Importance of Business Ethics: A Case Study of Volkswagen

This report discusses the importance of business ethics by analyzing the unethical practices committed by Volkswagen, including the emission scandal, and its impact on the company's image, shareholders, and stakeholders. It also provides recommendations for the company and discusses the role of a code of ethics. Course code, name, and college/university are not mentioned.

Success through
Business Ethics

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Brief background of the company.......................................................................................3
Reasoning behind selection of Volkswagen........................................................................4
Unethical practices committed by the company................................................................4
Consequences........................................................................................................................5
Ethical Framework...............................................................................................................6
Company had aligned its ethics and values............................................................................6
Impact on the company’s image on shareholders, stockholders, etc. especially if the company
was involved in any CSR activity..........................................................................................7
What was done by the company as a damage limitation control exercise in terms of addressing
moral dilemmas?....................................................................................................................7
Recommendations to the company.........................................................................................8
Do you think that having a Code of Ethics would have assuming it did not have one made any
difference to this Company that you have chosen Substantiate your response accordingly.. 8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
The modern business scenario has been subject of major advancement in technologies
and digital tools along with the ever increasing spread of globalization which has made
conducting and scaling of business very easy and streamlined than before. However in this cut-
throat competitive environment where business enterprises must strive to maintain and sustain
their competencies and edge over their rivals for a consistent period of time, business ethics have
a key role to play. Business ethics refers to the combined application of both applied and
professional ethics which serve as guidelines and frameworks mean to guide and analyse the
operations of the business (Rodríguez-López and Souto, 2020). In order to succeed in the market,
companies must display ethically sound behaviour but for some quick benefits and to avoid
getting in turmoil, companies also often commit unethical practices. This report will highlight
the importance of business ethics by citing unethical practices committed by Volkswagen along
with the impact and consequences associated with that particular unethical act.
MAIN BODY
Brief background of the company
Volkswagen group also known as Volkswagen AG is a major manufacturer of cars of
various varieties ranging from sedans to SUV's and even sports models and is one of the most
popular brands worldwide in terms of market share and popularity in the eyes of general public
and automobile enthusiasts. Founded by the German government in 1937, Volkswagen when it
comes to ethics has a very troubling background as it was initially operated by the German
Labour Front which was a Nazi organization and it was the prestigious project of the Nazi's in
order to mass produce a low cost car for the people of Germany (Lutge and Uhl, 2021).

In 1939 during the backdrop of the massively controversial and devastating world war 2,
the factory premises of Volkswagen was converted into a makeshift weapons manufacturing and
supply in case of emergency but such controversial ethical stances also resulted in its factory
getting bombed and ruined by the end of the war. It was only when the British government
gained hold of the country's economic proceedings that the company was repurposed and rebuilt
from the ground up and the journey began which eventually led to firm to dominate the
automobile landscape with years to come with successful models such as the Beetle.
Reasoning behind selection of Volkswagen
There are many reasons due to which this automobile sector giant has been take as the
subject of study of the unethical actions and their subsequent consequences that will be covered
in this report and they have been listed herein.
 Since Volkswagen is a car manufacturer of the highest quality and is held to strong
quality standards, the unethical practices that the company does get involved in is
subjected to a lot of backlash and media coverage
 When it comes to ethics in business, the company's origins itself are shrouded in
controversy as its initiation and control were under the powers of Nazi's, a fascist
organization condemned around the world
 The company has been involved in serious scandals over the years, one of the most
famous being the Volkswagen emission scandal which is also called Dieselgate and
Emissionsgate in which the company admitted to cheating on emission tests
 Despite being found guilty of major scandals and being of questionable ethical origin,
Volkswagen is a stellar example of a success story wherein a company learns from its
mistakes and still achieves a large degree of success in the market
Unethical practices committed by the company
The modern business landscape has done almost an unmeasurable amount of damage to
the environment which has made the concept of environmental sustainability a key core concept
when it comes to business ethics. One of America's most primary and important regulatory law
connected to regulation of air pollution is the Clean Air Act within which companies are
subjected to emissions test which is meant to measure the amount of harmful emissions,
especially Nitro Oxides (NoX) which is major proponent of air pollution. The scandal which was

committed by the Volkswagen group started in 2015 wherein it cheated on the emissions test
which it was subjected to by the US government and its anti-pollution laws (Jung and Sharon,
2019).
Volkswagen cheated the system by designing and programming turbocharged direct
injections (TDI) diesel engine to only generate emissions during the time spent in laboratory to
officially measure the amount of emissions being pumped in the atmosphere. What this allowed
the company to do is to show regular levels of emissions to the US officials and regulatory
bodies during testing meanwhile in actuality, the actual emission which was being generated by
the vehicles of Volkswagen in the environment exceeded the limit by more than 40 times which
is a massive violation of the Clean Air Act. Another major ethical blunder that was made in this
same context by Volkswagen was that during the time period of 2009-2015, Volkswagen had
deployed this software in 11 million cars worldwide and this must have led to a large spike in the
level of pollution on a global level.
Consequences
In order to cheat out on a few tests wherein the company was supposed to show its ethical
compass and drive the goals towards environmental sustainability, Volkswagen chose the low
road by cheating and it had devastating consequences which are listed underneath.
 According to the studies and surveys which are conducted by expert authorities on
pollution and its health effects, the amount of pollution inadvertently generate through
the cars of Volkswagen being fitted with the fraud software must have resulted in
multiple deaths. A 2022 study also showed its negative effects on infant birth weight and
mortality rate
 Since nitrogen oxides are one of the most major factors which are responsible for
environmentally damaging effects such as acid rains, Volkswagen caused a lot of damage
to the environment which is very unethical
 The company was also sued on multiple occasions by both the UK and European
governments and it has till date settled legal cases and settlements worth more than 33
billion (Jacobs and Kalbers, 2019).

Ethical Framework
Since Volkswagen is a major global manufacturer and exporter of auto-mobiles, its code
of conduct pays specific respect to ethical considerations and standards of compliance and its
framework also prompts ethical decision making by taking the interest of its stakeholders at all
times. The company pays specific attention to complying with human rights and has made
several policies which are made to safeguard the children rights and has also made pledge for
sustainable procurement and making sure child labour does not exist in its factories. Its corporate
principles are the guiding light of its operations and the ethical decision making which the firm
partakes in and it also focuses on the equal opportunity and non-biased treatment of its
employees.
As far as sustainability is concerned, the firm has made provisions in its framework to
include steps which are supposed to drive its operations towards an environmentally friendly
area and also make people move on from the emission gate scandal (Maamoun, 2021). The
ethical decision making in this regard is focused majorly on the decarbonization of its activities
as the group has made targets of achieving carbon neutrality by 2050 while also complying with
the standards set in the Paris Climate agreement which the company has labelled as “goTOzero”
within which it aims to make its operations free of harmful carbon emissions.
Company had aligned its ethics and values
The alignment with ethics and values for the organisation is being a very important role
as it makes the company ethical. It is necessary to understand that alignment with ethics and
values is playing a very important role in order to make the organisation ethical. It is necessary
that organisations should focus on aligning there is a strategy as well as goals with ethics and
values (Yan, 2020). This will help them to achieve their goals and objectives and become a
reputed organisation in the market. With the help of this action, they are able to achieve the
original position. Volkswagen is found to wear a reputable Global organisation that is found to
be a market leader and because of it, it is very important to align with its ethics and values. It is
analysed in the case of Volkswagen that they are always focusing on compliance with ethics and
value. It is identified that the company will become sustainable only when they act with integrity
and complies with the statutory provisions. In addition to this, they also need to follow and
understand its ethical principles and voluntary undertakings. It is identified that they had a diesel
emission scandal which was really a bad move for Volkswagen. It becomes a big ethical

dilemma and because this reason its reputation was highly compromised. Otherwise, it is
identified that Volkswagen always focused on its core values which include accountability,
servant attitude, integrity and teamwork. It is identified that the companies are popular because it
confirms their diligent behaviour in satisfying the needs of their customers.
Impact on the company’s image on shareholders, stockholders, etc. especially if the company
was involved in any CSR activity.
It is identified that unethical practices are providing a negative impact on the company's
image as well as on shareholders and stakeholders. It becomes more difficult in the case where a
company was involved in any CSR activity. The reason behind this is CSR activities always
focus on the welfare of society and this is the main reason that it is very important to make sure
the company that they should not involve in any unethical practices. The repetition of the
organisation is continuously negative impacted by unethical practices. This can be better
understood with the help of the Volkswagen case where they were involved in a big ethical
dilemma of the diesel emission scandal. It is identified that it was a very bad move for the
company as its reputation was highly compromised which also provide it with a negative impact
on the shareholders as well as stakeholders (Rubtcova and Pavenkov, 2018). They are already
involved in many CSR projects which include the support of art and culture, science, health and
education, etc. Due to the involvement in unethical practices, their CSR activities are not
recognised by the people because that thought was changed due to the scandal of diesel.
What was done by the company as a damage limitation control exercise in terms of addressing
moral dilemmas?
It is very important to understand that company should take the right action in order to
address the moral dilemmas otherwise it will affect their reputation as well as the stakeholders.
Volkswagen is a company which already done many article practices and this is the main reason
that it becomes more important for a company to use a damage limitation control exercise so that
they are able to address moral dilemmas. It is identified that moral dilemmas are considered a
conflict situation and which one makes moral harm which cannot be restlessly repaired. It is
identified that Volkswagen has taken an action as soon as possible as it was highlighted by the
media. This is the main reason that company promised to the customers the look into the matter
from within and will give full cooperation to the regulators in order to clean up the mess
(Panigrahi and Al-Nashash, 2019). The company also launched and recall campaign which was a

main to rectify the anomalies which were detected in the process of ethical dilemmas. In order to
handle the moral dilemmas, they were trying to give promises so that people are able to build
trust in a company.
Recommendations to the company
It is necessary to understand that organisations should focus on making an ethical
organisation which helps them to achieve their goals and objectives (How to Design an Ethical
Organization, 2019). It is identified that Volkswagen has already done many unethical practices
which provided a negative impact on the shareholders and stakeholders. It is very important for
them to take right actions. For that purpose there are some recommendations a mentioned below
that help to recover from the challenges of unethical practices:
 It is suggested to the organisation that they should focus on pillars of ethical culture
which include explicit values, cultural norms, incentives and thoughts during judgement.
It is important to note that t-shirt focus on strategies and practices which is able to clearly
state the principles of the company. If the company have a good craft mission statement
then it becomes very easy to understand the boundaries of company operations.
 It is suggested to the organisation that they should focus on thoughts during judgement. It
is identified that most people have less difficulty in order to know what is wrong than
what is right because they have good decision-making skills and also thought before any
judgement. With the help of this nature, the ability to reduce ethical lapses in the culture.
 It is also suggested to the organisation that they need to lead by examples in which
employees get motivation from the managers from using good examples.
Do you think that having a Code of Ethics would have assuming it did not have one made any
difference to this Company that you have chosen Substantiate your response accordingly.
No, it is not like that. If the company have a code of conduct still they are affected by the
way which I used in order to prove the company. The reason which I analysed is that it is very
obvious that companies are affected by any single comment which was related to the
organisation. It is important to understand that it provides a direct impact on the repetition of
organisation and that's why they are reflected in the response used for the company (Miller, John
and Ganai, 2021). A Code of ethics is necessary for each organisation but it is very important to

follow them and an effective way and should not be violated. So it is not right that a company is
judged only because of their code of ethics and the way which I used to describe it.
CONCLUSION
It can be concluded from the above discussion that success depends on the ethical
behaviour of an organisation because it makes the repetition in the market which provided in
influences each and every individual. It is also analysed with the help of a case study of a
company that it is very important for an organisation to take the right correct direction in order to
overcome the challenges due to unethical practices.

REFERENCES
Books and Journals
Jacobs, D. and Kalbers, L.P., 2019. The Volkswagen diesel emissions scandal and
accountability. The CPA Journal, 89(7), pp.16-21.
Jung, J.C. and Sharon, E., 2019. The Volkswagen emissions scandal and its aftermath. Global
Business and Organizational Excellence, 38(4), pp.6-15.
Lutge, C. and Uhl, M., 2021. Business Ethics: An Economically Informed Perspective. Oxford
University Press, USA.
Maamoun, A., 2021. Volkswagen’s Greenwashing Backfires: The Road to Redemption. SAGE
Publications: SAGE Business Cases Originals.
Miller, P., John, P.R. and Ganai, S., 2021. How Should Surgical Palliative Success Be
Defined?. AMA journal of ethics, 23(10), pp.778-782.
Panigrahi, S. and Al-Nashash, H.M., 2019. Quality work ethics and job satisfaction: An
empirical analysis. Quality Access To Success, 20.
Rodríguez-López, Á. and Souto, J.E., 2020. Empowering entrepreneurial capacity: training,
innovation and business ethics. Eurasian Business Review, 10(1), pp.23-43.
Rubtcova, M. and Pavenkov, O., 2018, November. Ethics of PR in Market Conditions of Russia.
In International Academic Multi Disciplinary Conference, 23rd to 24th November.
Yan, Y., 2020. The drive for success and the ethics of the striving individual. In Ordinary ethics
in China (pp. 263-291). Routledge.
Online:
How to Design an Ethical Organization, 2019. [Online] Available through: <
https://hbr.org/2019/05/how-to-design-an-ethical-organization >