Corporate and social responsibility. The case of Volkswagen

Elaboration, 2016

18 Pages, Grade: 89.888


Table of Contents

1 Introduction:

2 Volkswagen, CSR and Ethical Dilemma:

3 Corporate Social Responsibility Theory by CarrollS:

4 Decision Making and Managers’ Morality:

5 Conclusion:

Reference list:

Executive Summary

In the recent decades, managers and organisations are changing their view in managing the organisations. Ethics and the ethical value in making a decision have changed the perspective of organising a business. The theorists have described that revenue generation and profit making are not only the sole ideas in running a business. Satisfying all stakeholders and contributing to the societal development makes the organisation sustainable for long term. On this change, the organisations have formed new department by the name department of corporate social responsibility (CSR). Moreover, governments are insisting companies to follow CSR and providing with incentives. However, ethical dilemmas are coming into light. This paper will discuss some theories of CSR and relates with recent Volkswagen ethical dilemma.

1 Introduction:

Ethics are the norms that play a vital role in building healthy relations and constructive society. Ethics can be defined as a set of norms in the society that distinguish a decision whether it is right or wrong (Macklin, 2007). In the context of ethics, corporate companies have to follow some ethical norms in their decision making to have a healthy working environment. Generally, the outputs of these ethical norms in terms of HR department are impartiality in judgment, mutual respect, etc, (Macklin, 2007). Not only the companies should maintain ethical values at internal organisational environment but companies should also feel some responsibility as they use resources from society and environment to make profits (Visser, 2006). In this context, corporate social responsibility (CSR) was framed and many theories and abundant research has been done, stating the uses of a corporate social responsibility. CSR can be defined as a structure that keeps a company away from making illegal decisions, and developing ethical and philanthropic ideology and business at economic profits (Visser, 2006). In the recent decades, most of the companies are following CSR but there are some issues and dilemmas that are noted because lack of organisational focus on CSR (Robinson, Davidsson, van der Mescht & Court, 2006). Ethical dilemma is a situation either where morals are ignored to achieve profits, the profits are individual or organisational (Robinson, Davidsson, van der Mescht & Court, 2006). This essay will discuss two theories of CSR evaluating with an ethical dilemma of Volkswagen (VW) and CSR activities of VW and provides some suggestions in leadership and decision making processes to avoid such Ethical issues.

2 Volkswagen, CSR and Ethical Dilemma:

Volkswagen (VW) is a German automobile manufacturer operating in multi continents and one amongst the leading car manufacturers. From the vision statement of VW it is found that, VW wanted to be the most attractive employers by 2018 (Volkswagen, 2016). In addition, Volkswagen believes that healthy and skilful team can make an efficient team (Volkswagen, 2016). By these findings, it can be predicted that the company is bound to maintain a healthy working environment, which is an evidence of following corporate social responsibility (Jamali & Mirshak, 2006). Apart from the internal ethical environment VW is actively participating in the social support activities (one of the components in CSR activities) such as education and training centre in India and other countries, awareness programmes on fuel consumption in Australia , conservation of threatened species in China, encouragement to technology innovations at graduate levels and other public awareness programmes (Volkswagen, 2012). Though VW is playing an active role in CSR, in the year 2015 an ethical dilemma has been recorded.

In the world of manufacturing industries, companies and manufacturers have to maintain certain standards in their products in the market (Hotten, 2015). Despite of these standards, VW has violated the permitted carbon emission level of their diesel variant vehicles, which was identified by a small research team at University of Virginia (ABC, 2015). Latter the issue was reported to Environmental Protection Agency (EPA). EPA, in its investigation has discovered a defeat device that cheats the agency in from recognition of excess pollution at checking stage before the car is certified to release in the market (Spence, 2015). To describe in depth, VW has used a device in the vehicle’s exhaust system that neutralise the carbon dioxide elements, but to make the device to be effective more fuel has to be consumed by the vehicle (Spence, 2015). However, VW cannot afford a higher fuel consumption car in its products, which is a potential threat to its market (Hotten, 2015). The neutralising device is designed to have a flexibility in switching it on and off as a result, fuel consumption can be altered (Hotten, 2015). Moreover, a software feature is provided in the vehicle interface that actually reports carbon emissions by the vehicle (Hotten, 2015). In the real time usage the readings recorded by the software does not match with actual emissions (Spence, 2015). As the carbon element-neutralizing device is switched off in the real time usage for lower fuel consumption, the carbon dioxide elements are released into atmosphere which is much more higher than the standard emission values (Spence, 2015). By the software features and defeat device, VW has cheated the EPA from discovering the real time emission values. After the issue being exploited, EPA has found that the carbon emissions are 40% higher than the legal limit of carbon emission (Colvin, 2015). As VW claim their cars to be with low emission by cheating the EPA, there is an ethical issue, which can damage the company’s prestige in the global society. In this critical situation, VW has to act carefully on the issue. On the issue, the company’s chief executive officer has resigned taking responsibility of the issue (Colvin, 2015). The executive committee of VW has appointed new leader and has called back for rectification for all the claimed vehicles (Colvin, 2015). By this response, it can be assumed that VW is trying to resolve the problem and retain their company’s value.

Few more cases that are similar to VW issue are being recorded, but to evaluate such issues, to understand the role of corporate social responsibility and to map company’s activities to CSR functions some theories are required. From the research, it is discovered that, of the theories developed and research, Carroll has explained the value of CSR and developed a CSR pyramid. The pyramid illustrates the important components that are to be followed by a company at different levels of the company’s management.

3 Corporate Social Responsibility Theory by CarrollS:

Corporate social responsibility has come into existence by the notion of enterprises has to take some responsibility in the development of the society rather, just profit making (Carroll & Shabana, 2010). There are some arguments against CSR in the early years of its development, that responsibility of an enterprise is to make profits but it is proved that following CSR make long term benefits (Carroll, 1999). CSR is defined as a management practice that helps the organisations to meet societal expectations such as legal, ethical, commercial norms (Jamali & Mirshak, 2006). CSR means working for social development with the organisation’s employees and fellow communities (Jamali & Mirshak, 2006). Carroll has differentiated the organisational responsibilities in to four segments; they are economic, legal, ethical and discretionary or philanthropy (Carroll, 1999). Furthermore, for an effective implementation of CSR, organisations should be aware of ongoing issues that require the organisations responsibility and responsiveness to the issues (Carroll & Shabana, 2010). The functions of four responsibilities are discussed below by mapping with CSR activities of Volkswagen (VW):

Economic responsibility: The main aim of economic responsibility is to make profits for the company with the activities that helps to improve the internal environment and value of the organisation (Carroll & Shabana, 2010). The activities such as providing some returns to stakeholders, job creations, healthy treatment of employees, generous salaries, promoting technology innovations, educational contributions etc, (Visser, 2006). By following these activities company increase its income and simultaneously helping the fellow community to develop (Visser, 2006). VW is significantly contributing in this area. From the vision strategy of VW, it is identified that, VW is bound to become an attractive employer by providing various benefits to the employees (Volkswagen, 2016). Furthermore, VW is conducting various technology innovation programmes in Russia, other European countries and some of the countries in the rest (Volkswagen, 2012). VW, with starting a new plant in Pune, India, also started a training institution that provides required technical work force to the plant (Volkswagen, 2012). By this there is job creation in India and solves the human resource problems simultaneously training the potential graduates in local communities (Volkswagen, 2012). Many more such programmes are being conducted by VW that creates some profits to the organisation in direct and indirect ways.


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Corporate and social responsibility. The case of Volkswagen
Charles Sturt University
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Viswa Krishna Vyas Tippabhotla (Author), 2016, Corporate and social responsibility. The case of Volkswagen, Munich, GRIN Verlag,


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