Volkswagen Case

Volkswagen is a German car manufacturer, the second-largest car market globally, with numerous brands under its umbrella. It has channeled resources towards environmental goals, through objectives such as reducing greenhouse emissions and fuel consumption, enabling alternative fuel use and avoiding hazardous material use. The brand has produced various models of both electric and hybrid cars, in line with environmental sustainability efforts.

However, in September 2015, it was revealed that Volkswagen had been fraudulent with their green efforts relating to their diesel vehicles launched from 2009 to 2015. Having marketed these models as environmentally friendly with minimal emissions, it turned out that a defeat device had been installed on the vehicles’ hardware, allowing them to identify an emission tests taking place, and artificially suppressing emission levels below its true operating values. This allows them to circumvent emissions testing, deceiving their consumers on the environmental sustainability of their products who had relied on that information in their automobile purchasing decision.

There has been an immediate material impact on the firm’s performance, significantly from the fall in share price as the markets reacted to the news. Sales figures have fallen as car buyers distrust the brand after the occurrence of this PR disaster. The loss of credibility is also extended to the entire automobile industry as a whole. Volkswagen is also facing a 40 billion euro lawsuit from its investors.

There is a clear indication that Volkswagen has affected many stakeholders from their utter lack of CSR. There are however some car owners that are unwilling to under the repairs to undo the damage, as it would reduce their fuel efficiency, a clear indication that environmental concerns are not shared by everyone. It is clear that the financial performance of Volkswagen took a big hit from their fraudulent sustainability practices.