How Volkswagen transformed from a climate cheater to an EV leader

Most of our readers are probably familiar with what we call the Dirty Diesel Debacle. In 2015, the US EPA charged Volkswagen with installing software in its diesel cars that allowed it to cheat on emissions tests. Investigations from European regulators followed, the company (naturally) tried to cover up the scandal, executive heads rolled, and the Volkswagen Group was eventually forced to pay some $30 billion in fines and damages. It was a shocking example of deliberate corporate lawbreaking, and VW’s brand seemed irreparably damaged.

Above: Volkswagen's logo on a car. (Image: Cesar Salazar / Unsplash)

But it wasn’t. Just a few years later, the company is considered a clean vehicle leader. New EVs from VW, Audi and Porsche are selling well, and Electrify America, the infrastructure company that was established as part of VW’s settlement with the authorities, has rolled out an extensive and rapidly growing charging network across the US.

It was one of the most impressive rehabilitations in corporate history—but VW didn’t achieve it alone. In 2016, the company formed a Sustainability Council consisting of nine experts from a wide variety of fields to help it transform itself from a polluting pariah into a pioneer of petrol-free propulsion.

One of the members of the Sustainability Council was Margo Oge, a former EPA executive, the author of a book called Driving the Future, as well as numerous articles on clean vehicles, a Tesla driver and “a devoted champion of reducing transportation emissions.”

In a recent article for Forbes, which I highly recommend reading in its entirety, Ms. Oge describes her ground-breaking work with VW’s Sustainability Council.

“Of course, some of us were concerned that the Council’s work could devolve into an exercise in greenwashing,” she writes. “However, the challenge of trying to positively impact one of the world’s largest auto companies made the offer hard to pass up. If VW truly committed to zero-emission vehicles, other OEMs would likely follow with similar strategies—a huge win for climate change action.”

To their credit, the new leadership at VW understood that substantive action was needed—firing a few execs, paying some fines, then going back to dirty business as usual wasn’t going to cut it this time. “The company had to break away from the past and its diesel-centric strategy, embrace zero-emission vehicles, and enshrine ethical practices across its workforce to restore its brand,” Oge writes.

The Sustainability Council outlined a set of three key strategic changes, which VW management adopted to a large extent:

1. Technology Shift: Diesels had become “radioactive,” and the only viable way for VW to rescue its brand and comply with tightening global emissions regulations was to embrace EV technology.
2. Policy Shift: VW had forfeited all its credibility with regulators and policymakers. To rehabilitate its official reputation, the company had to “change its position with regulators and NGOs in all key markets and become an advocate for ambitious standards that reduce pollution and drive e-mobility, rather than fighting with policymakers and regulators.”
3. Cultural Shift: “VW needed to drive a culture shift towards a more ethical, collaborative and purpose-driven company that could learn from failures.”

Over the course of six years, the Sustainability Council met regularly with top execs, serving under three CEOs—Matthias Mueller, Herbert Diess, and now Oliver Blume. “Our efforts as council were respected by all three,” Margo writes, and “our exchanges were always constructive, even when we took exception to their actions—or lack thereof.” They also met with leaders of VW’s Works Council, the German equivalent of a labor union, which represents the workers.

Yes, there was pushback, from managers whose entire careers had been built around diesel engines, and from union representatives who fear (not without reason) that the transition to EVs will result in major job losses. But the massive ship turned around as quickly as anyone could have imagined—in 2017, VW announced an investment of 50 billion euros to launch a comprehensive electrification initiative. In 2018, Herbert Diess became CEO, and soon became a hero to EV advocates, overseeing a rapid expansion of VW’s capacity to produce EVs.

Diess’s new strategy was radical—in 2021, he even invited Tesla’s CEO to address a group of 200 VW executives on the topic of accelerating the transition to e-mobility. It was also controversial—he repeatedly locked horns with the powerful Works Council, and his propensity to draw comparisons with Tesla apparently ruffled some powerful feathers at the company. In 2022, he was forced out, to be replaced by Oliver Blume. It remains to be seen whether Diess’s departure will damage Volkswagen’s EV strategy.

Whatever happens next, the Sustainability Council can take credit for some significant achievements, some of which went far beyond Volkswagen’s world and helped to shape the auto industry as a whole. In the European Union, VW has supported a ban on the sale of new ICE vehicles by 2035, as well as the EU Green New Deal. The Sustainability Council worked with EU policymakers to establish partnerships between VW and electric utilities to provide clean energy for EV charging stations and battery cell production. In the US, VW supported California’s ambitious emissions standards, which the then-occupant of the White House was trying to water down. More recently, VW took a firm stand against the oil industry’s efforts to cripple President Biden’s pro-EV policies.

The Sustainability Council’s mandate was a temporary one, and it will bring its operations to a close at the end of 2022. The Volkswagen Group’s thousands of employees, the entire German and European economies, and anyone who breathes air owes a hearty Thank You to the Council for its work to help VW transform itself “from diesel cheater to e-mobility leader.”

“VW is on the right track now and we hope the company under CEO Oliver Blume will accelerate the pace of change—especially given the increasingly horrific impacts of climate change-driven human and ecological suffering around the globe,” Margo Oge concludes. “As the world struggles to reduce greenhouse gas emissions quickly enough to stave off the worst impacts of climate change, VW’s [electrification strategies] can lead the way.”

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Source: Forbes