Business Ethics and Leadership, Volume 2, Issue 1, 2018 6 Volkswagen Emission Scandal and Corporate Social Responsibility - A Case Study Iveta Mačaitytė Kaunas University of Technology, Lithuania Greta Virbašiūtė Kaunas University of Technology, Lithuania Abstract Corporate social responsibility plays a high-profile role in today’s competitive market and any unethical behavior done by a corporate leads to objectionable consequences. These consequences often have influence on businesses activity in a negative way. The purpose of this study is to examine the relationship between the social responsibility of an organization and three variables: the stock market of the organization, the financial performance of the organization, and the reputation index by the organization set during the scandal. The study was carried out on the latest corporate social responsibility related scandal escalated in the Volkswagen corporation, known as “Diesel gate” or the emission scandal. While other authors have analyzed this scandal by focusing on one variable, we concentrated on integrating the general picture of key issues. By studying the quantitative data from 2013 to 2016, the research evidenced that unethical behavior of well prominent company unfold negative effect on the corporate’s stock price, financial performance and reputation as well. Keywords: scandal, Volkswagen, Corporate Social Responsibility, Diesel gate. JEL Classification: E71. © The Authors, 2018. This article is published with open access at Sumy State University. Introduction Every business faces malfunctioning processes in its system but not all failures have the same weight on consequences. Nowadays, Corporate Social Responsibility (CSR) related lapses, especially in prominent ones, draw self-attention and often implicate a scandal. These scandals could cause damages for business in various ways. Most common manifests itself in decrease of reputation, sales shrinkage, stock prices plunge etc. The damage that is done to a business brand mostly affect the loss of reputation with all of the high reputation bonuses alongside, including customers loyalty, stakeholders’ promotion, customers’ affection and determination to buy a product from the particular brand. The paper reveals the importance of CRS to a business and exposes the subsequences from a qualitative and quantitative perspective. On this basis, the approach is based on a case study of the Volkswagen (VW) emission scandal. In 2007, VW represented the “Strategy 2018” in which company included essential aspirat ion to become number one in the auto industry. It covered business commitment in both economical and ecological perspective. VW took responsibility for supporting fuel efficiency and minimizing harmful emission in their vehicles. However, it was done using dishonest approach. In 2015 the Environmental Protection Agency (EPA) confirmed that VW has been using the software attached to the control device concealed the true amount of nitrogen oxide. After this announcement, VW faced “Dieselgate” scandal and the “Strategy 2018” became unattainable. The vehicles' software was programmed to pass testing performed by the EPA. Cars with this software pollute NOx at up to 40 times the federal maximum on the road. When this news hit the society, Volkswagen has tried to portray this software as a mistake that slipped through corporate cracks. EPA found that “Diesel gate” scandal had an impact on 84,391 cars. However, later VW admitted they were cheating on emission testing. They started to pay charges and compensations for car owners. The damage to company’s reputation was already done and despite the fact that VW admitted their illegality, stock prices fell and still has not recovered to their peak in 2015.