The Overview of the Emission Scandal
The Volkswagen Group is driven by its mission that guides the operations in production and marketing its products. Among the policies is the environmental policy that is meant to ensure that the company operates within the minimum environmental pollution standards. However, the company's employees, with the knowledge of the organizational leadership conducted unethical act of cheating during the emission tests. The installation of a device to indicate emission levels that met the environmental act regulations became a scandal in 2014 after the discovery of the cheat garget.
Effects of the VW Emission Standards
The knowledge of the cheat device spread to other world markets and had the following effects:
The company recorded a significant drop in profits
The firm experienced a downward flow of its shares in the market
While other brands has better sale, the cars with the VW brand had worst sale.
The wealth and revenues declined due to bills such as fines and the recall cost.
The VW Group Response
The management admitted publicly about the cheat device
The Chief executive officer, Michael resigned
The company allocated a budget to facilitate the recall of the faulty vehicles
There are several ethical issues that the company failed to meet in its operations. The collaboration of the management and the employees to install the cheat emission device was unethical. The VW Group need therefore to ensure strict adherence to its policies of which the environmental regulation is among them. If the firm had taken a different option in relation to meeting the pollution regulation criteria, the losses in revenue and the legal costs would not have occurred. To enhance ethics in the management, the firm needs to enhance communication as an important tool in ensuring integrity and transparency.
Volkswagen Emission Impacts
Business is currently one of the essential activities that human beings engage. Almost all the events involve a factor that relates to business in one way or another. Business operations are currently the fundamental pillar in building the world, and as such, there exist various implications for ethics in the business fraternity. Business ethics can be described as the excellent characteristics that regulate an individuals' or an organization's behavior. Multiple individuals or stakeholders in an organization have portrayed wrong business behavior. Business ethics associated with Corporate Social Responsibility (CSR).
Numerous incidents depict how business has performed their responsibility in ways that are morally right and also wrong in other cases. Most companies ignore moral ethics in their activities, for instance, Apple with Foxconn and Walmart with incidences of mistreating employees. Volkswagen portrayed organizations can ignore the significance of business ethics in their operations in the present era.
The Volkswagen Group who is famous for their automobiles faced allegations from the United States Environmental Protection Agency (EPA) in violation of the Clean Air Act. The EPA discovered that the VW Company had installed programmed diesel engines to facilitate particular emission regulations. This paper intends to describe how the VW management initiated the installation of the cheat device and how the company's leadership engaged its staff to participate in the vice. The paper also intends to state and describe how the scandal unfolded relates the organization's environmental policy to the scandal. Moreover, the essay suggests possible recommendations to the company and other firms in general about environmental ethics, the importance of ecological conservation and the possible strategies for pollution prevention.
Overview of the Emission Incident
In the year 2014, researchers surveyed the VW diesel-burning vehicles. The report realized a discrepancy in the levels of emission between the laboratory tests emissions and the actual driving status. The researchers later realized that the differences in the levels were due to the installation software with the authority of the VW management. The defeat garget gave vehicles the ability to falsely indicate emission levels that were adhering to the standards recommended by the Environmental Protection Agency EPA. The actual driving situations stated emission degrees that were over 30 times the quantity of toxic substances permitted by the EPA. Modern motor vehicles depend on computers for their operation and receiving information from various sources. The company engaged this knowledge to manipulate the levels of nitrogen oxide readings on the meter. Investigations from EPA further revealed that the gargets could recognize whether the mobility of the car was for laboratory tests or actual conditions (Zhakypova, 2017). Moreover, the researchers drew a correlation between the emission levels and impacts on human life. The findings estimated that the emissions led to 59 premature deaths, over 31 bronchitis cases and approximately 34 admissions to health centers. It is discouraging the company faced such an environmental scandal when the firm had received the Dow Jones Sustainability Indexes award for sustainability in its production. The EPA announced the breach of the environmental standards just after the firm had won the award.
The VW Group Environmental Policy
Although motor vehicle companies manufacture their products with the aim of enhancing mobility, there is the need for the firms to accept the environmental responsibilities that accompany their products. Volkswagen, in its efforts to meet one of its ethical business requirements, endeavors to improve the environmental compatibility of its cars. The company also accepts the role of promoting conservation of natural resources and energy. The company's environmental policy also aims to develop technology that is environmentally efficient worldwide. Among the strategies of VW Group to achieve these targets on environmental policy is cooperation with the society and policy authorities to initiate environmental and social gains.
Volkswagen policy insists that all the activities production should limit its environmental effects to a minimum and to offer solutions to environmental issues. To conserve nature, the company also aims at producing high-quality automobiles that satisfy the needs of customers pertaining environmental compliance as well as the economical aspect (Katz-Rosene, 2015). The company also strives to ensure continuous improvement of its production sector and its cars especially about environmental compliance. The company, therefore, has an environmental management department responsible for quality production. The Volkswagen Board of Management further inspects to ensure the adherence to the environmental regulations in place and proper functioning of the environmental management system. The management also extends the importance of the environment to its workers through training and motivation to obey environmental protection.
The Accusations against VW Group
Volkswagen Group marketed its vehicles possessing low emission engines in a push to increase its market bases in the United States. Allegations hit the Volkswagen that the cars in the American market had faulty software in their diesel engines. The Volkswagen Company accepted the blame for lying in the emission tests results. The Environmental Protection Agency, EPA discovered that over 482000 cars in the US market had wrong emission tests results (Odeneye, 2017). The motor vehicles in the category with false emission results included the VW models, Audi A3 Jetta, Beetle, Golf and the Passat. Although the American market was the main region to experience the scandal, the firm also confirmed that globally, the total number of cars with faulty emission software was approximately 11 million cars.
Moreover, EPA laid allegations on the VW company that it had modifies the 3 liters diesel engines installed on some Audis. A survey indicated that almost 10000 vehicles had changed engines. In addition to the allegations from the EPA, Odeneye, (2017) research work reveals the VW Company itself discovered and announced that almost 800000 cars in Europe had irregularities in the carbon dioxide emission tests. The defects also involved vehicles which had not only diesel engines but also petrol engines.
Extend of VW Group Problems
The scandal, although the first cases occurred in the US, the issues spread to other countries. Various state authorities have doubts and question about the emission tests of the VW cars. Examples of countries with problems with the VW tests are UK, France, Italy, South Korea and Canada. It is further detrimental that Germany, the mother country of the VW Company, launched and carried out investigations about the company's failure. The shares of the company also experienced a downward trend majorly due to them recalling millions of cars from their primary markets.
The profits of the Volkswagen Group, according to surveys, reveal a drop by nearly 20 percent. The stumble in the revenue was due to the continuous fall in the decrease in the sales. The German firm realized a pre-tax profit of approximately 3.2 billion Euros, implying a significant drop from almost 4bn Euros over the same period the year before the scandal. The emission issues made the VW record a loss after a period of over 20 years since the year it experienced such a fall in the revenue.
Moreover, the vehicles with the VW brand experienced the worst hit while the Audi brand had fair sales in the market. The other brands which included the Porsche and the Spanish marque Seat recorded better sales and high profits from its operations. The revenues and the wealth of the firm could face further decline from the bill that arise from the scam. The bill which was at 16bn Euros was likely to increase to 30bn Euros if the Norway's Wealth fund makes a legal response to the firm's emission issue.
The VW Response
Any company tries to maintain its reputation whenever a scandal appears to affect its market base. The firm had various responses to the allegations. Michael Horn, the then chief executive officer, admitted that the VW Company had broken the trust of the public due to the enormous failure in the emission tests. As a professional, the overall blame falls on the head of the company. This scandal led to the resignation of the CEO Michael, and after which, Matthias Mueller assumed the position of the CEO (Odeneye, 2017). The departure is a sign of the head failing to uphold business ethics which should have protected the clients from accessing faulty products. Trust from clients is one of the elements of business social values. The new CEO assuming his office stated that his core responsibility was to win back the confidence that the public initially had in the VW products.
Among the efforts to tackle the scandal, the VW Company set aside approximately EUR6.7 billion to facilitate the process. The company, due to these recalling expenses, posted a loss, an experience they have never faced for over 15 years. The EPA also fined the firm amounting to about $18 billion.
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