The Impact of Ethics on Volkswagen's Reputation: A Detailed Report

This report provides an in-depth analysis of the Volkswagen emission scandal, examining the ethical breaches related to the installation of defeat devices in their vehicles. It explores how these unethical practices, driven by engineers' difficulties in meeting emission standards, severely damaged Volkswagen's reputation, leading to a decline in brand value, customer trust, and sales. The report delves into the Reptak model to assess reputation and discusses the impact on stakeholders. It concludes that ethical failures directly affect a firm's success and recommends strategies for Volkswagen to rebuild its credibility, including rebranding, partnering with independent verification agencies, and posting a bond to ensure future ethical conduct and regain customer loyalty. The report emphasizes the importance of ethical behavior in maintaining a strong reputation and achieving long-term business success.

Academic and Professional
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EXECUTIVE SUMMARY
The report is all about the business ethics. Study has emphasizes on analysing extend up
to which ethics plays crucial role in developing the reputation of firm. The introduction section
in the report includes the meaning of ethics as well as it importance in business. It also consists
of overview of the case study of Volkswagen. The analysis section will include the description
about the way emission scandal has effected the image of Volkswagen. Conclusion includes a
summary of analysis section. Some recommendation has also been given in the report which an
organisation can consider as it will assist them in improving the reputation. It has been found
from the study that ethics plays very important role in driving firm towards success.

TABLE OF CONTENTS
INTRODUCTION .........................................................................................................................4
ANALYSIS....................................................................................................................................4
CONCLUSION .............................................................................................................................7
RECOMMENDATIONS...............................................................................................................7
REFERENCES...............................................................................................................................9

INTRODUCTION
Ethics can be defined as moral principles which governs the behaviour of individual. It
can also be considered to be as branch of philosophy which includes systematizing, defending
as well as recommendation related to the concepts of right and wrong. Ethics can also be
referred to as a system accepted beliefs which controls behaviour of people.
In context of present study, the case study of Volkswagen has been considered. In year
2015, there was scandal where Volkswagen company admitted that the car have faulty devices
which has been implemented for enabling vehicles to pass emission tests. According to the top
level management they were not aware about such types of unethical activities within an
organisation. After analysing the case it has been found that the engineers in Volkswagen has
installed the defeat devices in the cars as they were facing difficulty in building diesel engines
which is essential in order to achieve high performance standards while keeping emission within
regulatory standards. Due to the unethical practices by engineers, Volkswagen has to face loss
and firm has to recall cars from the market. Such scandal has long lasting effect on the financial
performance of company. In addition to this, execution of unethical practices also have adverse
impact on the reputation of an enterprise. Maintaining the reputation is very much crucial in
order to sustain or run business for long time (Farouk and Jabeen, 2018).
The main aim of the report is to analyse extend up to which ethics plays an important
role in success or demise of an enterprise.
ANALYSIS
Before 2015, according to the annual reputation research studies Volkswagen was
always at the top of list. In context of corporate social responsibility, Volkswagen has got the
eleventh rank. Raking of companies in relation to corporate social responsibility is completely
based on the perception of public which is based on the three dimensions of reputation these are
citizenship, governance and workplace.
Actions forcing event
International council of clean transportation which is non profit organization had taken
initiative to conduct the investigation on environmental regulation government agencies.
Volkswagen promotes its diesel car as one of the most eco- friendly as well as fuel efficient
vehicles. Considering a such low emission from the cards, research committee has been asked

by regulatory authority to again perform the emission test. During the second time of the test it
has been found that defeated devices has been installed in order to enable vehicles to pass
emission test. An international council of clean transportation has suspended the Volkswagen
for installing the defeated devices in the vehicles. In 2015, the two main regulatory bodies that
is Environmental protection agency as well as California Air resource board has public ally
announced that Volkswagen has violated the clean air act by installing the defeated devices in
the car in order to cheat in emission tests (Industry report - Volkswagen: quantifying the
reputational damage, 2019).
Reason for events
But In 2015, the emission scandal has been faced by the Volkswagen as few engineers in
an organization had installed a defeated device in the cars. Engineers of Volkswagen has
performed unethical practices in order to enables cars to pass emission test. It has been
analyzed from the case scenario that engineers of Volkswagen had installed the defeated devises
as they faced the difficulty in developing the diesel engineer for reducing the emission from
cars. The scandal has badly affected the reputation of organization (Jin, Austin, Reber and
Espina, 2018).
Impact of Event on reputation of Volkswagen.
An organization ha to face ethical issues as the emission from the cars have negative
effect on the heath of people as well as on environment. It has been analyses that emission
scandal indicates the poor governance model of Volkswagen Scandal also shows unethical
behavior which has negative effect on the reputation of organization. By analyzing the different
research report it has been found that existing clients of Volkswagen are planning to sue an
organization. Many of the customers are criticizing their perceived betrayal. There are mainly
three things which determines extend up to which Volkswagen Is prone to reputation risk. These
three determinants are reputations exceeds to its true character. The second is changes in the
perceptions as well as expectations of customers. Third is quality of internal coordination
(Snezhko and Coskun, 2019).
For instance, the stakeholders' intelligence report of Amazon shows that reputation risk
is not very much important in context of workplace issue from the perception of consumers. An
amazon has not made any commitment to customers related to treatment of workers therefore,

it is it a crucial issue for group of stakeholders. Such small I workplace issues does not have
much effect on the performance of organization.
In context of Volkswagen, the research has been conducted using the social media
results of which reveals that there has been great decline in the positive recommendations by
customers. It has also been found that people are attempting to discourage other person from
buying the products or services from Volkswagen. The other fact which has been discovered is
that due to emission scandal, Volkswagen is getting negative response from customers.
Customer perceptions about the products or services offered by Volkswagen has completely
changed. There has been great decline in the customers trust related to goods or services
offered by organization. In addition to this, emission scandal has also leaded to the great
decrease in brand value of Volkswagen. It ha been analyzed from the secondary data collected
using the companies report, books , magazines, articles, newspaper that before the emission
scandal the brand value of Volkswagen was 31 billion US$. But after emission scandal an
organization has lost approx. billion US$ brand value (How VW Lost the Public’s Trust, 2016).
In addition to this, due to the emission there has been great decline in the sale of products or
services by enterprise. It has also been analyzed that Volkswagen emission scandal has lead to
the devastating consequences which also have direct as well as significant effect on its
stakeholders (VW Can’t Escape the Diesel Scandal Fallout, 2019).
Reptak model is considered to be as an effective in order to measure the reputation of
company in the market. It is the model which assist in determining firm capabilities to meet the
expectations of its stakeholders. According to the Reptak model there are 7 rational dimensions
of reputations these are products or services, innovation , workplace, governance, citizenship,
leadership and performance (Hiekkataipale and Lämsä, 2019). In context of Volkswagen,
engineer has installed the defeated devise in the car which has lead to the building of negative
perception about the quality of products or services among customers. Reptak model also states
that organization by fulfilling all expectations in all seven aspects can gain the support of its
stakeholders. In context of Volkswagen , business entity has failed to meet the expectation of its
stakeholders which has resulted into lack of support. Due Installation of defeat devises in the car
by engineer Volkswagen has to face serious consequences one of them is break down of
emotional bond. In addition to this, an Enterprise fails to deliver on the rational dimensions of
reputation, stakeholder support for the firm drops as well. This, in turn, affects the business

result, in negative manner (Craft, 2018.). The lack of support from the stakeholders also gave
adverse effect on the financial performance of Volkswagen. With the drop in reputation,
Volkswagen’s decline in support followed. Due to the emission scandal, there has been great
decline in the stock price of Volkswagen.
CONCLUSION
It has been concluded from the analysis is that the unethical practices executed by
engineer has adversely effected the reputation of Volkswagen. The other thing which has found
from the analysis is that emission scandal also has the negative effect on the credibility of firm
with its customers as well as stakeholders. It has also been found that the consequences of the
emission scandal is that emotional bond between the organization as well as its stakeholders has
been broken. . In addition to this, an organization fails to deliver dimension of reputation. Due
to emission scandal, there has been decline in the support of stakeholders. It is the emission
scandal which has adversely effected the reputation of Volkswagen and has lead to the decline
in support followed. The other thing which has been found from the analysis is that because of
emission scandal there has been great decline in customer willingness to buy products or
services from company, which has lead to the declines in sales of firm. It has also been
concluded that there is direct relationship between stock prices and reputation of an
organization.
RECOMMENDATIONS
The Volkswagen is now facing the difficulty in re-building the reputation as well as
establishing the credibility to its stakeholders and customers. It is very much crucial for
Volkswagen to take high initiative and implement different measures for restoring credibility as
well as re-built brand image. The worst case scenario could take place if an organization fails to
take corrective action on time. Consumer may boycott to buy product from Volkswagen if
unethical business practices continues to take place within an enterprise. Ethical issues can lead
to the decliner in sales and even lead to the collapse of firm.
The three strategies which can be adopted by Volkswagen in order to establish
credibility among stakeholders and to re-built its reputation in the market, these solutions are

business entity can restart business under new name. In addition to this, an organization can Join
an independent verification agency and can set up a bond.
Re branding strategy: It is considered to be one of an effective strategy which will assist
Volkswagen in improving brand image. Re-branding is the strategy which will provide
Volkswagen an ease in speeding up efficiency program. It will also aid firm in reducing the
negative publicity which is caused due to scandal.
Joining of interdependent Verification agency : Volkswagen can develop a special
team for checking the emission from vehicles. Business entity can form strategic partnership
with Independent Verification agency, as this tactic will support an enterprise in re-gaining the
customer loyalty (Gazzola, 2018). It will also support an enterprise in improving its image in the
market. Few independent verification agency with whom Volkswagen can form strategic
partnership are Federal trade commission, World business council for sustainable development,
etc.
Posting a bond : It is the strategy which will assist Volkswagen in re-gaining the
loyalty of customers. Volkswagen is required to post a bond which assures that unethical
activities will not be executed again in the future by organization. A bond is considered to be as
indicator of credibility. It will assist business entity in re-establishing the credibility with
stakeholders. In addition to this, firm can announce that if any unethical practices will be
executed then they will pay a bound out to European commission (Joshi and McKendall, 2018.).
It can be the tactics to motivate European union to be strict with their audits. In addition to this,
Volkswagen is required to make more capital investment in the research and development
activities, as it will assist engineers in identifying the suitable solutions to the problems which is
being faced by them in development of vehicles.

REFERENCES
Books and Journals:
Gazzola, P., 2018. Ethical Behaviour Integrated in CSR: How to create and maintain the
Corporate Reputation. Economia Aziendale Online. 9(2). pp.175-185.
Joshi, M. and McKendall, M., 2018. Responses to the discovery of unethical acts: An
organizational identity and reputation perspective. Business & Society.57(4). pp.706-741.
Craft, J.L., 2018. Common thread: The impact of mission on ethical business culture. A case
study. Journal of Business Ethics.149(1). pp.127-145.
Hiekkataipale, M.M. and Lämsä, A.M., 2019. (A) moral Agents in Organisations? The
Significance of Ethical Organisation Culture for Middle Managers’ Exercise of Moral
Agency in Ethical Problems. Journal of Business Ethics.155(1). pp.147-161.
Snezhko, S. and Coskun, A., 2019. Liability or Ethics?: The Real Value of Compliance. In The
Circular Economy and Its Implications on Sustainability and the Green Supply Chain(pp.
198-212). IGI Global.
Jin, Y., Austin, L., Reber, B. and Espina, C., 2018. How financial crisis history informs ethical
corporate communication: Insights from corporate communication leaders. Public
Relations Review.44(4).pp.574-584.
Farouk, S. and Jabeen, F., 2018. Ethical climate, corporate social responsibility and
organizational performance: evidence from the UAE public sector. Social Responsibility
Journal. 14(4). pp.737-752.
ONLINE:
How VW Lost the Public’s Trust. 2016.[ONLINE]. Available through
:<https://www.reputationinstitute.com/sites/default/files/pdfs/How-VW-Lost-Public-
Trust-2016.pdf>.
VW Can’t Escape the Diesel Scandal Fallout.2019..[ONLINE]. Available through
:<https://www.bloomberg.com/businessweek>.
Industry report - Volkswagen: quantifying the reputational damage.2019..[ONLINE]. Available
through :<https://www.iam-media.com/valuation/volkswagen-quantifying-reputational-
damage>.