VW’s Deliberate Cheating on Emissions Highlights the Gap Between Sustainability Talk and Business Action
Yesterday the VW share price fell by more than 20% wiping $18 billion from its market value after the International Council on Clean Transportation undertook tests on a range of VW cars. The widely reported consequences, including an obligatory recall of almost 500,000 VW cars in the US, make this cynical program akin to the lack of safety measures put in place by BP which resulted in the Deepwater Horizon disaster. In fact, VW is more culpable in its decision-making given the firm deliberately invested in a digital “defeat device” to mask the tailpipe emissions from 11 million vehicles manufactured over a six year period. Dozens, if not hundreds, of employees at VW must have been involved in designing the software. The firm has set aside $7.3 billion to bring the vehicles into compliance.
In the firm’s 2014 sustainability report, the letter from the chairman of the board states that: “We aspire to shape the mobility of the future – making it responsible, environmentally compatible and beneficial for everyone. As we see it, advancing digitization is not a threat but a major opportunity that we aim to and indeed will leverage.” Unfortunately, VW has used digitization to produce less environmentally compatible vehicles. Earlier this month, RobecoSAM announced that VW is the world’s most sustainable automotive group and awarded the firm the top ranking in the Dow Jones Sustainability Index beating 32 other automotive companies. According to the press release: “For investors, the Dow Jones Sustainability Index is the most significant benchmark for measuring the development of the world’s most sustainable companies.” The gap between talk and action on sustainability at VW is unmeasurable.
The biggest consequence from the VW debacle is that the regulatory scales have been tilted away from the automotive sector and towards environmental pressure groups. All fleets can expect to have more robust testing and potentially massive fines for non-compliance. Regulators smell blood.
If it was needed, the VW scandal is a huge wake up call for the sustainability sector. If the world’s most sustainable automotive manufacturer is in fact deliberately faking emissions for potentially over a million cars how can anyone trust the analysis, rankings and ratings? Answer: they can’t. The hard reality for the sustainability community is that the majority of the discussions are still in the cosy realm of corporate communications and have very little connection with core business operations. That is not going to change any time soon. The DJSI has taken a massive hit in credibility.