Sample Case Study Paper on Volkswagen Scandal: Business Ethics

Business scandals have been in existence for as long as the process of business
transactions has been in existence. In the past, the world has become witness to such major
scandals as the Enron scandal, the WorldCom scandal, the Bhopal and Chernobyl disasters to
mentions but a few of the scandals that raised ethical questions in the manner in which
business management teams make their decisions in a bid to maximize profits by disregarding
various environmental and societal factors. Such scandals have also proved that unethical
decisions adversely affect the companies in terms of massive loss of trust and confidence in
the organization, as well as the loss of integrity. Presently, the business world has experienced
another scandal, the Volkswagen scandal that further proves that although organizations have
the obligations to seek strategies to maximize their value and profits, the subject of business
ethics is still critical thus should be addressed in the value and profit maximization process.
The Volkswagen scandal came to light as a result of a group of researchers from West
Virginia University winning a grant worth fifty thousand dollars from the international
council on clean transportation. This grant was to enable the research team to carry out
performance and emissions test on a variety of light duty clean diesel cars under every day or
realistic conditions, conditions that varied from those in the lab environment, among which
were the vehicles from the Volkswagen brand. In their tests, the researchers thus fitted the
vehicles with a portable emissions measurement system that was to collects a constant flow of
information and data over a variety of road types in the United States of America 1 .
However, on carrying out the tests, the research team’s results varied significantly from
those results presented by the Volkswagen Company. They found major discrepancies in that

1 Quirin Schiermeier, "The Science Behind the Volkswagen Emissions Scandal" Nature:
International Weekly Journal of Science.

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their results showed that various Volkswagen vehicles emitted thirty-five to forty percent
more emissions than those dictated by the United States government. On discovering this, the
research team suspected cheating by the company however they lacked the data to prove it. In
presenting their results to the environmental protections agency, an investigation was
launched into the Volkswagen emission tests 2 . Further tests by the California air resources
board confirmed the discrepancies whereby Volkswagen was confronted; however, they
insisted that the discrepancies were as a result of a technical fault as opposed to intentional
cheating. Ultimately Volkswagen admitted to their deception when the environmental
protection agency threatened not to approve further sales in the United States market.
Clearly, one of the major negative effects of the Volkswagen scandal is the immense
negative effect to the environment. Were it not for a non-governmental organization carrying
out the tests, the Volkswagen Company would not have rectified this “flaw” and would have
carried on producing and selling their cars that were emitting harmful gasses above what was
permitted by the government. This action, or lack of action, is by itself unethical as it is the
responsibility of any organization to make sure that their products are safe and
environmentally friendly, a responsibility that Volkswagen neglected. By releasing vast
amounts of nitrogen oxides into the atmospheres and the environment, it led to the risk of the
formation of smog, acidic rain and the formation of ground level ozone which has been
associated with a myriad of health problems 3 . Furthermore, these nitrogen oxide gasses have
also been known to cause damage to plants and vegetation. Thus, by intentionally employing
unethical practices, the environmental damage that will result from the Volkswagen scandal is
estimated to have far longer lasting and immense adverse effects on the ecosystem.

2 Bourree Lam, "The Academic Paper That Broke the Volkswagen Scandal." The Atlantic.
3 Sarah Zhang, "New Study Links VW’s Emissions Cheating to 60 Early Deaths."

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Moreover, in analyzing how Volkswagen violated business ethics, the deontological
ethical view can be applied to better understand the case. Deontology in the field of ethics
focuses on the action itself. Pertaining to Volkswagen, the action was equipping their cars
with a cheat device. In order to pass various environmental tests so as to sell in specific
markets such the United States, Volkswagen was fitting their cars with a cheat device. More
precise, the cheat device was not hardware, rather it was software. Diesel cars are supposed to
have software installed that is intended to clean the diesel exhaust. This software is intended
to work throughout, however, in the case of Volkswagen; the software was only operational
when the car was under test conditions. In normal conditions, the software would
automatically shut off which resulted in the release of more emissions.
Thus, according to the ethical considerations of deontology, an individual, or in this
case, an organization acts ethically only if they follow a categorical imperative. In the case of
Volkswagen, the company, in making their choices, should have followed and acted
according to the company’s values and objectives, that is, primarily maximizing value. Thus,
according to the categorical imperative, the company should strive to produce and offer
products that are environmentally sound and safe for their customers 4 . However, when taking
into account the actions by Volkswagen, it is clear that their actions were unethical. In regards
to the vehicles, the adoption of properly working exhaust emission software would not have
any negative impact on the design of the vehicle or its safeness, therefore, had no ethical
reason to forego installing it. However, intentionally adding a “cheat device” had significant
negative effects to the environment which goes against the ethical view of providing safe and
environmentally friendly products. Hence it is clear that Volkswagen intentionally violated

4 Martijn Hermans, and Pedro da Cruz Caria, "‘The Volkswagen’ case; morally permissible

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environmental ethics by approving the installation of faulty software knowing fully that such
an action would lead to the significant pollution of the environment.
Furthermore, it is clear that Volkswagen violated environmental ethics by going against
the environmental rules and regulations set by the government meant to protect and preserve
the environment. According to Bowie as stated by Hoffman, the social responsibility of any
organization is to produce goods and services with the primary objective of making and
maximizing profit. However, maximizing profit for the benefit of the shareholders should be
accomplished within the rules of the market. Such rules and regulations are set by the
government and include among others rules that seek to protect the environment.
Additionally, Bowie goes to note that a business enterprise is not obligated to more than is
required by the rules set by the government 5 .However, in the contexts of the Volkswagen
scandal, the implementation of the cheat software in their diesel cars was not in fact within the
environmental rules set by the government. The Volkswagen management made the unethical
decision to cheat the government as well as their consumers on the environmental friendliness
of their vehicles.
Furthermore, although their actions did for a short time maximize profits for the
shareholders, once the scandal became public knowledge, the company’s stock declined by
about thirty six percent as well as a significant reduction of the company’s profits 6 . Hoffman
further explains on this ethical view by stating that it is the ethical responsibility of any
organization to be an active participant in the formulation of solutions dealing with social and
environmental dilemmas 7 . In the present society, one of the major concerns is climate change

5 Michael W. Hoffman, "Business and environmental ethics." Business Ethics Quarterly (1991),
6 Volkswagen. 2017. Volkswagen. Accessed April 25, 2017.

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which has been attributed to air pollution caused by such human activities as the burning of
fossil fuels. Thus, for a company to knowingly install faulty software in their products is
morally and ethically wrong. Companies, therefore, must develop an environmental
conscience and not isolate themselves from the solution seeking process.
In evaluating the violation of the ethics, including the environmental ethics that
Volkswagen violated as a result of their cheat software, one can base such analysis on the
theory of utilitarianism as proposed by Mill. Utilitarianism in this regard is about what an
activity fulfills and whether the consequences of such an activity are ultimately aimed at
fulfilling the greater good. Utilitarianism is about amplifying joy, whereby one ought to
dependably go for the choice that expands delight for the most people as possible under the
circumstances. As per utilitarianism everything in life and each decision can be reduced to a
score of joy or satisfaction, regardless of the possibility that there are lives in question.
Utilitarianism in the context of the Volkswagen scandal includes the ethical violations
pertaining to an assortment of stakeholders. These stakeholders include Volkswagen and its
workers which include the company’s Chief Executive Officer, the clients, the environmental
testing agency and also the indirect stakeholders which include the numerous people living in
the areas where the Volkswagen diesel vehicles were sold and were directly or indirectly
affected by the unethical actions of Volkswagen 8 .
As per the theory of utilitarianism Volkswagen’s activities were neither ethical nor
acceptable, given that their aim was not to maximize the greater good of any or all of the
stakeholder involved. Especially taking into account that in the end, after the discrepancies
were discovered and the unscrupulous activities of the company were made public, all of the

7 Michael W. Hoffman, "Business and environmental ethics." 173
8 Martijn Hermans, and Pedro da Cruz Caria, "‘The Volkswagen’ case; morally permissible?."

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stakeholders were adversely affected more so the environment. Since acceptability and
goodness are recognized by value, it merits investigating the value for the Volkswagen case
too. Volkswagen was culpable for their activities since they realized that what they were
doing was not ethical, as they had created a software that had the ability to cheat and bypass
the system. This may have, at the early stages, resulted in the creation of utility, yet this action
did not strive towards the greater good for all the stakeholders involved 9 .
For this situation, punishment would be ethically required for Volkswagen since as
indicated by act utilitarianism punishment is acceptable when it would prompt more
prominent utility. The punishment, in this case, would prevent or at least act as a warning to
the car company to not engage in such unscrupulous activities in the future. The same goes for
other car producers. In actuality, Volkswagen is at present experiencing punishment, by
means of legal claims, a massive drop in profits and stock prices. Furthermore, as a result of
their ethical violations, Volkswagen lost a major segment of their market share in the industry
for diesel cars. Ultimately, a company’s decisions and action should be aimed at maximizing
the greater good for all stakeholders while still remaining ethical 10 . In the case of Volkswagen
however, the company did not aim for the greater good, rather it opted for unethical behaviors
when it opted to cheat their way into bypassing environmental regulations in order to make
more sales.
It is also important to note that in achieving their business goals and objectives, most
organizations knowingly or unknowingly adopt an individualistic point of view in that the
enterprise, as a foundation of its ethical decision making process, is solely concerned with the
maximization of profits completely disregarding all other factors. In the context of

9 Martijn Hermans, and Pedro da Cruz Caria, "‘The Volkswagen’ case; morally permissible?."
10 Ibid

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Volkswagen, it is clear that their motivation in making the unethical decision of installing a
“cheat device” was motivated by the goal of making as much profit as possible even by going
to the extent of breaking the law. The company, in taking an individualistic approach also
violated its corporate social responsibility in that it lied to its customers as well as the
government about the quality of their product and their diesel engines. All these actions were
made with the sole purpose of increasing sales in a stringent market so as to ultimately
increase their profits. The company was so focused on the bottom line that for a company that
for years prior to the scandal had a heavy presence of diesel fuel vehicles and was widely
known for its green initiatives and production strategies, abandoned its other equally critical
objectives for profit maximization through deceitful actions. It thus evident that the company
was not concerned about the damage that their vehicles would have on the environment as
well as the health of the population 11 .
On the other hand, there are many that believe that consumers have the greater
responsibility towards the protection of the environment. This as explained by Hoffman is due
to the fact that if the consumers are willing and are readily purchasing products that are
harmful to the environment, then the corporations only have to comply with the
environmental laws thus do not have any ethical obligation more than expected in the
protection of the environment 12 .This notion is reinforced by Bowie in his argument that
organizations should not involve themselves in solving societal and environmental issues if
such interventions lead to the negative impact on the organization’s profit maximization
objective 13 . However, these arguments fail to take into account the fact that as consumers, we

11 Barrett S.R.H., Speth R.L., Eastham S.D., Dedoussi I.C., Ashok A., Malina R., Keith D.W.,
"Impact of the Volkswagen emissions control defeat device on US public health"
12 Michael W. Hoffman, "Business and environmental ethics." 173

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are individualistic, that is, a consumer, in making purchase decisions, acts for his or her own
good, without any concern for the greater population. Also, this argument assumes that the
consumer has comprehensive knowledge of the product they are purchasing. However, this is
not true for the Volkswagen scandal. For starters, the Volkswagen consumers did not have
any knowledge of the faulty software in their vehicles. Although one cannot make the
assumption that with this knowledge they would not have bought the vehicles in question, a
safe assumption can be made that the sale vehicles would have been halted much earlier and
the consequences would have been less severe.
However, it cannot be said that consumers do not have any responsibility to be ethical
in their consumption behavior. They bear a significant responsibility for protecting and
preserving the environment, a responsibility that they have not exercised to the full extent.
That being said, decisions that have a significant environmental impact should not be solely
left to the consumer, and such decisions also should not be based on what the customers know
or are willing to tolerate and accept. Because by doing so, the society runs the risk of
organizations, such as Volkswagen, incorporating unscrupulous strategies that are ethically
wrong and are harmful to the environment simply for the sole purpose of creating and
maximizing profits and value for the shareholders.
Furthermore, consumers are not responsible for the development of environmentally
friendly products. As stated earlier, this is the function of the organization. Therefore, it is the
ethical responsibility of the company to educate their consumers on environmentally
responsible behavior while at the same time practicing such behavior in their own dealings, an
ethical responsibility that Volkswagen failed at significantly 14 .The management at

13 Ibid 171

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Volkswagen did not have, in this context, a moral vision, courage, and commitment. This lack
of morals and ethics is evident in the fact that even after the results proving discrepancies
were presented to them, the management still denied knowledge of this default and it was
only after being threatened by the environmental protection agency that they finally admitted
to their mistakes.
The Volkswagen scandal, however, is not the only case of harmful emissions going
beyond the permitted levels. Various studies have presented that several diesel-powered cars
emit more nitrogen oxide in normal conditions as compared to those emitted in laboratory
tests. Such revelations just go to show that the problem may not entirely be blamed on the
unethical business practices of companies, but rather shortcoming on the reliability and
validity procedures utilized to approve cars as worthy. Furthermore, many in the industry are
of the idea that the cheat strategies are not unique to Volkswagen rather other companies may
also be employing technology 15 .In light of this car manufacturers, especially those in the
diesel-powered vehicles, should thus take up the responsibility of scrutinizing their
productions strategies in order to make sure their cars are compliant as the diesel-powered car
has been attributed as a viable option towards mitigating the effects global warming as they
leave a smaller carbon footprint as compared to their petrol-powered counterparts.
In conclusion, The Volkswagen case shows the failures of a compliance attitude that is
present in a majority of businesses today. It demonstrates that ethics are ordinarily considered
as practices that are only practiced within the context of certain external rules that the
government among other regulatory bodies enforces. Organizations like the Environmental
Protection Agency authorize rules and regulations and businesses carry on with the activities

14 Michael W. Hoffman, "Business and environmental ethics” 174
15 Quirin Schiermeier, "The Science Behind the Volkswagen Emissions Scandal"

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any manner they deem fit as long as they do not go against the laid-out industry standards.
This way of thinking has over the years been led to the notion that as long as a business is not
caught violating the set out environmental rules and regulations, there is no harm even though
there is actual harm to the environment and the society. Such thinking has thus led to such
actions as those observed in the Volkswagen scandal. Obviously, there is no single answer for
such a profound systemic issue. To keep something like this from happening again would
require an upgrade of the administrative structure, business morals and ethics, corporate
culture, and furthermore the education of engineers.
Laws and the enforcement of such laws should be fixed so that individuals in the
multinational companies have a reason to deter them from such unscrupulous business
activities. Corporate and Business ethics projects could then more perceptibly put forth the
potential consequences of the ethical violations. Presently, the penalties that such companies
as Volkswagen faces are only limited to fines and not criminal charges of imprisonment for
the parties responsible. Taking into account the significant adverse environmental and health
effects that the Volkswagen scandal had, fines are not an enough incentive to prevent future
companies from practicing such unethical strategies. Studies have shown that the Volkswagen
scandal had cause death and contributed to the further degradation of the ozone layer 16 . Such
effects cannot be reversed or amended by fining a multinational company that can easily pay
such fines and carry on with its business operations.
The education system also has the responsibility to perform an exemplary task in
teaching ethics in engineering courses. It should be noted that the subject of ethics has only
been introduced in engineering courses in the last few decades. The requirement for

16 Barrett S.R.H., Speth R.L., Eastham S.D., Dedoussi I.C., Ashok A., Malina R., Keith D.W.,
"Impact of the Volkswagen emissions control defeat device on US public health"

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engineering students in light of this is the graduates are only required to have a basic
understanding the professional and ethical responsibility. However, the majority of
engineering courses and institutions do not have ethics as a core requirement; rather ethics
courses are typically selective options. This lack of emphasis on the importance of ethics
course can also be attributed to the compliance mindset whereby the ethics course is just a
course that most engineering students take in order to reach the degree requirements thus the
value of such a course is extremely limited. In seeking to rectify and prevent cases such as the
Volkswagen scandal, it is thus imperative that the education system moves away from the
compliance mindset and properly integrate ethics in the curriculums. This strategy will move
away from the present situations whereby consultants are occasionally brought in to teach
ethics in engineering as the engineering professors are not encouraged nor are they expected
to incorporate ethics into their curriculum.
Finally, as stated earlier business enterprises, more so multinational corporations, have
the responsibility to be active participants in the formulation of solutions pertaining to
environmental problems. This, as stated by Hoffman, is because large organizations have the
special knowledge resources and expertise that are invaluable in dealing with a variety of
environmental issues 17 . The present society needs ethical cooperation and vision among all its
members so as to solve its most urgent issues, especially those pertaining to the protections
and preservation of the environment. As such, business enterprises have to work in
conjunction with the government to come up with better ethical and effective strategies that
aimed at the preservation of the environment as opposed to the current situations whereby

17 Michael W. Hoffman, "Business and environmental ethics."  173

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corporations are happy with doing the bare minimum in the context of environmental
protection and preservation.

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Hermans, Martijn, and Pedro da Cruz Caria. "‘The Volkswagen’ case; morally permissible?."
Hoffman, W. Michael. "Business and environmental ethics." Business Ethics
Quarterly (1991): 169-184.
Lam, Bourree. "The Academic Paper That Broke the Volkswagen Scandal." The Atlantic.
September 25, 2015. Accessed April 10, 2017.
S.R.H. Barrett, R.L. Speth, S.D. Eastham, I.C. Dedoussi, A. Ashok, R. Malina, D.W. Keith.
"Impact of the Volkswagen emissions control defeat device on US public health"
Environmental Research Letters, 10 (2015), p. 114005.
Schiermeier, Quirin. "The Science Behind The Volkswagen Emissions Scandal" Nature:
International Weekly Journal Of Science. Published
24/10/15. s/the-science-behind-the-volkswagen-emissions-
Volkswagen. 2017. Volkswagen. Accessed April 25, 2017.
Zhang, Sarah. "New Study Links VW’s Emissions Cheating to 60 Early Deaths." Wired.
October 30, 2015. Accessed April 10, 2017.
links -vws-emissions-cheating-59-deaths/.