VW Scandal Exposes What Has Gone Awry with 'CSR'

The emissions-rigging scandal that Volkswagen has driven into keeps getting worse. What was originally disclosed to be a “defeat device” installed in half a million diesel-powered cars could affect as many as 11 million of the German automaker’s vehicles. These revelations mark a stunning fall for VW, which earlier this year made good on its long-term goal to leap ahead of Toyota as the world’s largest automaker. Shares in the company’s stock have fallen 20 percent, its CEO is under fire and trust in its brand will be long tarnished.

As if we did not have enough of kicking a company while it's down, viewers of Sunday night’s Emmy Awards were treated to Audi commercials featuring Kermit the Frog singing “It Isn’t Easy Being Green,” while NFL football fans were treated to another line of the company's commercials touting “truth in engineering.”

But those indulging in Schadenfreude over VW’s woes need to take a step back and see the ramifications of their choice to cheat emissions standards in favor of vehicle performance. These events are a massive setback for the automotive industry at large, which for decades had long resisted any mandates, from seat belts to better fuel mileage, to implementing new environmental or safety measures. The past several years, however, have seen a shift, as automakers improved their cars’ environmental performance while investing in next-generation vehicles — even at a time of low petroleum prices. VW wanted to capitalize on increased interest in clean vehicles without actually meeting the standards and they got caught.

For Germany, VW’s shenanigans are a kick in the gut for a progressive, proud and accomplished nation that has long been carrying Europe — economically, politically and morally (as in the refugee crisis) -- on its shoulders while its neighbors bicker and absolve themselves of any responsibility. As CNN deftly points out, VW and its portfolio of brands, are a critical cog in Germany’s economic engine. If consumers worldwide start spurning German cars, the sputtering of the world’s fourth largest economy will come at a terrible time as it copes with an additional 1 million people who have crossed its borders.

What looks to be the decision of a few rogue executives will long tarnish the reputation of a company that has not only enjoyed a solid record of engineering and customer satisfaction.

But Volkswagen’s self-immolation also reflects on many of us who have been deeply involved within the corporate social responsibility (CSR) movement. Last week, Volkswagen led the Dow Jones Sustainability Index automotive sector. This week, it was called to the carpet for environmental sins only to admit several days later it deceived millions of customers in the pursuit of profit. We obviously need to take a step back and look more deeply at what we're measuring.

When a company pitching a product tied to depleting municipal water sources as well as obesity, like Cola-Cola Enterprises, is listed on the DJIA, we should scratch our heads. When a company such as Unilever, which boasts about 2 billion people a day using its products to “look good, feel good and get more out of life,” also makes this prestigious sustainability listing, the logic should give us pause and make us scratch our heads. Companies that ordinarily would fall under the radar, such as Thai Oil — which is also on the DJSI despite a questionable record on human rights — reveal a global business culture that awards and rewards itself on “sustainability” and “responsibility” but frequently does not match accolades with accomplishments.

Unfortunately, while the ideals behind corporate social responsibility certainly have merit, the overall execution has been deeply flawed. The trend in CSR has been to focus more on goals and aspirations, and less on concrete and tangible results. Companies often highlight what they say they will do in 2020 or 2025, and focus less on what happened last year or in 2015. Professionals in this space travel across the U.S., even the world, to present their findings at conferences and congratulate themselves on how well they are doing. And all of this is backed up by relentless public relations professionals, who issue streams of emails with platitudes such as, “our inclusion in the DJSI is due to our success integrating sustainability into our core decision-making, and delivering sound long-term plans for sustainable development.”

Sadly, they get away with it, because no one is going to follow up five years from now and ask about whether they achieved those benchmarks touted earlier in the decade. Why would it be any different? Questions at these events are less about “What have you and your company done?” and more about “Are you going to X conference in X city?” The result is an industry that is built upon self-congratulation.

When companies decide to place emphasis more on how to style a responsible company, and less on substance, we in turn create a culture in which a few people at a corporation feel as if they can break the rules in the belief that no one will notice.

This saga at VW should, therefore, send a strong message to companies that -- no matter how good their storytelling is, no matter how lofty their goals are, no matter how many villages were helped or carbon emissions diverted -- most people want to know these organizations are having a real, positive impact. Once egregious behavior, such as the installation of defeat devices, is publicly revealed, that trust is gone, and it will take years for reputation and stock prices to recover.

It is time for companies to focus less on rankings, less on platitudes and less on generating positive press. Honesty, transparency and real impact will not only keep the public’s trust, but also, pragmatically, keep those customers and build a stronger, more reputable and sustainable company in the long run.

Image credit: Bull-doser via Wikimedia Commons

 

Published earlier today on Triple Pundit.