Volkswagen Corporate Social Responsibility Issue

Subject: Company Analysis
Pages: 9
Words: 2478
Reading time:
9 min
Study level: Bachelor

Introduction

Companies throughout their activities face various problems that can greatly affect their functioning. This paper examines a particular issue that the Volkswagen Group has encountered in the past and which still affects the company’s activities. Such a problem has become an irresponsible practice associated with corporate social responsibility. It is based on responsible actions of companies, which has many advantages, including profit growth and demand. Additionally, there is a reduction in the negative impact of production on the environment. It is worth emphasizing that in this way CSR implies the creation of a business strategy based on sustainable development. Thus, this scientific work aims to study the essence of the complexity faced by the organization, consider examples of the correct practices of other successful companies in the field of sustainability and provide recommendations for changing the situation.

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First of all, it is necessary to consider what the Volkswagen company is. This company is world famous due to the fact that it produces some of the most reliable cars in the world. In addition, the manufacturer releases heavy truck vehicles such as MAN and Scania, motorcycles and premium class cars to the market. Research shows that “Sales revenue for 2020 amounted to 222.9 billion euros, or $272.2 billion U.S. dollars, down almost 12 percent on 2019” (‘VW expects ‘significant’ revenue increase in 2021’, 2021, para. 5). The main problem that has greatly shaken the company’s reputation is the scandal that occurred in 2015 (Zhang, Atwal, and Kaiser, 2021). Then, the global automobile manufacturer faced a public relations crisis, and the U.S. Environmental Protection Agency drew attention to it.

Issue the Company Faced

The problem that has greatly affected the company’s activities is associated with an irresponsible and incorrect policy towards corporate social responsibility (CSR) and its management. This aspect is critical for any organization, as it includes initiatives and actions that benefit society, the economy and the environment (Advantage, 2020). Many businesses neglect this approach or only talk about its importance, completely ignoring it. However, with the development of society, many consumers have much more knowledge and awareness on the topic of corporate responsibility and neglect of it can adversely affect the reputation, competitiveness and productivity of the company.

The main issue was the company’s concealment of information from the public. In December 2015, the organization pleaded guilty to the fact that its engineers had substituted data for the emission test. The reason that experts cited in their justification was that “they couldn’t find a technical solution within the company’s “time frame and budget” to build diesel engines that would meet U.S. emissions standards” (‘EPA: Illegal Trump emissions tampering is running rampant’, 2020, para. 5). Volkswagen admitted to installing a defeat device and withdrawn more than 10 million cars globally. Therefore, the inappropriate policy led to the fact that the company had to pay huge fines, for example, in America they amounted to more than four million dollars. Moreover, with the emergence of this scandal, other incorrect actions began to be revealed in some offices of the company, which also shook its reputation.

The main goal of the company in this case was to maintain competitiveness in the market while buying into a new segment of pure diesel fuel in the USA at that time. It tried to compete with the help of an environmentally friendly engine with such giants as, for example, Toyota, which was engaged in the production of hybrid engines. Thus, the manufacturer’s diesel cars had a specialized software program for fault detection. In addition, the technological innovation could determine and test the number of emissions into the atmosphere and carry out pollution control.

During a specialized investigation, it was concluded that Volkswagen cars emit an extensive amount of harmful gas into the environment, thereby causing serious harm to it. Moreover, this number significantly exceeded the indicators that were established by the legislation of the country. Thus, Volkswagen failed in providing due care for society and the environment, which led the company to commit such a tremendous mistake. Corporate social responsibility should thus be placed in a leading position in the organization and should be aimed at creating safe products and minimizing environmental pollution.

Behaviors Toward the Company and Its Impact

When this problem arose, the company had multiple problems, since at that time the behavior of buyers and interested parties changed a lot. Such a negative attitude has left a contribution on the reputation, the buyer’s response and the profitability of the organization. Thus, many of the company’s customers and the general public were dissatisfied with the company’s lies about their attitude to ecology and the environment. This is due to the fact that corporate social responsibility primarily implies these aspects. Furthermore, the company that acquired such reputation faced legal troubles, which also contributed to its failure.

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Non-compliance with corporate social responsibility has caused damage to the company in many areas of its activities. Henceforth, as already mentioned, the company suffered losses due to various fines and lawsuits, in the amount of several million dollars. Moreover, on the part of stakeholders, Volkswagen also lost a lot of money, as it suffered a decline in its value by almost half. The company also had to pay dealers who sold cars to it and these losses are difficult to calculate specifically, but it can be argued that they are very numerous.

Therefore, the company is still experiencing difficulties related to reputation. Hence, before the scandal, the company occupied the eighteenth place in the rating of brands, when at the moment it is located much lower. Due to the fact that the company preferred to install specialized technologies to reduce the harmful gas indicators, instead of spending more time researching the field, it failed to meet the quality standards set by it. Thus, the title of the manufacturer with the best German vehicles quality has been significantly shaken.

Examples of Organisations who Have Behaved in a More Responsible Manner and the Competitive Advantage Gained

Following the right corporate social responsibility strategy can bring a company many competitive advantages. Moreover, this policy helps to control the company’s contribution to society, the environment and the economy and contributes to building a good image among customers and all interested parties. Thus, compliance with CSR also allows company to stand out from competitors in the market. A correct and well-thought-out corporate policy is an important factor that influences the fact that consumers are willing to pay more for the products of such an organization than the one that does not comply with it.

Therefore, in order to gain a better understanding of the importance of CSR, it is necessary to consider examples of companies that successfully apply it. Thus, the American company Target can become one such instance. A large corporation that has points of sale of its products throughout the country and gives priority to the observance of aspects of corporate social responsibility. At the same time, the company maintains and constantly increases its profitability and competitiveness. The company works to help support communities and donates funds to charity. In addition, Target uses and constantly modernizes sustainable business practices.

Another example of effective corporate social responsibility policy is one of Volkswagen’s competitors, the global manufacturer of Ford cars. The main mission of the organization is to create a better world, all people will have freedom of movement and the opportunity to fulfill their desires. The company is constantly increasing its investments in electrification and is committed to ensuring that their vehicles are carbon neutral in the near future (Chaffee, 2017). This action is taken by the company primarily for the benefit of people and the environment. In addition, the company pays a lot of attention to pay equity. Thus, it takes into account such aspects as diversity and inclusivity in the workplace, while introducing a global wage coefficient.

Further, Google is one of the largest in the world and occupies a leading position in the market. For the most part, it owes such a position to the conduct of the correct policy, including in the field of corporate social responsibility. In addition to implementing various CSR initiatives, the giant also applies the successful Google Green environmental policy. This program represents special measures for the efficient use of resources and support of renewable energy sources.

Henceforth, Google is one of the largest in the world and occupies a leading position in the market. For the most part, it owes such a position to the conduct of the correct policy, including in the field of corporate social responsibility. In addition to implementing various CSR initiatives, the giant also applies the successful Google Green environmental policy. This program represents special measures for the efficient use of resources and support of renewable energy sources.

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Recommendations for Future Behaviour to Address the Discussed Issue 1060

Taking into account everything that was said earlier, it is necessary to provide recommendations that will help Volkswagen improve its policy in the field of corporate social responsibility. It is worth noting that corporate weathering implies not only compliance with the rules of protection of society and the environment, but also contributes to the preservation and attraction of the most talented and hardworking employees (Grayson and Hodges, 2017). In addition, it affects the satisfaction of customers and staff and increases the rating of the company. Thus, when hiring new personnel, the company must take into account their focus on CSR compliance. Moreover, Volkswagen must integrate this concept into its practice, the main goals and missions that correspond to the policy of sustainability and environmental responsibility.

Thus, companies that practice CSR also have more satisfied employees. Research shows that “CSR has been shown to relate positively to organizational commitment, job satisfaction, and organizational citizenship behaviours” (Chaudhary, 2017, p. 324). This is due to the fact that the organization and its staff form a sense of common purpose and purpose. In addition, enterprises practicing corporate social responsibility invest more in the internal components of the company and work harder to create a correct and positive workplace. Thus, corporate social responsibility contributes to the retention of talented and efficient employees.

In addition, the development of technology, especially social networks, has also contributed to the development of awareness of CSR practice and raising its importance. So, companies that use unethical business policies are immediately frowned upon by users and their reputation can be seriously damaged in a very short time. A positive aspect of the Internet is providing organizations with the opportunity to show how they implement corporate social responsibility in their activities and adhere to ethical business principles. Such actions can increase the disposition of the audience to the business and thereby increase sales and contribute to free positive advertising. Thus, Volkswagen must hire specialized personnel who will be engaged in the digital promotion of the company and the dissemination of information about the actions taken to protect society and the environment.

Another important step that a company should take is to revise its code of business ethics. It defines how employees should behave and forms an understanding of how to act in matters of values, the environment, diversity and building long-term relationships between employees and customers. Thus, Volkswagen should also include social and environmental goals in this document. Another recommendation may be to follow the occupational health and safety program at the workplace. This aspect is one of the main ones in the practice of corporate social responsibility.

Creating a clear charter on the protection and support of personnel will help reduce possible negative consequences and prevent accidents. CSR also includes certain obligations to protect the environment (Schwartz, 2017). Therefore, Volkswagen should develop or make changes to its strategy of action and decision-making based on these other aspects. An initiative may be introduced to attract a specialized analytics department that will generate reports on the environmental impact for a certain period of time. It is also important to ensure transparency of these data for both staff and customers and stakeholders.

Stakeholders and other parties involved in the process of functioning of the manufacturer have their own value. Thus, it is recommended to ensure their awareness of behavior in matters of environmental ethics. Furthermore, a correct pricing policy and interaction of participants can be formed and determined. Another way to raise corporate social responsibility is to involve the company in charity events. For example, company can invest in supporting environmental organizations that focus on protecting the environment and limiting harmful effects. The point is to show the public the true intentions and values of the company. This also implies compliance with all claims and the company’s initiative. If they are neglected, the audience has the power to worsen the company’s position and significantly reduce its competitiveness.

To sum up the conclusion, it is necessary to emphasize the main directions for the company, which it is obliged to take into account. Thus, it becomes important to establish the relationship between the company and society. An organization must have an accurate understanding and understanding of how its decisions and activities affect people. Moreover, the tactical aspect is considered to be a pure vision of expectations regarding this influence. This is due to the fact that following corporate social responsibility has a positive effect on the reputation of the company, the attitude of society towards it and the preservation of a competitive place.

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The next point is to establish relations between business and stakeholders. This implies how the company can influence potential and real individuals and organizations involved in the process of its functioning. Thus, its similar impact is the basis for the formation of the parties’ interest in cooperation. Last, but not least, is the establishment of a relationship between stakeholders and the public. The company needs to have an understanding of how these two aspects are related and what impact they can have directly on the organization. In addition, the value is the compliance with the expectations of society and other teachers of the process.

Therefore, in conclusion, the work looked at how Volkswagen’s improper practices affected the company. The main problem was not the consequence of corporate social responsibility, when the organization hid data about the harm that its cars cause to the environment and society as a whole. Moreover, aspects such as the change of behavior and attitudes of society after the incident were investigated and recommendations were given on how a car manufacturer can improve its position. Among them was the establishment of the code taking into account environmental and social ethics, the maintenance and improvement of the workplace to retain existing and attract new staff. It was also proposed to create a more explicit vision and mission of the company, taking into account environmental and social aspects. In the end, the value also has the right interaction with stakeholders, which will also lead to the improvement of the company’s reputation.

Reference List

Advantage, C. (2020) ‘Corporate Social Responsibility’, CSR and Socially Responsible Investing Strategies in Transitioning and Emerging Economies, 65.

Chaffee, E.C. (2017) ‘The origins of corporate social responsibility’, U. Cin. L. Rev., 85, p.353.

Chaudhary, R. (2017) ‘Corporate social responsibility and employee engagement: can CSR help in redressing the engagement gap?’, Social Responsibility Journal, 13(2), pp. 323-338.

EPA: Illegal Trump emissions tampering is running rampant (2020) Web.

Grayson, D. and Hodges, A. (2017) Corporate social opportunity!: Seven steps to make corporate social responsibility work for your business. London: Routledge.

Schwartz, M.S. (2017) Corporate social responsibility. London: Routledge.

VW expects ‘significant’ revenue increase in 2021. Web.

Zhang, M., Atwal, G. and Kaiser, M. (2021) ‘Corporate social irresponsibility and stakeholder ecosystems: The case of Volkswagen Dieselgate scandal’, Strategic Change, 30(1), pp.79-85.