ENS2159: Engineering Innovation and Ethics Volkswagen Report

This report provides a comprehensive analysis of the Volkswagen diesel emission scandal, examining its causes, impacts, and ethical problems. The report begins with an executive summary, followed by a company overview of Volkswagen, and an introduction to the scandal. It then delves into the causes, including technological shortcomings, company culture, poor human resource practices, and a bad ethical culture. The impacts are explored, encompassing people's health, workforce bonuses, drops in sales, and a decline in Volkswagen's share value. The analysis further discusses the ethical problems associated with the scandal and offers recommendations, along with their challenges, for Volkswagen to adapt and improve its practices. The report concludes by emphasizing the importance of ethics in ensuring an organization's success and the need for companies to learn from such crises. References are included at the end of the report.

ENS2159: Engineering Innovation and Ethics
Volkswagen Diesel Emission Scandal
Report on Volkswagen emission scandal
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Table of Content
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s
Executive summary.........................................................................................................................3
Company overview..........................................................................................................................4
Introduction......................................................................................................................................4
Analysis of causes and impacts of the scandal................................................................................5
Causes..........................................................................................................................................5
1. Technology shortcoming:..............................................................................................5
2. Company culture:……………………………………………………………………..5
3. Bad human resource practices:......................................................................................6
4. Bad ethical culture:........................................................................................................6
Impacts.........................................................................................................................................6
1. People’s health:.............................................................................................................6
2. Workforce’s Bonus:......................................................................................................6
3. Drop-in sales:................................................................................................................7
4. Drop-in Volkswagen shares:.........................................................................................7
Analysis of the Volkswagen scandal’s ethical problems.................................................................8
Recommendations and their challenges when Volkswagen adapt..................................................9
1. Recommendation:..........................................................................................................9
Challenges:..............................................................................................................................9
2. Recommendation:..........................................................................................................9
Challenges:..............................................................................................................................9
3. Recommendation:........................................................................................................10
Challenges:............................................................................................................................10
4. Recommendation:........................................................................................................10
Challenges:............................................................................................................................10
Conclusion.....................................................................................................................................10
References......................................................................................................................................13
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Executive summary
Ethics are essential to ensure the failure or success of an organization. The unethical
behaviour reflected by the Volkswagen diesel emissions scandal caused the company to lose a
massive amount of money and its severity. According to the report, in September 2015,
Volkswagen acknowledged that it had installed more than 600,000 diesel vehicles worldwide
that met stringent emission standards, making it the front page of all news media (Agusti et al.,
2018). From the press release onwards, Volkswagen's reputation, stock price, stock price, etc.
The company has taken many steps to rebuild its image and restore confidence in the US federal
government. The biggest problem they face is that CEO Martin Winterkorn pressed to cover up
this massive mistake. The facts of the case show that he was aware of Volkswagen engineers'
actions and was also authorized to cover them (Andrade and Tomblin, 2018). The ethical
principles violated by the company are maximum health, fairness, goodwill and efficiency. We
will explore the sheer scale of this scandal and the negligence of top management to handle the
consequences.
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Company overview
The Volkswagen is a German automobile manufacturer that mainly sells Bentley,
Lamborghini, Audi, SEAT, Porsche, Skoda, Bugatti, and Volkswagen motorcycles such as
Ducati as well as commercial vehicles (Jacobs and Singhal, 2020). The organization with an
initial listing on the Frankfurt Stock Exchange and a secondary listing on the Sixth Swiss Stock
Exchange in Luxembourg. Since 1988, it has traded in the USA through receipts of American
depository. The organization’s headquartered in Wolfsburg, Lower Saxony, Germany (Mačaitytė
and Virbašiūtė, 2018). The divisions, including the financial services and automotive, around
340 subsidiaries.
Figure 1: Vision and mission of Volkswagen
Introduction
The business world has witnessed many instances of ethics, such as unethical behaviour
that affects its economic status and stakeholders. Many global and local companies have
involved in well-known scandals, including unethical behaviour, such as Volkswagen.
Nowadays, companies focus on making money and increasing shareholder value, equally
emphasizing ethics as one of their business foundations (Strittmatter and Lechner, 2020). Ethics
is a crucial practice in creating a fair and equitable business environment. Every company
adheres to its code of conduct, and any breach of this conduct will be affected, such as failure,
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ethical behaviour, fraud and misbehaviour can dominate the organization (Kim and
Vandenberghe, 2020).
According to the report of (Kircova and Esen, 2018), Volkswagen engineers decided to
manufacture a device that could open during a rigorous exhaust test. Researchers at the
University of West Virginia found in independent tests that these vehicles polluted 40 times the
amount allowed by the EPA “Emissions and Pollution Administration”. There are three aspects
to particular fraud such as opportunity, rationalization and pressure. As the research of (Jacobs
and Singhal, 2020), the pressure from above is excellent. Volkswagen's 25-page code of conduct,
which ostensibly teaches ethics to every employee, seems insignificant when it sharply contrasts
with management's authoritarian leadership style and the sole goal of achieving success in every
way.
Furthermore, Bosch retailed diesel engine management software to Volkswagen that
might notice when a car was being verified and turn on an emission controlling device.
Volkswagen's engineers had fixed the device that permits the organization to fraud on the latest
rectified emission standard. As (Jung and Sharon, 2019) research, every employee at
Volkswagen is under severe pressure to produce results at any cost, leading to negligent thinking
from the top down. Volkswagen intends to increase its global market share from 20.2% to 29%.
Therefore, they wanted to see the expected result to install software that shows fewer engine
emissions (Guckian et al., 2018). The organization are in danger of losing their global market
share because of their reputation and facing a fine of around 18 billion pounds. Therefore, a
comprehensive analysis is needed to create guidelines to avoid engineering errors, taking into
account the industry's future needs.
Analysis of causes and impacts of the scandal
Causes
1. Technology shortcoming:
The engineers forced to take this decision and failed to meet the emission standards
through Volkswagen given budget and time (Rogerson et al., 2019). Eventually, after some time,
they came up with the solution to meet the emission standards, but they still chose to rig rather
than implement the method.
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2. Company culture:
Volkswagen was more of an autocracy than a democracy. The employees had to perform
their tasks so that the company's demands and expectations fulfilled nevertheless. The working
environment of Volkswagen avoided dissent and discussion (Rogerson, 2018). Therefore, the
chief in Volkswagen's position might not have directly enforced workforces to install the defeat
device, but the work environment did not discourage them either. For example, the whole chain
of failures caused by the negligence of employees to comply with the company's ethical policies
(Tanaka et al., 2018).
3. Bad human resource practices:
Volkswagen, HR practices such as if the failed employee performed their task threatened
to be replaced by another who could. Therefore, when it came to maintaining the job, the
employees had no choice to do that task at any cost (Hössl and Baumgartner, 2019). For
example, the engineers cannot meet diesel engine emission targets provided in the US by
permissible means.
4. Bad ethical culture:
The company declared the approaches that were not ethical and appropriate. There was a
lack of transparency, and the employees at lower levels could not communicate effectively with
the higher level’s management (SINGH, 2020). The employees also could not share their
disagreement opinions with their supervisors. Therefore, it perceived that the scandal in terms of
profit maximization was a misconception.
Impacts
1. People’s health:
The emissions from Volkswagen diesel vehicles between 2008-2015 resulted in increased
health risks to the public. It was estimated that 36 million kg of “nitrogen oxide” was emitted.
The cars had emitted enough toxic pollutants to trigger about 60 cruel deaths merely in the USA
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directly (Welch, 2019). It also harmed the environment, resulting in acid rains, impacting human
lives and destroying nature.
2. Workforce’s Bonus:
The sales of Volkswagen saw a dip after this scandal. It led to a decrease in the
remuneration of a majority of its workforce or employees. Volkswagen stated that they are
establishing models to provide a fair and rational solution for all participated parties (Strittmatter
and Lechner, 2020).
3. Drop-in sales:
The scandal impacted the sales of both Volkswagen group brands, Audi and Skoda, and
Volkswagen itself. It was much prominent for Volkswagen had lost the trust of its customers and
the public (Duniya, 2019). Customer loyalty was affected by the bad reputation that came with
the scandal, and customers switched to its competing brands, which led to a noticeable drop in
Volkswagen's sales.
Figure 2: How Volkswagen's sales were continuously plunging in the USA
4. Drop-in Volkswagen shares:
The unethical practice of Volkswagen led to a rapid downfall in share value. The market
share value of Volkswagen fell by one-third as soon as the whole scandal made publicly. The
scandal wiped billions of dollars from Volkswagen value (Damert and Rudolph, 2018).
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Figure 3: The drop in stock price in the United States in 2015-2016.
Analysis of the Volkswagen scandal’s ethical problems
The Volkswagen emissions scandal has brought an apparent immoral pattern to its
characteristics. Therefore, the company's human actions will be considered a sugar coating that
will cover its reputation (Che et al., 2020). For example, promoting corporate social
responsibility is an entirely inadequate response. Consequently, Volkswagen's crushing impact is
used globally to cover this impact, as its business model reflects selected and isolated activities
rather than general and systemic activities (Guckian et al., 2018).
Furthermore, Volkswagen's most apparent ethical inconsistency is the engineer's
responsibility for software malfunctions and not the responsibility of management for the most
sensitive issues of corporate social responsibility (Jacobs and Singhal, 2020). The company's
refusal to adopt engineering ethics standards shows that management needs to be aware of this
problem. Some of the significant ethical issues related to the scandal are:
 It is impossible to achieve the goal set by the senior management within the specified
time.
 Volkswagen rejects the idea of competition in hybrid cars. Therefore, with the limited
opportunities to sell diesel vehicles, the engineers put much pressure and decided to cheat
the safety and technological regulations (Ameen, 2020).
 The German government will not bring charges against minors for breach of contract and
will not monitor them due to could lead to significant disasters in the future.
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 The opportunity, mentality and pressure these three factors coexist often see employees
behaving unethically (Andrade and Tomblin, 2018).
Recommendations and their challenges when Volkswagen adapt
1. Recommendation:
Volkswagen management must pay attention to the integrity of the environment as
prevention efforts are created and prevent climate change and health issues from being
addressed.
Challenges:
Sometimes attention is distracted, and the rectification work exhausted Volkswagen's
financial resources (McNamara et al., 2018). The latter may be why the company will accept
shortcuts and hide more pressing environmental problems to avoid the whole industry.
2. Recommendation:
Volkswagen should emphasize the path of survival to disrupt its future and current
networks' ecological, economic, and social existence (Agusti et al., 2018).
Figure 4: Actions on specific sustainability issues
Challenges:
Volkswagen is one of the largest multinational companies; Thus, sustainability due to
exhaust scandals is still very fragile as many alternative car dealers can produce more
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environmentally and socially efficient cars (Rogerson, 2018). Therefore, the company should
reconsider sustainable consolidation goals for a dominant position in the mass market.
3. Recommendation:
Volkswagen should establish organizationally and formalized moral education as part of
its professional development (SINGH, 2020). For example, inviting science education for further
training in engineering ethics.
Challenges:
Moral education will be effective, and the only concern is the importance of compliance
and the implementation of the knowledge gained (Duniya, 2019).
4. Recommendation:
Volkswagen's management should solve the problem initially instead of setting up the
whole process by mistake. Ethics and other risk factors should be considered when planning to
increase the company to another level (Bouzzine et al., 2020).
Challenges:
To understand the Consequences of fraud and market manipulation, Volkswagen's
management must strictly understand its operating policies, ethics, and procedures (Tanaka et al.,
2018).
Conclusion
It is concluded that ethics are essential to ensure an organization’s failure or success. The
unethical behaviour reflected by the Volkswagen Group that the Volkswagen diesel emissions
scandal caused the company to lose a tremendous amount of money. The function of the business
model plays an essential role in influencing decision making. Volkswagen's case is indeed a
profit from corporate social responsibility, "corporate social responsibility", which brings its
equity to an unequal scale, followed by the protection of many corporate social responsibilities.
The scandal impacted the sales of both Volkswagen group brands, Audi and Skoda, and
Volkswagen itself. It was much prominent for Volkswagen had lost the trust of its customers and
the public. Customer loyalty was affected by the bad reputation that came with the scandal, and
customers switched to its competing brands, which led to a noticeable drop in Volkswagen's
sales. It offers many ways of expressing different opinions, which shows the negative aspects of
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the problem and shows the remedial measures of society. The company's future may not be as
optimistic as before, but it learns and heals in all tragedies. Therefore, Volkswagen must act
modestly to fulfil its responsibilities, including all company members and the community, to get
them on the right track and bring them into line with CSR. It is indeed the solution to many
problems in our society.
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