Monday, 09 November 2015 09:25

The Long And Winding Road

Volkswagen’s troubles are far from over, but could this all have been avoided?

Over a month has passed since the Volkswagen emission scandal hit headlines around the globe, but the full extent of the damage may not become apparent for a long time to come.

The International Council on Clean Transportation, in conjunction with West Virginia University, raised the alarm during an investigation into why US diesel cars seemed able to run at lower emissions rates than their European counterparts. Staff alerted industry regulators at the Environmental Protection Agency (EPA) and the California Air Resources Board after the Volkswagens they were testing produced emissions levels up to 35 times higher than the acceptable thresholds. After a year-long EPA investigation, Volkswagen admitted to using a defeat device to falsify emissions in order to pretend that their cars were cleaner than they were.

The automotive giant saw its share price fall nearly 30% in the two days of trading immediately after the news broke, wiping billions of dollars from its market capitalisation. It has since reported its first quarterly loss for at least 15 years. It has announced plans to recall some 11 million vehicles affected by the defeat device. It is facing civil penalties, criminal investigations and lawsuits from both customers and investors. It faces penalties from the EPA which could top $18 billion, and is anticipating class action lawsuits from angry customers who paid a premium for a car they believed to be more efficient and environmentally friendly.

The CEO resigned after his position became untenable, and several others at senior management level are either on leave or suspended. The entire automotive industry is under intense scrutiny, and emissions testing standards are likely to face considerable review and overhaul both in the US and around the globe.

It is still unclear who is responsible for this scandal. However, Volkswagen must have had some form of management approval that authorised the concept and use of the defeat devices.

Early detection of wrongdoing is crucial to minimise financial loss and reputational damage. With research continuing to show that a tip off from employees remains the most effective way for a business to be made aware of wrongdoing, Volkswagen would be well advised to identify why the alarm was eventually raised by an external tester rather than an internal whistle-blower.

Perhaps staff within Volkswagen did not feel confident to raise concerns to their senior management for fear of reprisal? Perhaps there were not effective whistleblowing arrangements in place that encouraged staff to come forward and report wrongdoing?

Around the globe employers are increasingly seeking the services of specialised external whistleblowing providers to provide a solution which aims to encourage employees to raise their concerns about wrongdoing externally and confidentially.

It may be a long and winding road ahead but without effective whistleblowing arrangements businesses around the globe will continue to be vulnerable against all types of wrongdoing.