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VW emissions scandal

3 Lessons Learned from VW, Exxon Scandals

VW emissions scandalNew details in the Volkswagen emissions scandal emerge almost daily as the scope of the investigations — and the number of cars involved — continues to grow.

Last week Volkswagen admitted that some 800,000 vehicles from the VW Group, including gasoline cars and additional model years of VW and Audi diesel vehicles, as well as Porsche diesel vehicles, are involved.

German car regulators on Wednesday said they are expanding their investigation beyond Volkswagen to more than 50 models from brands including BMW, Mercedes, Ford, Volvo, Nissan and Jaguar Land Rover.

Meanwhile, in the energy sector, the ExxonMobil climate change cover-up scandal also looks to be expanding to other companies. Just days after launching an investigation into whether Exxon lied to the public and investors about climate change risks, New York attorney general Eric T. Schneiderman on Monday said an investigation by his office found that Peabody Energy violated New York laws prohibiting false and misleading conduct in the company’s statements to the public and investors regarding financial risks associated with climate change.

The New York Times reports prosecutors may decide to investigate other companies that funded or joined organizations such as the American Legislative Exchange Council that questioned climate science or policies designed to address the problem, to see if discrepancies exist between the companies’ public and private statements.

“ExxonMobil is not alone,” Stephen Zamora, a professor at the University of Houston Law Center, tells the New York Times. “This is not likely to be an isolated matter.”

While there are obvious differences between VW and Exxon — “Nobody expects Exxon to be an environmentally friendly company while VW stakes its reputation on this,” says Mark Bünger, Lux Research’s VP of research — there are common lessons to be learned from both companies’ mistakes.

1. This is the Tip of the Iceberg

As Ford, BMW, Volvo and other automakers are now learning, the investigations aren’t likely to stop with VW and Exxon.

“Energy companies and others that have made disclosures related to climate change would be well advised to carefully review their disclosures, knowing that government agencies and private entities may be scrutinizing disclosures for misstatements,” says John Marti, a partner at the international law firm Dorsey and Whitney. Before joining the firm Marti was a federal prosecutor in the US Attorney’s Office for the District of Minnesota. “With climate change a front and center political topic firms should expect more investigations to come.”

Automakers have found ways to cheat emissions tests almost from the time governments began testing vehicles, Bloomberg reports. Cars in the 1970s used “defeat devices” that turned off the emission systems when the air conditioning was turned on while others used sensors to activated pollution controls only at the temperature regulators used during the emissions tests.

Bünger says other cheats make the test car lighter and less wind-resistant than production vehicles by removing seats and taping over gaps in the doors or vents in the grille, for example. “These cheats were technically legal and an open secret,” he says, “apparently because regulators are spineless, and led to actual emissions overall to be three to five times the stated limits. It’s also a difference of degree — not kind — in all the types of cheating that goes on in emissions tests.”

2. Be Transparent and Collaborate

“Obey the letter of the law and the spirit of the law,” Bünger says. “Don’t try to sweep things under the rug.”

Exxon’s in hot water because of allegations that its scientists conducted cutting-edge climate research decades ago and then led efforts to block anti-climate change action, while misleading investors about the risks climate change posed to its businesses.

Transparency — or a lack thereof — caught up with VW, as well.

Bünger says the idea that secrecy is the only way to protect business interests is one that automaker and other manufacturers must move away from. “In some cases it’s less safe than being open,” he says. “Make your process transparent. Everybody is smarter than anybody. More eyes helping makes your locks on the cars stronger, your algorithms for collision avoidance stronger. All those things perform much better when they are available for everybody to scrutinize.”

Transparent processes and industry collaboration results in better products, Bünger says.

3. Double Down on CSR

Exxon VP Ken Cohen last month issued a statement saying the fact that the company has produced more than 50 peer-reviewed publications on topics including the global carbon cycle, detection and attribution of climate change, low carbon technologies and analysis of future scenarios for energy and climate shows that Exxon is serious about advocating for low-carbon policies. It doesn’t seem to have been enough to convince investigators or the public.

To restore its reputation and credibility, Volkswagen — or any company that finds itself in a CSR scandal — needs to double down on its efforts to prove it’s a good environmental and social citizen, says Gregg Sgambati head of ESG solutions at S-Network Global Indexes.

“Volkswagen can maintain and strengthen its non-product related environmental impact,” Sgambati says. “But to repair its credibility, it would be well served to exceed the practices of its industry peers and establish new best practices in other areas. For example, the industry overall does not use a large amount of renewable energy sources in comparison to its total energy consumption. By addressing this, Volkswagen could position itself as a new leader in the automotive industry. Or internally, the company can employ environmental screening on its internal investment selection process for its corporate investments and benefit plans.

“Sometimes the only way to correct sustainability violations is to protect the environment in some other way. Volkswagen now needs to be an environmental hero where others are not.”

Photo Credit: VW emissions scandal via SGM / Shutterstock.com

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2 thoughts on “3 Lessons Learned from VW, Exxon Scandals

  1. I am writing to object to the headline and characterization of inaccurate reporting about ExxonMobil’s history of climate research as a “cover-up scandal” in your story today “3 Lessons Learned from VW, Exxon Scandals.”

    We unequivocally reject allegations that ExxonMobil suppressed climate change research contained in media reports that are inaccurate distortions of ExxonMobil’s nearly 40-year history of climate research that was conducted publicly in conjunction with the Department of Energy, academics and the UN Intergovernmental Panel on Climate Change.

    This work has resulted in nearly 150 publicly available papers, including more than 50 peer-reviewed publications, and nearly 300 patents for cutting-edge technological advances in emissions reductions and other related applications. Our scientists have been involved in the forefront of climate research and understanding and work with the world’s leading experts on climate.

    The reports by InsideClimate News and the Los Angeles Times cherry-picked statements attributed to various company employees to wrongly suggest definitive conclusions were reached decades ago by company researchers. They ignored statements demonstrating that our researchers recognized the developing nature of climate science at the time, which mirrored global understanding.

    You can read more about our response to these inaccurate articles on our company blog at http://www.exxonmobilperspectives.com

    Alan T. Jeffers
    Media Relations Manager
    Exxon Mobil Corporation

  2. So, let’s see: we have 1) the NY Times, 2) various Exxon researchers, 3) required annual Securities and Exchange Commission filings from Exxon, 4) records of Exxon activities to fund and establish various climate-change-denial groups, 5) public record statements from Exxon’s chairman and CEO Lee Raymond, 6) the Royal Society (the United Kingdom’s science academy), 7) Exxon’s top lobbyist Randy Randol, 8) Brian Flannery (Exxon’s science strategy and programs manager), etc., etc. To wit:

    According to a recent NYTimes article,:
    “According to people with knowledge of the investigation, Attorney General Eric T. Schneiderman issued a subpoena Wednesday evening to Exxon Mobil, … The investigation focuses on whether statements the company made to investors about climate risks as recently as this year were consistent with the company’s own long-running scientific research.
    The people said the inquiry would include a period of at least a decade during which Exxon Mobil funded outside groups that sought to undermine climate science, even as its in-house scientists were outlining the potential consequences — and uncertainties — to company executives.”

    The InsideClimate News report states:
    “In the early 1980s Exxon researchers often repeated that unbiased science would give it legitimacy in helping shape climate-related laws that would affect its profitability.
    Still, corporate executives remained cautious about what they told Exxon’s shareholders about global warming and the role petroleum played in causing it, a review of federal filings shows. The company did not elaborate on the carbon problem in annual reports filed with securities regulators during the height of its CO2 research.
    Nor did it mention in those filings that concern over CO2 was beginning to influence business decisions it was facing.”

    InsideClimate News further states:
    “… Exxon started financing efforts to amplify doubt about the state of climate science.
    Exxon helped to found and lead the Global Climate Coalition, an alliance of some of the world’s largest companies seeking to halt government efforts to curb fossil fuel emissions. Exxon used the American Petroleum Institute, right-wing think tanks, campaign contributions and its own lobbying to push a narrative that climate science was too uncertain to necessitate cuts in fossil fuel emissions.”
    As well as this:
    “As the international community moved in 1997 to take a first step in curbing emissions with the Kyoto Protocol, Exxon’s chairman and CEO Lee Raymond argued to stop it.”
    And this:
    “In 2006, the Royal Society, the United Kingdom’s science academy, sent a harsh letter to Exxon accusing it of being “inaccurate and misleading” on the question of climate uncertainty. Bob Ward, the Academy’s senior manager for policy communication, demanded that Exxon stop giving money to dozens of organizations he said were actively distorting the science.”
    As well as this:
    “Just weeks after Bush was sworn in, Exxon’s top lobbyist Randy Randol sent the White House a memo complaining that “Clinton/Gore carry-overs with aggressive agendas” were still playing a role at the IPCC as it prepared its next assessment of the climate science consensus.
    MacCracken and three colleagues should be replaced, or at least kept out of “any decisional activities,” he wrote. Meanwhile, U.S. input to the IPCC should be delayed.
    Further, two scientists highly critical of the prevailing consensus should be enlisted: John Christy of the University of Alabama should take the science lead and Richard Lindzen of MIT should review U.S. submissions to the IPCC.”
    But wait, there’s more:
    “In March 2002, Flannery, Exxon’s science strategy and programs manager, contacted John H. Marburger, the president’s incoming assistant for science and technology, to pitch the company’s favored approach of emphasizing the uncertainty.”
    But, of course, we have this:
    “Exxon has declined to answer specific questions from InsideClimate News.” Oh, well.

    And there’s PLENTY more where all of this came from, as well as from other sources (from the Union of Concerned Scientists, for example). In summary, the complaints by Alan T. Jeffers (Exxon Media Relations Manager) that the cited reports “cherry-picked statements” are patently absurd. Indeed, the InsideClimate News series is “based on Exxon documents, interviews, and other evidence from an eight-month investigation.” That can hardly be considered to represent “cherry picking”.

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