The process of documenting, gathering, and summarizing the numerous transactions resulting from business operations throughout time is referred to as financial accounting. It is a specific kind of accounting (Aichner et al., 2021). These activities are summarized by preparing financial statements, such as the income statement, cash flow report, and income statement, which show the organization’s operating performance over a specified period. Financial accountants can work in the public and private sectors. There may be differences between the responsibilities of a general accountant or a financial accountant because the former works for themselves and themselves rather than just one company or organization.
One of the largest automakers on the planet is the V.W.V.W. group. It is renowned for producing premium passenger automobiles and was created by the German Labour Front in 1937. (Jung & Sharon, 2019). Over the years, the company has worked very hard to develop environmentally friendly cars, especially in the present, when nearly everyone is experiencing the impacts of global warming. The corporation started a program to create vehicles with emissions that did not contribute to the increase in greenhouse gas emissions in the atmosphere to comply with environmental protection standards.
All of Volkswagen’s vehicles had to undergo laboratory evaluations. The United States is one nation that constantly complies with its pollution control laws (Jacobs & Singhal, 2020). It was anticipated that Volkswagen would uphold the regulations there because the U.S.U.S. is a primary market and a well-known manufacturer with significant social, ethical, and commercial obligations. When the U.S.U.S. Environmental Protection Agency (E.P.A.) discovered in 2015 that the corporation violated the Clean Air Act, it significantly damaged its reputation (Jung & Sharon, 2019). To comply with American rules, Volkswagen built the vehicles it showcased particularly to undergo the emissions regulations; nevertheless, the vehicles it placed onto the market lack the same regulatory regime.
Volkswagen emissions scandal
Allegations that the automaker lied during American air quality testing. Led to Volkswagen’s moral predicament (Aichner et al., 2021). The company aimed to promote diesel vehicles nationwide (Jacobs & Singhal, 2020). Oddly, Volkswagen (V.W.V.W.) developed a marketing campaign that asserted that vehicles had low pollution levels since they were informed of American emission standards. Before selling the vehicles, the government of America would have to inspect them.
From 2008 to 2015, the firm offered cars for sale on the American market that did not conform to the country’s pollution regulations (Aichner et al., 2021). The automobiles utilized for the exhaust emissions had special software installed by V.W.V.W. that altered the emissions. The program was essential in persuading the regulators that automobile emissions of hazardous gases were not excessive. The government launched an investigation when several environmental researchers expressed concerns about the pollutants the cars emitted after they were put on the market. According to their investigation, the vehicles emit up to forty times greater than permitted. As a result, Volkswagen was eventually forced to answer a government information request from the United States and acknowledge installing test vehicles with unusual equipment that was not present in production models (Jung & Sharon, 2019). The E.P.A. found several car models to have broken the guidelines, including the Jetta, Golf, and Passat. In reaction to the allegations, Volkswagen acknowledged installing a defeat device on the test cars even though it was not used on the ones already on the road. Because of all this, other countries that were a significant market for V.W.V.W. automobiles started investigating them for potential regulatory violations.
As soon as the U.S.U.S. and world press became aware of this problem, Volkswagen reacted (Jacobs & Singhal, 2020). In response to the shocking disclosures, top management at the company acknowledged their deep sadness for their unethical behavior and for breaking the trust of the billions of individuals worldwide they had fought so hard to earn over the years. The business promised to fully cooperate with authorities and conduct an internal investigation to resolve the issue (Jung & Sharon, 2019). A third of the company’s stock price was wiped out as a result of a scandal that also led group C.E.O. Martin Winterkorn to quit. Heinz-Jakob Nuesser, who at the time was the company’s head of brand management, was suspended as part of Volkswagen’s management board’s additional response to the issue.
Causes of the Volkswagen Emissions Scandal and What Could Have Been Done To Prevent It
The government learned that Volkswagen’s turbocharged fuel injection (TDI) diesel engines had been purposefully designed so that their emission standards would only begin during laboratory emission standards, allowing the vehicles’ NO x production to meet U.S.U.S. rules and regulations during regulatory testing (Poier, 2020). To boost consumer confidence, Volkswagen might have created an internal team to evaluate vehicle emissions and partnered with other independent verification organizations. The corporation might consider working with a few groups, including the Landfill Methane Awareness Program, the Fair Labor Association, the Federal Trade Commission, and the World Business Council on Sustainable Development (W.C.S.B.D.) (L.M.O.P.). The World Council for Sustainable Business Development (W.C.S.B.D.) is a “CEO-led organization of innovative enterprises that inspires the international business community to develop a sustainable tomorrow for industry, society, and the environment.
The independent F.T.C. agency of the U.S.U.S. government is responsible for safeguarding consumers and putting an end to dishonest corporate practices (Ding et al., 2022). The L.M.O.P. is a voluntary assistance program that employs landfill gas as a renewable energy source to run businesses, power plants, homes, and automobiles to reduce methane emissions from landfills. Suppose V.W.V.W. had opted to cooperate with non-governmental organizations (N.G.O.s), which assess and rank companies based on their C.S.R. policies. In that case, it restored consumer confidence and won praise and prizes.
Recommendation
Volkswagen’s actions were utterly unworthy of praise, yet it responded to the controversy in a very moral way (Poier, 2020). In this situation, the best course of action for a prestigious worldwide organization is to extend its deepest sympathies to individuals hurt by their conduct and suspend and fire all the staff members involved. Nonetheless, there were several approaches the business could have taken to deal with the situation. Volkswagen should have held off on acknowledging that they cheated on the pollution testing in the first place. This action is being taken primarily to protect their reputation, generosity, and good name.
Although Volkswagen might have pretended not to know about the problem, they offered to promptly recall all the cars and perform the necessary fixes (Jacobs & Singhal, 2020). This might have helped the general public see them as neither egotistical nor careless regarding their customers’ well-being. This strategy would have undoubtedly saved the company a large portion of the money it spent on fines and consumer appreciation (Ding et al., 2022). The second rationale by V.W.V.W. is that the American authorities’ testing process was defective. They would have had strong proof to support their claim, given that all of their autos had the same problem (Jacobs & Singhal, 2020). Nevertheless, this response would have severely negative financial consequences because the test would have to be redone, and all the recalled cars would have to be re-engineered at the company’s expense.
For the time being, Volkswagen should put all its resources and efforts towards regaining the market’s trust (Jacobs & Singhal, 2020). V.W.V.W. could decide to rename, but it is unlikely. Furthermore, it offers the choice to register with impartial verification companies, which is more doable and worthwhile. Selling one of the company’s brands and putting up a bond is the most expensive choice. Although it is the least expensive solution and unquestionably a last choice, this plan of action would achieve the most in terms of regaining consumer confidence in the V.W.V.W. name.
Combining the second and third recommendations would be the best idea. Sales will gradually increase as people begin to trust the brand again (Aichner et al., 2021). Several customers are considering buying discounted shares even if they believe V.W.V.W. will make the required effort to resolve the problem. V.W.V.W. may reclaim its position in the global auto industry if it can convince consumers that it regrets deceiving them and is committed to more robust C.S.R. policies, even though it is doubtful that the share prices will return to the old levels any time soon.
Conclusion
Every company has an ethical obligation to use its products and services to further the common good. Volkswagen is a reputable international company that should be a market leader in developing moral behavior. Concerning the diesel emissions issue, it made a wrong decision that significantly damaged its brand and put it in an awkward moral situation. As soon as they reach their sales targets, they disregard customers’ needs, as is evident from the dispute. The issue has helped expose some gaps that need to be addressed for the industry to thrive. Despite the company’s repeated attempts to repair its reputation, industry participants have once again expressed their support for the German manufacturer. Maintaining integrity and consistently working to serve the common good is essential in business.
References
Aichner, T., Coletti, P., Jacob, F., & Wilken, R. (2021). Did the Volkswagen emissions scandal harm the “made in Germany” image? A cross-cultural, cross-products, cross-time study. Corporate Reputation Review, 24, 179-190.
Ding, J., Xu, M., Tse, Y. K., Lin, K. Y., & Zhang, M. (2022). Customer opinions mining through social media: insights from sustainability fraud crisis-Volkswagen emissions scandal. Enterprise Information Systems, 2130012.
Jacobs, B. W., & Singhal, V. R. (2020). Shareholder value effects of the Volkswagen emissions scandal on the automotive ecosystem. Production and Operations Management, 29(10), 2230–2251.
Jung, J. C., & Sharon, E. (2019). The Volkswagen emissions scandal and its aftermath. Global business and organizational excellence, 38(4), 6–15.
Poier, S. (2020). Clean and Green–The Volkswagen Emissions Scandal: Failure of Corporate Governance?. Problemy Ekorozwoju, 15(2), 33-39.
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