Accountability Mechanisms in Volkswagen and Nike

“An ever-evolving set of responsibilities (and accountabilities) for the functioning and welfare of individuals, society and the environment is entrusted to public sector organizations and private business enterprises.”

By using both negative and positive examples, we can discuss the above statement.

The term “accountability” is “the fact or condition of being accountable; responsibility” (Oxford Dictionary (Oxford Dictionary, 2016). It is an integral part of every business, large as well as small. The ability that one person can use to demand the accounts of an alternative party is via different accountability mechanisms. This essay will look at the ways in which a few of these accountability mechanisms worked or failed in the instances of two big corporations: Volkswagen as well as Nike.

The protection of the environment falls under the control of companies. An excellent example of how the trust was violated can be seen in the instance of Volkswagen (“VW”) pollution scandal. In this instance, the legal accountability system was a disaster. Legal accountability refers to the obligations businesses must meet to comply with the law. These accountability obligations, unlike others e.g. market accountability are mandatory. This is the case with the VW emissions scandal that broke out in the late 18 of September 2015 (Kollewe 2015). The company was instructed to recall 482,000 vehicles across the US following the scandal’s being revealed. Because of the deliberate and illegal installation of a “defeat device’, VW could cheat emissions tests on various models and was then allowed to sell the cars (Hotten 2015). The “defeat device” made vehicles to be able to pass normal conditions for emissions testing. It was designed to recognize the conditions of testing such as e.g. an unlocked steering wheel or the stationary test rig and then put the vehicle into a “safety” mode that resulted in vehicles emitting a much less amount of air pollution than they would in typical driving conditions. The manipulation of tests enabled VW to produce and market thousands of vehicles that were advertised as revolutionary because of their low emission. The fact was that, when the cars were tested in normal environments, “the engines emitted nitrogen oxide pollutants up to 40 times above what is allowed in the US” (Hotten 2015). After the scandal was exposed, it was revealed that 11 million vehicles worldwide could be equipped with the gadget (Kollewe Kollewe, 2015). It is a matter of debate the truth that the company did not even mention that 11 million cars could be equipped using the technology. You would think they’d know how many times they violated the law given all the profits they made into. The result was a pollution that amounted to almost one million tonnes annually (Lee and Vachon in 2016). “Roughly the same as the UK’s combined emissions for all power stations, vehicles, industry and agriculture” (Mathiesen and Nelsen in 2016). VW didn’t take responsibility for the environment in this case as despite the fact that their deceit allowed them to earn profits however their inattention and disregard for the environment caused negative effects on the environment as well as society as a whole. In this scandal lawful accountability system failed as the law said that cars cannot emit more pollutants than a predetermined limit, VW used deceitful ways using ‘cunning’ methods to get around the legal requirements. Now that the truth has been exposed, VW has paid and will continue to be liable for their blunders through lawsuits and ongoing legal action that are being taken against the company.

In addition, legal accountability isn’t the only accountability mechanism to fail in the context of the VW scandal. Another is accountability in the market, and to the market’s output specifically. Output markets are where goods are sold as well as services are offered. This market is crucial since consumers in such markets may take their business anywhere else in the case of misconduct. Being a huge firm, VW was trusted by millions of customers across the globe. Customers bought their products as a result of their loyalty to their brand and trust. They were attracted by advertisements that promoted “clean diesel” and gave the money they earned to purchase an item that, to the untrained eye of them was causing huge amounts of pollution to the environment (Jopson, McGee and Campbell 2016). A study concluded that “US VW vehicles would have released between 10,392 to 41,571 tons of gas that is toxic into the atmosphere each year|. If they had adhered to EPA standards and standards, they would have released only 1,039 tonnes of CO2each year, in all” (Mathiesen as well as Nelsen in 2016,). The lack of accountability of the market is even more shocking because of the staggering amount of pollutants released by these “defeat devices. The problem was that not only did VW display a lack of respect for the environment, but they also failed to behave responsibly in accordance by relying on the trust given to them by the production market as well as the society. The market punished VW for its unsustainable conduct with many customers choosing to take their business elsewhere. “Volkswagen faces a consumer backlash against its brand” (Lee and Vachon 2016) and it is rightfully so. This VW scandal is an excellent illustration of the negative impact legal and market accountability can have on companies when they are not taken into consideration.

In contrast, public image and market accountability were successful for Nike. The company started its “Reuse-a-shoe initiative in the year 1990, and has since reused over “28 million pairs of shoes and 36,000 tons of scrap material into Nike Grind for use in more than 450,000 locations around the world” (Ekstrom 2014). The product is Nike Grindis produced by using the “slice-and-grind” method. The shoes were cut into three parts: the rubber outsole the foam midsole and the upper made of fiber. The three distinct components were then ground and refined for use (Nike 2016, 2016). The three different kinds that comprise Nike Grind can then be utilized for various reasons, all with the aim of benefiting communities and society at large. The most remarkable thing is the way that Nike recognized an opportunity to use all the old sneakers that were being improperly taken away. In launching this initiative and focusing on the old trainers, it is easy to see how Nike could establish a solid brand image and build a loyal following. People are always keen to help a cause that will benefit the planet in any way, form, or form. Nike recognized this and has succeeded. The Nike Grind site says:

“Nike’s idea is that all of all of our items will have a “closed-loop”-that means they will be made from the least amount of feasible materials and be constructed in ways that permit them to be reused to create new products. Our long-term vision is to build a continuous loop that is free of any waste.” (Nike 2016,)

Nike has had great success in this endeavor and is a sign that they are concerned about the environment and also the wellbeing of the entire society. This fact is based on the fact that the old trainers were being taken care of in a way that was not correct, leading to an increased amount of garbage. Furthermore, the burning of rubber caused an increase in emissions of toxic gases into the air. Nike’s decision to start the “Reuse-as-a-shoe” program was a good one since it raised the level of respect which the company was viewed. Furthermore, their promise to utilize “sustainable, long-lasting materials designed for professional-level performance” has only boosted the popularity of Nike Grind among millions of people all over the world (Nike 2016, 2016). Nike’s quick decision to cut down the negative impact their previous products caused on the environment has worked to their advantage since Nike Grind can now be developed and is continuing to improve the Nike brand’s image.

In the end, it’s true that society and the environment are in the control of public sector companies as well as private business companies. They are controlled by accountability mechanisms. All businesses are accountable in a variety of ways. But, while VW did not meet its legal public, commercial and reputational responsibility due to its fraudulent behavior, Nike succeeded in its public and market reputational accountability by identifying and implementing ways to achieve its goals while making an impact on many communities and societies. When VW installed the ‘defeat gadget to evade emissions tests and ultimately earn more money, Nike’s forward planning led to even greater brand loyalties than they began with. This is a clear indication that accountability is an integral aspect of every organization, and if the accountability systems fail, there could be severe consequences.

Bibliography

Ekstrom, K.M. (2014) Waste management and sustainable consumption: reflections on waste from the consumer. Pg 169-171. Available at: https://books.domain.co.uk/books?id=GXLfBQAAQBAJ&pg=PA170&dq=nike+reuse+a+shoe&hl=en&sa=X&redir_esc=y#v=onepage&q=nike%20reuse%20a%20shoe&f=false (Accessed: 16 November 2016).

Hotten, R. (2015) Volkswagen: The scandal explained. Available at: http://www.bbc.co.uk/news/business-34324772 (Accessed: 16 November 2016).

Jopson, B., McGee, P. and Campbell, P. (2016) Volkswagen faces $15bn penalty due to US green advertising campaign. Available at: https://www.ft.com/content/1234f9be-f5bf-11e5-9afe-dd2472ea263d (Accessed: 16 November 2016).

Kollewe, J. (2015) Volkswagen emissions scandal timeline. Available at: https://www.theguardian.com/business/2015/dec/10/volkswagen-emissions-scandal-timeline-events (Accessed: 16 November 2016).

Lee, K.-H. and Vachon, S. (2016) Business value and sustainability: A holistic supply-chain perspective. Pg 101-104. Available at: https://books.domain.co.uk/books?id=ZPzcDAAAQBAJ&pg=PA102&dq=vw+scandal&hl=en&sa=X&redir_esc=y#v=onepage&q=vw%20scandal&f=false (Accessed: 16 November 2016).

Mathiesen, K. and Neslen, A. (2016) VW scandal have caused close to 1m tonnes of additional pollution, as analysis shows. Available at: https://www.theguardian.com/business/2015/sep/22/vw-scandal-caused-nearly-1m-tonnes-of-extra-pollution-analysis-shows (Accessed: 13 November 2016).

Nike (2016) How it’s produced. Available at: http://www.nikegrind.com/how-its-made (Accessed: 16 November 2016).

Oxford Dictionary (2016) Available at: https://en.oxforddictionaries.com/definition/accountability (Accessed: 16 November 2016).

Siedel, G. (2016) The Three pillar model for business decision-making The three pillars of business: law, strategy as well as ethics. Pg 16-19. Available at: https://books.domain.co.uk/books?id=SYXNCwAAQBAJ&pg=PA18&dq=vw+scandal&hl=en&sa=X&redir_esc=y#v=onepage&q=vw%20scandal&f=false (Accessed: 16 November 2016).

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