VOLKSWAGEN- AN ETHICAL DILEMMA

Introduction

Volkswagen (VW) is a German automotive company established in 1937, operating in 153

countries all over the world with the Net revenue of US$280 Billion in 2022. It is currently
the second largest automotive producer after Toyota.
Ethics in business environment deals with the moral dilemmas in the business environment.
The incorporation of ethics in in a business environment is important component in following
the decision-making process, as ethical practices are expected in the contemporary world.

VOLKSWAGEN EMMISSION SCANDAL

During 2015, a study led by John German found that Volkswagen had breached the Clean Air
Act. Volkswagen installed “defeat devices” in their diesel cars containing software that
modified the vehicles performance in order to cheat on emission tests. These devices helped
in enabling the emission controls while the car was in a lab setting, although when on road
conditions the device would switch off improving the fuel economy while nitrous oxide
emissions increased upto 30-40 times the regulated limit.
As a result of Volkswagen’s aggressive stance on profitability and market share, worsened
the consumer perception of the company as a result of poor professional behaviour and lack
of integrity. The combination of three elements, i.e opportunity, pressure and rationalization
led to the unethical decision. Employees were expected to complete tasks with no mistakes
under strict deadlines pressured with an autocratic leadership style and necessity to succeed.
The engineer’s future employment was compromised by the ethical dilemma they faced, they
could either deceive customers or follow ethical practices. In light of technological
outcomings, managers were faced with the ethical dilemma of cheating on the emission test.
This led managers to choose between integrity or increased costs, as evidenced by the
scandal. Volkswagen intentionally manipulated their product through the use of advanced
technology to deceive customers, government agencies and society while disregarding
environmental laws.
Due to the emission scandal, a range of stakeholders were impacted, internal stakeholders
including shareholders, employees and car dealers. In addition to this, external stakeholders
impacted by ethical issue include the government, the society and government bodies.
Employees remained concerned over job security as reputations had been tarnished even
amongst those who had no involvement.
Environment and Health issues
The external stakeholders were impacted as the pollution caused by Volkswagen threatened
people’s health and the environment, as VW diesel cars produced nitrogen oxide 30-40 times
the regulated limited it amassed to over 35 million kg of nitrogen oxide produced by
Volkswagen cars which would threaten 60 lives within next to 10-20 years prematurely.
Further pollution to the environment will produce 210000 respiratory related issues. The
increase of nitrogen oxide within the environment may lead to acid rains which detrimental
towards the natural environment.

Impact on Business
Volkswagen acted in an unethical manner in regard to their ethical dilemma impacting
business both negatively and positively. Volkswagen played a safe game in misleading
government agencies, consumers and shareholders in regard to emission of their vehicles.
Volkswagen didn’t adhere to the moral values which would uphold honesty, responsibility,
fairness and compassion. As a result of this Volkswagen was positively impacted as profits
increased, gaining an unfair market advantage against competitors.

Impact on Reputation
The breach of ethics tolerated by Volkswagen tarnished the brand image as society is
passionate about the sustainability. Through the teleological perspective it is clear that
environment charges, long term economic costs, lessened brand image and liability to
consumers contrasted the benefits of increase in profits in long run.
The business decision led by Volkswagen led to severe financial damages to the company
leading to multimillion-dollar fines and multiple lawsuits against Volkswagen by the
consumers, shareholders and government.
Conclusion
As evidenced by the Volkswagen emission scandal business ethics played a major role within
the operations of the company. As a result of poor professional behaviour Volkswagen
damaged their brand image resulting in a vast array of negative impact amongst both internal
and external stakeholders.