Author: Ian Finn
It’s been the business news item of the week. Actually, it’s been the news item of the week – full stop. The deliberate and willful deceit by the world’s largest car manufacturer in respect to the level of pollutants their cars actually put out. When not under test conditions. The reaction to the VW scandal has generally been one of shock and disbelief across the spectrum: how could such an established and widely-respected brand stoop to this?
But as shock starts to give way to public revulsion to this calculated deceit, the enquiries - both public and private - will now start in earnest. A pivotal part of these corporate post-mortems will be:
-‘so what does this all mean for the way in which big business is conducted in today’s world?’
-‘Just who do corporations actually exist to serve?’
I would argue that this whole automotive debacle just underscores what should already be instilled in big business ethics (but, as we have seen this week, is clearly not universally-enshrined). And that is to say that businesses need to exist within a clear, and guiding set, of principles which consequently set the framework in which all facets of that business are conducted. In the case of VW, one of these should have clearly have included ‘don’t seek to sidestep regulation’. But clearly that particular horse has now long since bolted.
So in the light of ‘VW Gate’ what should such principles look like? Naturally, business principles need to be relevant and tailored for specific industries and the individual organisations operating within them. But I would suggest that are some ‘inalienable truths’ that should inform the set of business ethics for any given organisation; no matter what line of business it’s in. And that should be to…
1…be stakeholder-centric: and work back from that
This is the principle where it should all begin and end really. Since all businesses are, ultimately, set up to serve a set of stakeholders. After all, you can guess the reactions of a VW shareholder who saw 20% of their investment wiped off their balance sheet in just one day when the story broke (only to suffer a further 20% fall the following day). The US Environmental Protection Agency (EPA) is the stakeholder whose standards have been bypassed by VW in such a calculating manner. And of course there is the end customer. You only have to take a passing glance at social media this week to witness the jibing of VW owners about their previously-proud choice of car brand. Customers who have gone from being proud owners of the marque to becoming disillusioned protesters in the space of just one week.
So the principle here should be quite a simple one: one which should always be enshrined in corporate visions and missions, no matter what the industry or point in time. And that is to:
>‘do the right thing for all your stakeholders. Be they your staff, your shareholders, industry bodies or, of course, your customers’.
Naturally the interests of various groups of stakeholders in an organisation will vary - and will often be in conflict with one another. But part of the art of good business is achieving the best balancing act between these interests.
To see the degree by which all three main external groups in the VW stakeholder community have been so simultaneously wronged by this episode is, quite simply, baffling. But what we must take away from witnessing this flagrant disregard for both regulatory and business standards should be this. That serving the full range of stakeholders that a business has should always form the centre of its world. From this principle all others should actually flow…
2. …be compliant
The extent of business impact brought by regulation obviously varies significantly by industry. In the automotive sector, standards can be exacting as the world generally looks to move to being a cleaner, greener planet.
But regulations are not there to be simply flouted: that way madness lies (clearly). It’s a lesson that the banks have learned at close quarters in the aftermath of the 2008 financial crisis. Regulations usually exist for cogent reasons. These reasons are there sometimes to ensure customer interests are met, ensure fair business practices or to protect the planet and the air we breathe (as in this case). Or, indeed, to protect all three interests simultaneously; or even to prevent/ mitigate still further undesirable potential outcomes of doing business.
So regulations should be respected and adhered to by businesses. Not deliberately avoided as here. So the principle here should be as simple as:
>‘as a business, we’ll comply with all relevant regulatory standards’
3. …be realistic to be credible
In the VW case, it appears that it simply wasn’t technically possible for their diesel engines to be manufactured in line with the prevailing US emissions standards. Which begs the question: why, then, position that particular product line in that market if the only way to do so was to facilitate the rigging of emissions testing?
We’re all familiar with ‘SMART’ objective setting in business. As we know, the ‘R’ here stands for ‘realistic’. And it is this ‘R’ for realistic which looks to have been unachievable here - for this particular product line in this particular market.
So then surely businesses should take a step back and reassess what that means: for the products, the business and, of course, their full range of stakeholders. In this case, it might have been that some alternate strategy could have succeeded. This might have been to position cleaner petrol (or indeed even hybrid) product lines primarily in the US market. But that’s not what happened here.
So the principle here, to inform business ethics, I would suggest should be this:
>‘we’ll strive, at all times, to be the best business we possibly can be for our customers and our stakeholders…but also ensure we operate in a way that is realistically attainable for us and our prevailing capabilities’.
Had VW taken a more ‘grounded’ approach to their technological and market strategy here, one can only assume a very different outcome would have transpired (i.e. not a strategy that was dependent on some hidden lines of code, within the engine management system, influencing what the cars’ emission readings would be under test conditions).
Making it ethical
So there we have it. Three suggested ‘guiding principles’ for businesses when setting out (or indeed, re-visiting) what their business ethics should be. In the context of the real-time, demanding and no-where-to-hide business world which we now all inhabit:
Be…
...stakeholder-centric - and work back from that
…compliant...
…realistic to be credible
In this way, organisations can look to simultaneously satisfy the full range of their stakeholders, avoid multi-billion dollar litigation and seek to build product portfolios and brands which can be the best they possibly can be (but based upon their actual capabilities and market opportunities).
So what do you think? Do you feel that the role played by business ethics requires a fresh evaluation, in the light of the VW story? Or do feel certain business principles ‘still hold true’ and it’s down to how they’re actually implemented/ governed within businesses? Or do you have some other perspective here?
>About Ian Finn
Ian Finn is a highly experienced Digital & Proposition Strategist and Fellow of the Chartered Institute of Marketing (CIM) who has led digital improvement at some of the UK’s largest companies. A diverse career across a range of the UK’s leading B2C service brands means Ian brings an ‘end-to-end’ portfolio of Digital capability spanning Product and Customer Proposition; in addition to Digital/ Customer Experience. Find me on LinkedIn or on Twitter (@IanFinnDigital)