Evaluating Volkswagen's Ethical Failures: Global Compact Analysis

This essay discusses the Volkswagen emission scandal based on a BBC news article, evaluating the company's ethical considerations against the ten principles of the United Nations Global Compact. It identifies that Volkswagen mainly breached the ninth principle by failing to develop sustainable technologies, instead installing cheating software in their diesel cars. The actions of Volkswagen are evaluated based on CSR and ethics theories, concluding that their actions were unethical and unsustainable. The essay recommends that Volkswagen implement more effective decision-making processes, adopt a sustainability management system, and focus on developing hybrid and electric vehicles to regain public trust and overcome negative associations with diesel cars.

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Introduction
In the recent time, Volkswagen emission scandal is the biggest scam being happened in
business history. According to the news article published in BBC news on 10th December 2015,
Volkswagen is accused of installing cheating software in their diesel cars in order to get away
with the stringent emission standard by Environmental Protection Agency (bbc.com 2018). It is
reported that in order to portray and position their diesel cars as cleaner than their competitors,
Volkswagen used the software to get pass the emission test. This device is installed in millions of
Volkswagen cars sold around the world. Thus, the scam gets amplified around the world and
affected a number of stakeholders. Further investigations revealed that top level management of
Volkswagen was involved in the scam and they have initiated this strategy in order to maintain
their leadership in the global automobile sector (Siano et al. 2017). However, publication of the
scandal led to the lawsuits against the top level managers along with adverse impact on the
goodwill of the brand and fall of the share price.
The chosen article of BBC news have stated about the response by Volkswagen in
countering the incident. It is reported that Volkswagen also proved ineffective in handling the
issue properly and caused further amplification of the issue among the relevant stakeholders. It is
also being reported that number of top managers of Volkswagen are prosecuted and CEO also
resigned from his post. This essay will discuss about the ethical responsibilities of Volkswagen
in against the principles of United Nations Global Compact. In addition, CSR and ethical
theories will be used in evaluating the actions of Volkswagen.

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Ethical responsibilities of Volkswagen
There are number of ethical responsibilities being stated by United Nations Global
Compact that should be followed by Volkswagen in their global business operation. According
to United Nations Global Compact, the first ethical principle is protection of human rights. It is
important for Volkswagen to look after the violation of human rights in their global workforce.
The second principle states that business should also not get involved in abuse of human rights
(Unglobalcompact.org 2018). Third principle states that business should respect the right of
collective bargaining. Volkswagen should have the respect for the labor association and their
bargaining power. Fourth and fifth principle states that business should rid of forced labor and
child labor. It is also important for Volkswagen due to the reason that having child and forced
labor will reduce the ethical approach and morality of Volkswagen in the global market.
Sixth principle states that business should eliminate the employee discrimination. It is
more important for global organizations such as Volkswagen. This is due to the reason that
Volkswagen is having diverse workforce with having employees from different social and
cultural backgrounds. Seventh principle states that business should have precautionary measures
against degradation of environment (Rasche, Waddock and McIntosh 2013). Volkswagen should
be more careful due to the fact they are automobile manufacturing company and is having direct
impact on the environment. Eighth principle states about the importance of initiating responsible
environmental activities. Volkswagen should initiate these activities in order to generate positive
word of mouth in the market. Ninth principle states about the importance of developing more
sustainable and environment friendly technologies (Unglobalcompact.org 2018). It is the
responsibility of Volkswagen to develop more sustainable and cleaner vehicles to reduce their

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environmental impact. The last principle states that business should have mechanism in fighting
against corruption.
Volkswagen and United Nations principles
From the above discussion of the ten principles of the United Nations Global Compact, it
is identified that Volkswagen mainly breached the ninth principle that states the importance of
developing and promoting environment friendly technologies. This is due to the reason that
being an automobile company, Volkswagen is having the ethical responsibility of developing
cleaner vehicles with having less amount of emission in the environment. In accordance to this
principle, Volkswagen should have to develop cleaner diesel vehicles (Jung, Chilton and Valero
2017). However, they have not developed more sustainable technologies rather they have
installed a cheating device in their diesel cars. This helped them to show lower level of emission
even the vehicles are having outdated technologies. This is direct breach of the ninth principle of
the United Nations Global Compact (Krall and Peng 2015). Volkswagen has not initiated the
development process of cleaner vehicles and this proves that they are not responsible towards
environmental sustainability.
Application of CSR and ethical theory
According to the shareholder value theory of corporate social responsibilities, companies
should initiate their business policies that will contribute in the society and economy. However,
this theory also states it is the responsibility of the business to initiate social activities as done by
the government and other social organizations (Servaes and Tomayo 2013). Thus, according to
this theory, it is the responsibility of Volkswagen to develop and produce cleaner vehicles that
will contribute to the society by the means of lesser level of emission. However, they sold

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existing vehicles with higher level of emission in disguise of improved vehicles. This is not as
per to the shareholder theory of corporate social responsibility (Flammer 2013).
According to the utilitarianism theory of ethics, actions can be termed as ethical only if
the end results helps in benefiting to larger section of stakeholders. In addition, this theory also
states that actions to be initiated should be made by considering views of different relevant
stakeholders (KORTENK AMP and Moore 2014). However, in the case of Volkswagen, their
action of installing the cheating software has not done any benefits to the internal and external
stakeholders. Furthermore, it affected the goodwill of the company in the global market. Thus,
according to the utilitarianism theory of ethics, the action of Volkswagen of introducing
polluting diesel cars can be termed as unethical (Moehler 2013).
Recommendations
It is recommended that global organizations such as Volkswagen should have more
effective way of decision making process in place. This is due to the reason that effective process
of decision making will help in considering the views and opinions of all the involved
stakeholders. This will enable the organization in determining the different positive and negative
factors prior to the decision making. Thus, the probability of emergence of unethical behavior
will be less for the organization. On the other hand, it is also being recommended that these
global organizations should initiate sustainability management system in their business
operation. This will help the business organizations in having sustainable approach in their
operations and sustainability will be given the major concentration. In addition, initiation of the
sustainability management system will lead to having more responsive business practices in
place along with having more cost savings.

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In case of Volkswagen, it is recommended that they should initiate change in business
level along with having more concentration on sustainable business process. For instance, they
should focus more on developing hybrid and electric vehicles over producing cleaner diesel
motors. This will help in regaining the public trust in the market and will also help them to
overcome their negative goodwill associated with the diesel cars.
Conclusion
In this essay, the emission scandal faced by Volkswagen is being discussed based on the
news article published on BBC news. In addition, the ethical considerations for Volkswagen are
evaluated against the ten principles of the United Nations Global Compact. It is identified that
Volkswagen mainly breached the ninth principle of developing sustainable technologies. The
actions of Volkswagen are evaluated on the basis of CSR and ethics theory and it is identified
that their actions are unethical and unsustainable in nature. This essay concluded with a few
recommended steps that will further help Volkswagen in increasing responsive business
practices in the future.

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Reference
bbc.com (2018). Volkswagen: The scandal explained. [online] BBC News. Available at:
https://www.bbc.com/news/business-34324772 [Accessed 4 Oct. 2018].
Flammer, C., 2013. Corporate social responsibility and shareholder reaction: The environmental
awareness of investors. Academy of Management Journal, 56(3), pp.758-781.
Jung, K., Chilton, K. and Valero, J.N., 2017. Uncovering stakeholders in public–private relations
on social media: a case study of the 2015 Volkswagen scandal. Quality & Quantity, 51(3),
pp.1113-1131.
KORTENK AMP, K.V. and Moore, C.F., 2014. Ethics under uncertainty: the morality and
appropriateness of utilitarianism when outcomes are uncertain. The American journal of
psychology, 127(3), pp.367-382.
Krall, J.R. and Peng, R.D., 2015. The Volkswagen scandal: Deception, driving and
deaths. Significance, 12(6), pp.12-15.
Moehler, M., 2013. Contractarian ethics and Harsanyi’s two justifications of
utilitarianism. Politics, Philosophy & Economics, 12(1), pp.24-47.
Rasche, A., Waddock, S. and McIntosh, M., 2013. The United Nations global compact:
Retrospect and prospect. Business & Society, 52(1), pp.6-30.
Servaes, H. and Tamayo, A., 2013. The impact of corporate social responsibility on firm value:
The role of customer awareness. Management science, 59(5), pp.1045-1061.

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Siano, A., Vollero, A., Conte, F. and Amabile, S., 2017. “More than words”: Expanding the
taxonomy of greenwashing after the Volkswagen scandal. Journal of Business Research, 71,
pp.27-37.
Unglobalcompact.org (2018). The Ten Principles | UN Global Compact. [online]
Unglobalcompact.org. Available at:
https://www.unglobalcompact.org/what-is-gc/mission/principles [Accessed 4 Oct. 2018].

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Appendix

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