ARTICLE • 5 min

How Volkswagen's $14.7 Billion Fine for Emissions Scandal Led to Today's ESG Laws

In the wake of the Volkswagen emissions scandal, European lawmakers introduced a series of regulations designed to increase transparency and accountability in corporate ESG reporting. Among these were:

  • The Non-Financial Reporting Directive, which required large companies to disclose information on environmental, social, and governance issues
  • The Conflict Minerals Regulation, which required companies to ensure their supply chains were free from minerals that funded conflict and human rights abuses
  • The Waste Framework Directive, which required companies to take responsibility for their products throughout their lifecycle, from production to disposal

These regulations had a significant impact on the global supply chain, as companies were forced to take a more holistic approach to their ESG practices. In particular, companies were required to conduct due diligence on their suppliers to ensure compliance with relevant ESG regulations.

The emissions scandal also had a significant impact on Volkswagen's share price. In the immediate aftermath of the scandal, the company's share price fell by nearly 40%. The scandal highlighted the reputational and financial risks of poor ESG performance, and served as a warning to companies that fail to prioritize ESG considerations.

Fund managers also took note of the scandal and its implications for ESG investing. As Tim Crockford, Head of Equities at Hermes Investment Management, stated:

"The Volkswagen scandal exposed the lack of transparency and accountability in the automotive sector. It also demonstrated the importance of taking ESG considerations into account when making investment decisions. Investors can no longer afford to ignore ESG risks and opportunities."

The Volkswagen emissions scandal was a watershed moment for ESG investing, driving the development of modern ESG laws and regulations and highlighting the importance of strong ESG performance. Companies must now navigate a complex landscape of ESG reporting and regulation, with investors and stakeholders demanding transparency, accountability, and a commitment to sustainability.

Over 90 public companies and 70 non-profit organizations use Socialsuite for tracking and reporting on their impact. With the help of our ESG software and expert team, businesses can easily get started on impact reporting, disclose faster, and save money compared to traditional methods. Whether you're new to impact reporting or looking to enhance your current practices, Socialsuite offers the tools and expertise needed to achieve your sustainability goals. Contact us to learn more about our solutions.

Brad Gurrie
Chief Executive Officer
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