social and economic interest of the company ownership and management is kept separate. In order to fulfil the gap, the agent-principle relationship is useful. The level of the trust to meet the environment impact has seriously lost the trust of the consumer and companies’ claims on the sustainability need to be redefined. The overall economic burden has increased from the unsustainable product (car), social cost such health and trust has increased as well as the environment has serious affected (Henisz, 2014).

Business ethics and Corporate Social Responsibility (CSR)

Morrison (2015) stated that business ethics involves the ethical concerns, which examine the principles and morals of the problem that arise from the market practices of the company. The range of the business ethics issues includes corporate social responsibility, corporate governance, discrimination and fiduciary problems. Therefore, the role of the companies to contribute towards the society and environment is important to become a good corporate citizen.

Volkswagen cars actual level of the emission in the diesel engine was kept hidden by the Volkswagen and the programme failed the regulatory to identify and examine the actual level emissions. The sneaky and emission control module highlight the malpractices of the Volkswagen shows that the professionals ignored fiduciary responsibility (Stefanidis & Banai, 2014).

The social responsibility as well ethical behaviour to compliance with the law was ignored and, in this case, the Volkswagen is less efficient and neglects the safety of the public. The wrong doing and malpractices have risen concerned and breach of the public trust. For examples, it is estimated that emission has increased the mortality rate among pre-matures. Volkswagen operations and business processes of the company should be consistent with the social values and norms and i.e. it is fundamental that Volkswagen’s behaviour should include the integrity and ethical behaviour (Bititci & Carrie, 2013).

The emission cheating by the Volkswagen has lasted for 6 years and there was no system to catch such unethical practices. The deliberate attempt to manipulate the result shows that Volkswagen has pursued the deception policy and disregards the ethics and sustainability. The form of capitalism suggests that trust in the people is based on the performance and it is evident that Volkswagen has not integrated sustainability and code of ethics into the corporate culture of the Volkswagen and they simply ignored climate change problems (Bose, 2012).

Bondy, Moon, & Matten (2012) explained that corporate social responsibility (CSR) is known as self-regulation integrated into business process and operations and includes social, economic and ethical perspective. (Carroll & Buchholtz, 2014) The examining of the excessive emission scandal under the ‘CSR’ lens has a highlight that Volkswagen failed to its social, ethical and environmental obligations. For example, the Carroll’s CSR pyramid outlay three domains for the companies that are legal, economic and ethical responsibility.

The legal domains show that Volkswagen has failed to meet the regulations and comply with the law to ensure safety and quality product. The ethical stance shows that company has provided deceptive information as well as the vehicles is fitted with a program which cheats the regulatory to identify the problems. The economic responsibility shows that Volkswagen has provided the shareholders return at increased social cost (Wright & Bennett, 2011).

Triple bottom line (TBL) is an accounting framework based on the three areas which are social, financial and environment which look beyond traditional profit measure. It highlights the on economics, social and people account Volkswagen fails to deliver any of its obligations as well as it has damaged the trust of the public. These practices have resulted in the collateral damage to the whole car industry and have affected the whole car industry morally, economically and legally wrong practices (Nicolaescu, 2013).

The unethical practices of the Volkswagen show that it has failed to deliver externalities. The trust and confidence of the public are breach with increased mortality as well as the carbon levels were significantly higher and damage the eco-system and environment. (Wettstein, 2012)

Section B

According to Harford et al (2012), shareholders activism includes the influence, which shareholders can exercise to affect the organisation behaviour using their own rights. The power and interest of the shareholders have decisive impact on the actions of the organisation. The history of the corporate scandal in automobile industry involves multiple scandals.

The scandal of the ‘Lotus/Dany Bhahar’ is one in which there was misuse and disregard of the company funds and taking personal advantage. This shows that ethical responsibilities as well as business ethics been completely ignored.

The scandal of the ‘Ford/Lee Lacocca’ is another example of the unethical and malpractices of the industry. Ford management put the profitability first and ignored the social and environment perspective. The problem with the car is that explosion in rear-end and ford was fully aware of the problem but the Ford model was launched by ignoring the public safety. It was estimated that 27 people died while 900 effected from the problem. The CEO later resigned but greed has prompted unattainable business practices (Preuss, 2013).

This highlight that the principle agent based relationship ensures that shareholders and management have a clear and transparent relationship that encourages the confidence of the shareholders in the operations of the company. The scandals highlight that management has provided the wrong information as well as did not provide the transparent review and information to shareholders (Core, Holthausen, & Larcker, 2009).

Grene & Marriage (2015) added that Volkswagen the first point is shareholders and investors could have identified the corporate governance issues at the company were ranked on the 30th percentile on the corporate governance and business development index (MSCI). The lower score was based on the senior management turmoil at the company. The problem between the senior executive for the power was highlighted as well as news of the poor performance of the company.

The scandal of the corporate greed was evident during the ‘Chrysler/Bob Nardelli scandal’ in which expensive corporate loans were taken out which has resulted in the bankrupts of the company. The shareholders approve the deals and management went to take out expensive loans which clearly communication. The government grants could have helped the company to overcome financial problem at lower and repay after the financial problems. This represents that shareholder has failed to identify and exercise their power to manage and tackle the problems at the company (DesJardins & McCall, 2014).

The principle-agent relationship failed because executives do not provide clear and transparent information. This represents that company ethically and sustainability’s problems were challenged along with shareholders to balance the economic and social interest.  Therefore, there is a need to implement corporate governance law such Sarbanes-Oxley, which minimise the problem corporate failure, and greed and companies behave in ethical and responsible manner (Daily & Dalton, 2015).

Sustainability Strategies and Leadership

Orsato’s present the integrated and structural approach to representing the multiple stakeholders for the European automobile industry through analysing the number of factors in order to foster ecological modernisation of the industry. The theory proposed that corporate sustainability is based on societal phenomena. The Orsato’s proposed that to modernise the European automobile industry it is important that technological innovation and institution reformed is proactively managed (Guha & Alier, 2013).

The radical technological innovation is fundamental for the success and development of the industry. The reconfiguration of the industry systems with improves and enhances the industrial ecology (Orsato, 2015).

Dodgson, Gann, & Phillips (2013) stated that the review of the Volkswagen shows that company need to innovate and develop new products and processes which increase the performance of the company. For example, the diesel emission and performance is directly linkage to each. The reduction in emission means the cars will lower performance. Therefore, there is need to innovate product which mean the sustainability needs as well as deliver positive benefits for a wide range of stakeholders.

The innovation low emission engines are likely to have less emission, which reduces the morality. The manufacturing processes should develop in wider industrial perspective to optimise the ecological principles through minimising resource utilisation and increase eco-efficiency. The industrial ecology should be based on the closed loop system in order to reduce the waste, improve processes as well as increase the energy efficiency.

The adoption of the schemes such as global reporting initiatives and the UK combine with improving the transparency of the reporting and influence positive public opinion. The trade certification such ISO 14000 and ISO 9001 is likely to increase and improve the positive image of the Car industry as well as beyond compliance based approach is likely to provide a factor differentiation (Ordonez de Pablos, 2012).

Loser (2015) added that the relationship between the organisation processes and the product is undeniable and gains can be transformed to the products. According to Porter, the basic condition to achieve the sustainable strategic position includes the trade-off between the company products and processes and the competitive environment management. For example, improved processes would likely to improve the product which further translate into eco-efficiencies achieve the environmental cost leadership.

This approach would allow the auto industry to achieve the triple bottom line success. The numbers of the immediate actions company can choose is focus on the climate change understand the environment and social concerns improve the corporate governance as well as integrate the code of conduct into the corporate culture (Sarkar, 2015).


The emission scandal at Volkswagen has raised and highlighted the social, economic and environmental problems. The company management has pursued the deceptive policy on the product quality as well as failed to provide the transparent information to the stakeholder to sabotage the principle-agent relationship. The emission test shows that company has failed to achievement and sustainability in its product and processes.

Company to manage the externalities as well as exploited the social and environment factors. The failure to meet the sustainable practices is backed by the unethical business practices as well as the lack of the effective corporate governance. Company CSR activities have lost the public trust and analysis shows that it fails to meet the dimensions of the CSR.

The future direction strategy of the automobile industry exists in innovative technological processes as well as strong compliance with the regulation that will help the industry to achieve the environment cost leadership.

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