The Covid-19 Crisis as a Turning Point for Corporate Ethical Behavior? Corporations in General and the Case of Volkswagen


Essay, 2020

13 Pages, Grade: 1,3


Excerpt

Table of Contents

List of Abbreviations ... III

1 Introduction ... 1
1.1 Presentation of the topic in the context of Business Ethics ... 1
1.2 Procedure and objectives of the Scientific Essay ... 1

2 Main Concepts ... 2
2.1 License to Operate ... 2
2.2 Triple Bottom Line ... 2
2.3 Corporate Responsibility ... 3

3 Ethical and responsibility challenges and opportunities arising from the Covid-19 crisis in general ... 4

4 Volkswagen Group AG ... 5

5 Conclusion ... 7

List of Abbreviations

et al. et alii

VW Volkswagen

1 Introduction

1.1 Presentation of the topic in the context of Business Ethics

Regarding the module Business Ethics, everyday managers and executives of businesses across the world have to make business decisions that have ethical implications. In the context of this decisions, the strategy formulation process and the organisational value process including an holistical focus on, for instance, resource investment strategy, credibility, empathetic culture and competitive advantage with responsible profits play crucial roles. The system of Business Ethics is a field of philosophy and a system of moral and ethical beliefs, that guides the values, behaviors, and decisions of a business organization. It addresses the totality of all economic actors to establish a sustainable development, regarding the interests of the environment and the society and giving orientation to the people of the community and forming the basis for what is interpreted as moral economic action.

But in view of many scandals and irresponsible behaviors, economy and ethics are often presented as opposites in public – an oxymoron that cannot be combined. In times of boom, steady and appropriate economic growth is desired without considering of external costs, but what happens when an unforeseen recession occurs, and a pandemic stops public life? Solidarity and above all ethical action are required. Companies have to respond to challenges and opportunities. Is the corona crisis therefore a turning point for Corporate Responsibility? In terms of this, the Volkswagen Group is mentioned. It has been criticized for several years due to the emissions scandal. But during the corona crisis, the company develops a new ethical strategy. But is it even possible for companies to agree on ethical and economic goals and to establish a permanent ethical corporate strategy as a result of the pandemic?

1.2 Procedure and objectives of the Scientific Essay

For the key question, the Scientific Essay using three concepts of the module Business Ethics analyse and discuss the challenges and opportunities arising from the Covid-19 crisis in general and for VW. The concepts, which are initially defined and form the basis of the Scientific Essay, are: License to Operate, Triple Bottom Line, Corporate Responsibility. In the main part, the challenges and opportunities of the pandemic are presented based on the concepts (chapter 3). With reference to the title, it is particularly emphasized to what extent the Covid-19 crisis represents a turning point. Based on this chapter, the Volkswagen company is analysed. The contrast between the emission scandal and the new ethical orientation of VW is shown during the pandemic (chapter 4). Finally, the conclusion is drawn looking back at the entire Essay. During the presentation, only scientific books and internet sources for the timeliness are used.

2 Main Concepts

2.1 License to Operate

License to Operate refers to the social acceptance of companies, which is based on the intersubjective perception of society members.1 Consumers purchase products or take advantage of services, confirming and affirming the company´s actions and their continued existence.2

A missing License to Operate manifests itself in a loss of the entrepreneurial ability to cooperate among stakeholder groups, as a result of which the entrepreneurial added value is reduced. Accordingly, if there is a decline in production, the lack of trust on the part of society is often the reason. An important prerequisite is therefore the principle that society can trust that companies act in the interests of society.3

A central point for gaining this trust is the assumption of social responsibility. In this regard, the term Corporate Responsibility takes an important meaning. It becomes an investment in License to Operate and thus in the future viability of entrepreneurship.4 Is there a lack of consideration of the moral, such as that of Schlecker regarding poor employee management or Nestlé regarding infant nutrition, the company loses acceptance and thus the License to Operate.5

2.2 Triple Bottom Line

Environmental factors and sustainability are crucial factors in doing business. The strategy of a company is therefore not only to improve its own economic performance.6 Sustainability is a key component of corporate value creation and therefore in formulating “sustainable and ecological-friendly supply chains“7. For this, new approaches in business are required to create sustainable solutions with new processes and innovations at product and service level.8 The term sustainability aims to achieve a permanent balance between economic, ecological and social performance – Triple Bottom Line. According to John Elkington and his book `Canibals with Forks´ (1997), decisionmakers need to combine the three complementary pillars.9 The economic dimension includes a creation of wealth for all because of a sustainable production and consumption. A preservation and adequate management of natural resources defined the environmental dimension. The third dimension, the social dimension, is characterized by equity and involvement of all social groups.10 A fair consideration of interests and distribution of the benefits and costs as well as taking into account all dimensions are necessaire to a sustainable development.11

The term `People, Profit, Planet´ also refers to the Triple Bottom Line.12 It includes a distinction is made between physical and fixed capital (profit), which reflects the economic dimension, natural capital (planet), which captures the ecological dimension, and human capital (people), which encompasses the knowledge and ability of the employees.13

2.3 Corporate Responsibility

Corporate Responsibility is an important factor and serves as a fundamental strategy of the company.14 It describes a company´s level of responsibility with regard to the effects of doing business, an integrated process of sustainable, on stakeholder groups such as social, economy and environment.15 In addition, the principle is a corporate philosophy that places transparency, respect and ethical behavior in the foreground of doing business and defined the strategic orientation. Therefore, it can be interpreted as a general social responsibility of companies, which is determined by the offer of customer-relevant problem solutions and the needs of other stakeholders.16 Economic action is also in the interest of future generations and takes into account the ecological and economic dilemma.17 Furthermore, Corporate Responsibility can promote sustainable development increasing corporate value creation with new markets to be competitive and take responsibility with a new line of business.18 This stakeholder-orientated management approach has many positive effects like the improvement of customer and supplier relationships or the ensuring social acceptance.19 It emphasizes the promotion of shared interests (stakeholder value).20

Moreover, a high level of competitiveness or the success of a company is characterized by the customer´s assessment of the company and the company´s actions, but also the cost-benefit analysis of the product or service.21 In addition, external costs and the effects on the environment and society are also taken into account.22 Overall, the identification of weaknesses and strengths is of great importance to improve the company´s competitive advantage with an ethical corporate strategy.23

The term Corporate Responsibility also includes the subject areas of Corporate Social Responsibility, Corporate Citizenship and Corporate Governance.24

3 Ethical and responsibility challenges and opportunities arising from the Covid-19 crisis in general

There is no industry that is not affected by the Covid-19 pandemic. The international networking of the economy has brought prosperity and growth worldwide. But their dark side is now becoming clear to us. Networking in the economic system has created a dependency. This now demands solidarity and ethical action from everyone in order to meet challenges and opportunities appropriately.25

Many companies are currently facing liquidity constraints. As a result, the working mode changes fundamentally. Production is discontinued, home office and short-time work are widespread.26 However, this transition is associated with many worries, fears and consequences for the employees, such as social isolation, fear of health or job and even unemployment and loss of pension provision and for the company itself. Share prices are falling and many companies are illiquid. The federal government is looking for solutions.

The financial crisis in 2008 also revealed that it had to deal with internal process improvements, systematics and methods.27 Innovation focus in the company´s products and services, but also employee potential such as qualifications and motivation and the environment are at the foreground on the basis of an ethical behavior. The Covid-19 pandemic can be used as an opportunity to make the new start of economic more sustainable in order to be equally considerate of all stakeholder groups and not just pay attention to shareholders to generate profit.

The effects of global warming, the high consumption of resources and the dwindling biodiversity are consequences of an economy that is only for profit and ignores the dimensions of the social and the environment, such as climate change: the monsoon system in Asia or the Amazon rainforest are damaged with serious consequences for the availability of water and the nutrition of the local population.28 An ethical corporate strategy is needed to achieve a balance between in the Triple Bottom Line.

If the virus cannot be contained, health and economic systems around the world can collapse and unbalance the Triple Bottom Line even more. Decisionmakers see high incentives for change in a crisis. In times of uncertainty, a strong voice on the part of companies to reveal how future-oriented innovations in the direction of sustainability are to be tackled are needed.29 Companies have to develop social acceptance in this area by assuming Corporate Responsibility. In addition, stimulus packages and structural investments are intended to reactivate the economy after the pandemic so that employment is stabilized and climate protection and fairness are promoted at the same time.30 Corporate Responsibility thus becomes an investment in the License to Operate, the acceptance in the society, and in a further step stabilizes the Triple Bottom Line. But how is this implemented in a company?

4 Volkswagen Group AG

VW has been criticized for the emission scandal since September 2015. With the motivation of saving costs and generating more profits, VW used an illegal shutdown device in the engine control of diesel vehicles in order to circumvent the legally prescribed limit values for CO2-emissions.31 With this unethical act, VW ignored the balance of the Triple Bottom Line. On the one hand, VW has focused exclusively on maximizing profits, the dimension of the economy. On the other hand, the dimension of the environment is neglected and knowingly damaged, as more CO2-emissions have been released into the environment and cause external costs.32 Furthermore, VW deceived society by manipulating it and using its License to Operate. Consumers have trusted that the company has taken social responsibility. After the announcement of the manipulation, there was a decline in demand for diesel vehicles.33 The social acceptance, the License to Operate, has been lost due to the breach of trust. After a longterm view, however, there is an increase in demand and the society continues to support VW with its purchases without considering the external costs.34 In this way the society support VW´s unethical behavior.

In contrast, during the Covid-19 crisis, VW relied more on ethical Corporate Governance and brought Corporate Responsibility to the foreground. Firstly, VW positions itself by closing most of its company headquarters in Europe to protect its employees or by taking extensive measures to protect health. Nevertheless, many employees have to be sent on short-time work.35 At this point, however, it can also be noted, that VW receives short-time work benefits from the state and at the same time pays high dividends to shareholders, which contradicts ethical behavior. Amazon, on the other hand, plans to spend the profits related to Covid-19, for example, donations or increases in wages.36

According to the Chief Human Resources Officer from VW, solidarity is a priority. Therefore, a donation of over 200,000 protective masks was made as well as medical equipment such as gloves or clinical thermometers.37 In addition, VW would like to use a 3D printer for medical technology to manufacture parts for respirators. According to VW, it is of fundamental importance to position oneself in a crisis and to present values and convictions.38

Furthermore, the company calls for a new edition of the state scrappage bonus for the industry in the Covid-19 crisis. The switching to environmentally friendly technologies should be accelerated and the industry should be supported in structural change.39 VW has announced with this stimulus measure to stimulate the weakened economy after the pandemic and an economic recovery to combine effective climate protection.

Moreover, the manager from VW, Stefan Sommer, is for more investments in industry and consumer behavior in order to achieve an even higher incentive to protect the climate.40 This is where the strong voice from companies mentioned above can be cited. VW takes the Covid-19 crisis as an opportunity to reposition its values and accordingly to bring the three dimensions back into balance and also to stimulate society in terms of consumer behavior, also in the interest of future generation according to the concept Corporate Responsibility.

5 Conclusion

The Covid-19 crisis presents challenges to the economic and health system as well as to public life. Therefore, solidarity, responsibility and ethical action are required. In this regard, companies, like the example of VW, are of great importance because of their power to act in the economic, ecological and social dimension. Clear positioning is especially important in times of high uncertainty. Therefore, such a crisis can also be a turning point; sustainably influencing consumer awareness and establishing the economy itself through an ethically sustainable strategy, with the aim of bearing Corporate Responsibility and keeping the three dimensions in balance.

[...]


1 Cp. https://wirtschaftslexikon.gabler.de/, access on 17th April 2020.

2 Cp. Harrison, R., et al., Consumer, 2015, p. 215.

3 Cp. https://wirtschaftslexikon.gabler.de/, access on 17th April 2020.

4 Cp. https://wirtschaftslexikon.gabler.de/, access on 17th April 2020.

5 Cp. https://www.welt.de/, access on 17th April 2020.

6 Cp. Sarkis, J., Supply Chain, 2019, p. 431.

7 Qudrat-Ullah, H., Supply Chains, 2018, p. 95.

8 Cp. O´Riordan, L., Business Ethics, 2020, Lecture Script 2, p. 140.

9 Cp. O´Riordan, L., Business Ethics, 2020, Lecture Script 2, p. 139.

10 Cp. O´Riordan, L., Business Ethics, 2020, Lecture Script 2, p. 139.

11 Cp. Proops, J. L. R., et al., Economics, 2004, p. 139 f.

12 Cp. O´Riordan, L., Business Ethics, 2020, Lecture Script 2, p. 141.

13 Cp. https://csr-news.net/ , access on 17th April 2020.

14 Cp. O´Riordan, L., Business Ethics, 2020, Lecture Script 4, p. 265.

15 Cp. https://www.investopedia.com/, access on 17th April 2020.

16 Cp. O´Riordan, L., Business Ethics, 2020, Lecture Script 4, p. 266.

17 Cp. O´Riordan, L., Business Ethics, 2020, Lecture Script 4, p. 266.

18 Cp. O´Riordan, L., Business Ethics, 2020, Lecture Script 4, p. 266.

19 Cp. O´Riordan, L., Business Ethics, 2020, Lecture Script 4, p. 267.

20 Cp. Bottenberg, K. M., Collaboration, 2017, p. 93.

21 Cp. https://www.bloomberg.com/, access on 19th 2020.

22 Cp. O´Riordan, L., Business Ethics, 2020, Lecture Script 4, p. 271.

23 Cp. O´Riordan, L., Business Ethics, 2020, Lecture Script 4, p. 271.

24 Cp. https://www.bpb.de/, access on 19th April 2020.

25 Cp. https://absatzwirtschaft.de/, access on 19th April 2020.

26 Cp. https://sueddeutsch.de/, access on 19th April 2020.

27 Cp. https://www.welt.de/, access on 19th April 2020.

28 Cp . https://sueddeutsch.de/, access on 19th April 2020.

29 Cp. https://www.faz.net/, access on 19th April 2020.

30 Cp. https://absatzwirtschaft.de/, access on 19th April 2020.

31 Cp. https://www.theguardian.com/, access on 20th April 2020.

32 Cp. https://www.theguardian.com/, access on 20th April 2020.

33 Cp. https://www.manager-magazin.de/, access on 20th April 2020.

34 Cp. https://www.manager-magazin.de/, access on 20th April 2020.

35 Cp. https://www.tagesschau.de/, access on 20th April 2020.

36 Cp. https://www.focus.de/ , access on 20th 2020 .

37 Cp. https://sueddeutsch.de/, access on 20th April 2020.

38 Cp. https://www.tagesspiegel.de/, access on 20th April 2020.

39 Cp. https://manager-magazin.de/, access on 20th April 2020.

40 Cp. https://boerse.ard.de/, access on 20th April 2020.

Excerpt out of 13 pages

Details

Title
The Covid-19 Crisis as a Turning Point for Corporate Ethical Behavior? Corporations in General and the Case of Volkswagen
College
University of applied sciences, Düsseldorf
Course
Modul Business Ethics
Grade
1,3
Author
Year
2020
Pages
13
Catalog Number
V932328
ISBN (eBook)
9783346258632
ISBN (Book)
9783346258649
Language
English
Tags
Business Ethics, License to Operate, Triple Bottom Line, Corporate Responsibility, Volkswagen Group AG, Covid-19
Quote paper
Janine Kunas (Author), 2020, The Covid-19 Crisis as a Turning Point for Corporate Ethical Behavior? Corporations in General and the Case of Volkswagen, Munich, GRIN Verlag, https://www.grin.com/document/932328

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