09/21/2015 08:29 am ET Updated Sep 21, 2016

Volkswagen's Shame and Challenge to Sustainability Management

In an amazing and brazen attempt to avoid compliance with our air pollution rules, Volkswagen installed a piece of software that allowed their diesel-powered automobiles to circumvent air quality regulation. In a recent article, Coral Davenport and Jack Ewing of the New York Times reported that:

The Environmental Protection Agency accused the German automaker of using software to detect when the car is undergoing its periodic state emissions testing. Only during such tests are the cars' full emissions control systems turned on. During normal driving situations, the controls are turned off, allowing the cars to spew as much as 40 times as much pollution as allowed under the Clean Air Act, the E.P.A. said.

The hero in this story is the International Council on Clean Transportation who found a large gap between pollutants emitted in the lab and emissions detected on the road. They reported this to EPA, which led to the investigation, Volkswagen's (VW) confession, and the recall of about a half a million cars. VW owners may not be happy with the performance of their cars once the pollution control devices are restored because these vehicles lose a lot of pick-up when pollution controls are engaged. In all likelihood, many owners will not comply with the recall order and state-managed emission inspections will continue to be fooled.

It is not difficult to understand why auto company management might attempt to circumvent the law this way. There is always pressure to sell cars, and an automobile's pick-up is more visible to a buyer than the emission of pollutants from its tailpipe. It looked like the perfect crime: just design a piece of software that recognized an emission testing process and turns the device on during the test and off when the test is over.

The issue for Volkswagen is the depth of this corrupt attitude in its corporate culture. I imagine corporate management somehow felt justified in taking this action. They may have understood that the health impact of air pollution is real and important, but that it would be difficult to assign causality to one source of pollution. It is true that VW's deception was hard to detect and it's even more difficult to point to the specific harm caused by this deceit. But what if the same willingness to take shortcuts and deceive extends to safety equipment like seat belts and airbags? How about the car's brakes? If a car manufacturer is dishonest in one area, what's to keep them from being dishonest in other areas?

The issue for Volkswagen is not simply how do they comply with EPA's order, but what do they do to eliminate the cause of this deception within their organization? The auto industry has a long history of resistance and at best, grudging compliance with environmental and safety rules. The car companies complained about seat belts and said that requiring them would harm their business. They complained about the catalytic converter. They continue to complain about gas mileage standards. It is ironic that this crime was detected at the same time that Volkswagen was announcing a major increase in their production of electric and hybrid automobiles. It is clear that one part of the company understands the commercial potential of sustainable personal transportation--but clearly another part of VW could care less.

The effort to delegitimize and avoid compliance with government regulation has a long history in American politics. The American Revolution itself and the national creation myths it inspired tend to glorify clever efforts at averting the law. While I know of no similar current in German political culture, perhaps there is another explanation for this blatant disregard for the rule of law.

If we are going to develop a sustainable economy with a high level of production while maintaining the planet's ecological health, we need to get better at setting and complying with environmental rules. We no longer live on the frontier or in the Wild West. With over seven billion people on the planet, we need to learn to be more thoughtful about how we produce and consume the material resources we need. Air pollution rules are not optional because breathing is not optional.

The people who disconnect their air pollution devices should know they are trading off lung disease for a little bit of pick-up in their vehicle. Let's personalize it: If it was your child that might get sick, would you do it? But even more than the specifics of this case, we need to think hard about the underlying values and attitudes that lead to this anti-social behavior. On a more crowded planet we need to be more aware of the impact of our actions. We need to do a better job of projecting the impact of our actions on our neighbors and on our planet. We need to work hard to reduce negative impacts.

Volkswagen's behavior helps me understand the mindset that animates the Republican race for the presidency. As I watch the unfolding spectacle of the Republican presidential nomination contest I am constantly reminded of the dynamic of the paradigm shift now underway toward sustainability. While the renewable economy is growing, the crowd on the Republican debate platform doesn't seem to get it. While it's true that few real issues are emerging in this campaign, the environment is conspicuously ignored. It's not simply climate change that is ignored but the overall issue of the planet's long-term well-being.

If we begin 2017 with a Republican president and Congress it may be difficult to prevent a rollback of federal environmental and energy policies. It is clear that the part of the American public that will participate in the Republican nomination process thinks government is hopeless and would shut down the national government if they thought they could. Given the need for government to play an active role in the transition to a sustainable economy, this very vocal minority of the American public could slow the transition that has already begun.

Despite the dysfunctional politics in Washington, I don't think this transition can be slowed down. Let's remember that America is part of a global economy, and if we are not aggressive about sustainability we may find ourselves left behind and noncompetitive in the new businesses that emerge in renewable energy and recycled materials. It won't help our economy if other national governments fund infrastructure such as high-speed rail, electric vehicle charging stations and smart-grid construction, while our national government sits helplessly on the sidelines.

A key element of sustainability is the business principle of sustainability management: the organizational practices that promote a renewable economy. Compare it to Total Quality Management (TQM). TQM is a technique used to reduce waste and improve quality in an organization's supply chain and production processes. Sustainability management is a way to reduce resource costs and the potential costs of environmental impacts caused by an organization's production and consumption. Volkswagen's deception should be seen as sloppy management. It opens the company up to significant fines. According to Coral Davenport and Jack Ewing:

The Justice Department's investigation [of Volkswagen] could ultimately result in fines or penalties for the company. Under the terms of the Clean Air Act, the Justice Department could impose fines of as much as $37,500 for each recalled vehicle, for a possible total penalty of as much as $18 billion.

While a penalty of this size is probably unlikely, any penalty is bad for the bottom line and for the organization's reputation. Taken a few steps further, a modern sustainability manager would take care to ensure that any use of resources was fully thought through and all environmental impacts were minimized. The absence of concern for sustainability is an indicator that Volkswagen's level of management competence needs improvement. Perhaps this incident will stimulate the company to improve. At least the company seemed contrite. Over this past weekend Martin Winterkorn, Volkswagen's CEO, apologized for the company's misconduct. They also stopped sales of new and used cars with the deceptive software. Let's hope that Volkswagen sees this as more than a PR problem, but as a profound failure of management.