As consumers are becoming increasingly environmentally conscious it is clear to businesses that their level of environmental sustainability can become a stepping stone to success or their downfall. There are many benefits of environmental sustainability for a business, it can improve the brand image, increase sales through tapping into a new segment in the market or perhaps even reduce costs for a business by reducing waste. Despite all these advantages in many cases the cost of being environmentally friendly can be quite high for potential advantages that may not even be obtained.
The Volkswagen greenwashing scandal
Greenwashing refers to brands who market themselves as environmentally sustainable to claim the benefits without actually doing so. In 2015 Volkswagen was accused by the Environmental Protection Agency (EPA) of tampering with the car’s emissions test. Volkswagen was unable to meet the requirements of the government emissions test without reducing the cars performance so as a result they had installed devices which could detect when they were being tested and performed in a manner which was within the federal limit at the cost of the car’s performance. Though, when driven in normal circumstances the normal amount of carbon emissions would be significantly higher to maintain performance.
Volkswagen’s greenwashing cheats the environment by claiming all the benefits that came with environmental sustainability without paying the cost. When driven in normal conditions the amount of carbon emissions from the cars are approximately 40 times the amount allowed in the US. You can read more about the scandal here.
Consequences of Volkswagen’s greenwashing scandal
This scandal had many ramifications for Volkswagen including
- the top executives being sent to federal jail,
- the stock price of Volkswagen plummeting 20% within one day of the scandal, and
- billion-dollar fines and product recalls.
In 2017 the US fined Volkswagen $4.3 billion dollars for rigging the government emissions tests. In December 2019 the Australian government had done the same and fined Volkswagen A$125 million and as the scandal continues it is expected that Volkswagen will be penalised globally. Not only that, Volkswagen is to recall all the relevant cars which have been tampered and this will also increase the cost to Volkswagen. There is also the problem of consumer trust and brand image as this scandal tarnishes the brand and will inevitably lead to decreased future sales. This case study highlights the difficulty in achieving environmental sustainability as the Volkswagen engineers were unable to create engines which could perform at a high standard with low emissions, resulting in unethical and illegal practices and greenwashing that ultimately ruined Volkswagen.