SITUATION SELECTED

One real-world case of unethical practices in the business world involves the
Volkswagen emissions scandal that surfaced in 2015. Volkswagen, a leading
automobile manufacturer, was found to have installed software in their diesel
vehicles to manipulate emissions tests. This deception allowed the vehicles to
appear compliant with environmental regulations while emitting pollutants far
above legal limits in real-world driving conditions.

IDENTIFIED UNETHICAL ASPECTS

Volkswagen engaged in several unethical practices related to corporate-level

strategy, particularly regarding outsourcing and mergers and acquisitions
(M&A).
First, the company knowingly developed software called "defeat device" to
cheat emissions tests, thereby deceiving regulators and consumers alike.
Second, Volkswagen failed to disclose the existence of this software despite
having knowledge of its presence since 2006.
Third, the company did not adequately inform shareholders and investors
about the potential environmental liabilities associated with the defeat device
technology.
Fourth, Volkswagen's board of directors and senior executives were complicit in
approving and implementing the fraudulent scheme.
 JUSTIFICATION OF UNETHICAL BEHAVIOUR

The Volkswagen emissions scandal is rife with unethical behaviour across

various dimensions of corporate governance, strategy, and stakeholder
management. Let's justify the selection of the unethical aspects identified in
the scenario through the application of relevant ethical theories, frameworks,
concepts, and principles commonly taught in business courses:
1. Deception and Fraud: The development and implementation of the defeat
device software represent a clear violation of ethical principles. From a
deontological perspective, which evaluates actions based on their intrinsic
morality, deliberately deceiving regulators and consumers is inherently
wrong. Volkswagen's actions can be seen as a breach of trust and honesty,
fundamental principles in business ethics.
2. Stakeholder Theory: Volkswagen's failure to disclose the existence of the
defeat device to regulators, consumers, shareholders, and investors
disregarded the interests of these stakeholders. According to stakeholder
theory, corporations have a moral obligation to consider the interests of all
stakeholders affected by their actions. By withholding crucial information
about environmental non-compliance, Volkswagen prioritized short-term
gains over the long-term well-being of stakeholders.
3. Corporate Social Responsibility (CSR): The emissions scandal highlights
Volkswagen's disregard for environmental sustainability and societal
welfare. CSR emphasizes a company's responsibility to operate ethically and
contribute positively to society and the environment. Volkswagen's actions
directly contradicted CSR principles by knowingly polluting the environment
and undermining public health for the sake of profit.
4. Corporate Governance: The involvement of Volkswagen's board of directors
and senior executives in approving and implementing the fraudulent
scheme underscores significant failures in corporate governance. Ethical
corporate governance frameworks stress the importance of accountability,
transparency, and integrity in decision-making processes. Volkswagen's
leadership not only failed to uphold these principles but actively
participated in perpetrating unethical conduct, leading to severe
consequences for the company and its stakeholders.
5. Utilitarianism: From a utilitarian perspective, which evaluates actions based
on their overall consequences, Volkswagen's actions resulted in significant
harm to society and the environment. The increased emissions from
affected vehicles contributed to air pollution and public health risks,
undermining the greater good for the sake of corporate profit and
reputation. The unethical behaviour of Volkswagen prioritized short-term
gains for the company while imposing long-term costs on society.

Application of John Elkington's Sustainability

Framework

John Elkington's triple bottom line framework emphasizes the importance of

addressing economic, social, and environmental factors simultaneously.
Volkswagen's unethical practices negatively affected all three dimensions:
 Economic: Volkswagen faced substantial fines and penalties totalling
billions of dollars, as well as decreased revenue and stock value due to
the scandal.
 Social: Volkswagen damaged its reputation, causing distrust among
employees, customers, and stakeholders.
 Environmental: Volkswagen contributed significantly to air pollution,
putting millions of lives at risk.

Other Learning Applications:

Beyond Elkington's framework, other learning applications include:
 Stakeholder Theory: Volkswagen's unethical practices harmed various
stakeholders, including employees, customers, suppliers, communities,
and shareholders.
  Corporate Social Responsibility (CSR): Volkswagen's actions
demonstrated poor CSR performance, highlighting the importance of
integrating ethical decision-making processes across all areas of business
activity.
 Governance and Compliance: Volkswagen's board of directors and
senior executives should have exercised better oversight and compliance
measures to prevent the implementation of the defeat device
technology.

Suitable Response Based on Learned Principles:

To mitigate the consequences of Volkswagen's unethical practices, the
company could implement the following recommendations based on learned
principles:
1. Develop a robust governance structure with independent boards and
committees focused on monitoring compliance and risk assessment.
2. Implement a strong whistleblower protection program to encourage
employees to report any unethical activities.
3. Foster a culture of openness and transparency throughout the
organization, starting from the executive level downward.
4. Invest in research and development initiatives to produce cleaner
technologies and reduce carbon footprint.
5. Engage in proactive communication efforts to restore trust among
stakeholders and regain lost ground in terms of brand reputation.
By applying these recommendations, Volkswagen can move towards restoring
its reputation and establishing itself as a socially responsible corporation
committed to environmental conservation and ethical business practices.
 JUSTIFICATION OF RECOMMENDED RESPONSE

The proposed actions align with sustainability principles by addressing the

environmental, social, and economic dimensions of the Volkswagen emissions
scandal. By investing in clean technologies and transparent practices,
Volkswagen can mitigate its environmental impact and contribute to global
efforts to combat climate change. Furthermore, by prioritizing ethical conduct
and stakeholder engagement, Volkswagen can rebuild trust with customers,
regulators, and the wider community, fostering long-term sustainability and
resilience in the face of future challenges. This response is most suitable
because it not only addresses the immediate consequences of the scandal but
also promotes a culture of accountability and responsibility essential for
sustainable business practices.