Exploring Ethics & CSR at Volkswagen - Essay Sample

Executive Summary

This report offers an extensive evaluation of the issues and problems associated with ethics and Corporate Social Responsibility that are facing the automotive giant, Volkswagen. The first step was to conduct research on the past and present situation on the ethical conduct of the employees at all levels of the organisation and also to highlight the shortcomings of the Corporate Social Responsibility (CSR) department. The results of the research indicate that there are prevalent cases of professional unethical conduct at many levels of the organisation, from the CEO to the scientists performing tests on new car models. The CSR department has also failed at its responsibilities, which led to the emissions cheating scandal in 2015. With the failure of the CSR department in its objectives leading to unethical decision-making, Volkswagen needs a restructuring of its CSR department.

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Solutions to solve the problems of unethical decision-making and failure of the CSR department have been presented. First, ethical check-ups are an excellent way to make sure every decision made in the organisation follows the code of ethics set by the organisation. Furthermore, enforcing the code of conduct at every level of the organisation will prevent unethical practices in the organisation. In the case of the CSR department, there needs to be a full restructuring of the department to ensure the engagement of all the employees to ensure no irresponsible decisions are being made by specific members of the department and also to ensure transparency in the department.

Several recommendations to improve the ethics in Volkswagen include rewarding honesty among employees in the organisation. This will motivate employees to maintain transparency in the organisation and to work towards the objectives set out for them in their work description, thus, improving the organisation's reputation in the long run. The second recommendation is to perform an ethical audit on the organization. An ethical audit will enable the company to find out the level of ethical compliance of every employee in the organization. It will also enable management find out the 'ethical illnesses' present in the organisation, to ensure professional ethics are maintained in the organisation. On the part of the failure of the CSR department, a complete restructuring of the organisation's CSR department is vital in ensuring those dragging down the company's reputation in terms of selfish and irresponsible decision-making are rooted out, and a new department with clear objectives installed will ensure a smooth workflow within the department. Also, unified decision-making within the CSR department will ensure only decisions that improve the company's image are made. These recommendations will help Volkswagen prevent future unethical practices and ensure its employees do not misuse their offices for selfish gain.

Introduction

In today's world, ethical issues within an organisation affect it adversely and are a significant threat to the organisation (Mackey, 2014). Ethical issues in big organisations, such as Volkswagen attract a lot of scrutiny, and the need to handle any ethical concerns in any organisation is vital to the organisation's brand reputation (Whyatt, Wood & Callaghan, 2012; Reis, 2010). The components of an organisation which determine how strategies within the company are devised influence the ethical behavior of individuals in all levels of the organisation (Riivari, Lamsa, Kujala & Keiskanen, 2012). The behavior of individuals within an organisation dramatically influences how they will handle issues that face them relating to ethics (English, 2008). Members of the Volkswagen organisation did not heed ethical practices in their professions, and this is what led to scandals that damaged the organisation's reputation. The main reasons that damaged its reputation are attributed to unethical practices by employees in the organisation at different levels, including the scientists and the CEO. This report will dig deep into issues of unethical practices and failure of corporate social responsibility in the CSR department. After analysis of these issues, solutions, and recommendations to get rid of these issues in the organisation will be provided to overcome these challenges.

Analysis of the Critical Issues

The day-to-day routines in the lives of individuals and organisations involve the identification, analysis, and resolution of problems (Cavaleri, Firestone, & Reed, 2012). Each problem brings with it a unique challenge and has a solution to prevent future consequences (Tucker, Edmondson, & Spear, 2002). Many issues are affecting big organisations such as Volkswagen. However, this report will focus solely on unethical practices and corporate social responsibility. These two problems are a significant challenge at Volkswagen and could explain the trail of scandals that have been haunting the organisation for the last couple of years.

Issue 1: Unethical Practices

Perhaps the most publicized scandal in Volkswagen's history, the emissions cheating scandal of 2015, is a perfect example of how unethical practices within an organisation can damage an organisation's reputation. The scandal took place in September 2015, where the United States Environmental Protection Agency (EPA) found out that motor vehicles being manufactured by Volkswagen were violating the US Clean Air Act. Upon investigation, the EPA found out that Volkswagen had found a work-around that enabled them to meet the required rates during laboratory tests that meant to test emission rates from their diesel engines. The staff at Volkswagen would mask the Turbocharged Direct Injection diesel engine to hide the real rates. However, the actual Nitrous Oxide being released was forty times the required rates. It was also found out that Volkswagen had been releasing fake figures for its vehicles' NOx emissions for car models that had been released since 2009. When the evidence was presented to the Volkswagen AG, the organisation admitted that it had been using a 'defeat device' that was able to distinguish lab environments from real environments, thus, enabling it to mask the actual emission rate of the test vehicles' Turbocharged Direct Injection engine software. During lab tests, this 'defeat device' adjusted the performance and power of the vehicles in order to pass the emission tests (Contag et al., 2017). This scandal led to VW losing 40% of its stock prices within two weeks. The scandal got even worse when it was found out that some individuals working in VW had been rewarded because of their involvement. Some employees and executives working at VW in the United States were arrested and imprisoned for violating the Clean Air Act (Kieler, 2016; Tabuchi, Ewing & Apuzzo, 2017). This scandal shows how some of the employees lacking professional ethics affected the whole organisation. VW lacked an ethical organisational culture, which would have established parameters defining what is right and what is wrong, rather than just making ethical decisions (Jovanovic & Wood, 2006). The lack of established ethical guidelines gave way for those involved in the scandal to act the way they did. These unethical practices can transfer to all parts of the organisation, such as departments that deal with corporate social responsibility.

Issue 2: Failure of the CSR Department

The primary function of a CSR department in any organisation is to build a positive image of the company, building the organisation's brand and motivating employees of the organisation to work towards achieving common goals .The Volkswagen case failed in achieving this objective. The organisation intentionally designed a means to work around emissions control, all to make itself the world's largest automobile manufacturer, by giving itself an unfair advantage over its main competitors, based on its supposedly environmentally friendly cars, while in reality, it was slowly poisoning the environment. This strategy was known at the highest levels of the organisation, more-so those in the CSR department. This strategy that led to the resignation of the CEO, the head of Research and Development, and Audi's engine chief, means that the CSR department knew about everything. Records are showing the chain of command that led to the addition of lines of code on the software that performed the emission tests, and all the tests that were done were documented. It is hard for the head of the CSR department to deny that they knew nothing about what was going on. It can only be concluded that for Volkswagen, CSR was being used as a marketing strategy. It is now clear that the chances of organisations self-regulating are very low, and that their main aim is to maximize profits by any means. It is sad that Volkswagen would decide to poison the planet by emitting 40 times the legal limit of emissions, if only it meant being the world's best auto manufacturer. The Volkswagen scandal goes on to clearly show that all organisations should re-invent their CSR departments, and the people heading these departments should be made responsible for their organisation's actions because that is their job.

Analysis of Alternatives

Alternative Solution 1 :) Rewarding Honesty

Honesty is not just the best policy; it is the only way to build a highly successful organisation. A study conducted in 2010 found out that honesty and open communication among staff resulted in a shareholder return that was 270% more than competitor companies in a 10- year period (https://www.softwareadvice.com/resources/why-honesty-is-the-secret-ingredient-of-successful-organisations. Organisations must encourage employees to be honest and reward them. A study conducted by Fierce, Inc. found that 99% of employees preferred workplaces when colleagues discussed issued openly and truthfully. This study also found that 70% of workers thought that a lack of honesty impacted the organisation negatively in that the company did not perform to its full potential (https://fierceinc.com/?page=white_papers_signup&wpID=11). When employees are encouraged to share issues and tell the truth early on, problems can be solved before they become significant challenges in the organisation. In the Volkswagen case, if the emissions problem had been shared earlier on before it became a big issue, it could have been solved, and the organisation would be performing better than it had been performing. Employees should be forthright in addressing issues and should not sugar-coat the problems. It can be concluded that if Volkswagen employees involved in the scandal had spoken truthfully, there would be no emissions scandal.

Alternative Solution 2: - Code of Conduct

All organisations should have a code of conduct that dictates how employees should behave and act while in the workp...