Are Regulators Embroiled in a Reputational Crisis?

Are regulators embroiled in a reputational crisis, or have they become a scapegoat for companies caught cheating?

In the wake of the VW emissions scandal, accusations are flying. Last Tuesday, British technology company Dyson announced that they will be taking legal action against both Siemens and Bosch, the latter of whom, as hardware and software developers for VW, are already under scrutiny.

Company founder Sir James Dyson has accused his rivals of attaining their ‘A’ energy rating labels from European regulators by running their vacuums on a low-power setting and using clean bags during lab tests. He branded their actions as akin to those of VW, asserting “[the] industry is rife with manufacturers engineering to find their way around tests, rather than engineering better, more efficient technology.” [1]

By installing ‘defeat devices’ that switched on fume cleaning technology when checks were carried out, VW got millions of high-fume diesel cars past the regulators and onto the roads. Similarly Bosch secured a gold-star from the National Measurement Office in line with Energy-related Product regulations, falsely boosting consumers’ faith in their green corporate values.

But should the full blame lie with these companies? Or, is this deception partly the fault of the regulatory bodies in question and their flawed testing methods?

Last year The Telegraph reported on James Dyson’s questioning of ErP legislation (targeted at products that use, generate, transfer or measure energy, excluding transport). Dyson argued that relevant energy tests should be stricter, suggesting that vacuum cleaners should be tested with dust already in them and that energy consumption, waste, landfill and cost of bags and filters should be included in their energy rating.

More recently, the media have been examining the loopholes that VW were able to exploit. Since the scandal came to light, The Financial Times have contacted national regulators responsible for energy certification in seven of Europe’s biggest car-making countries to question whether they had ever conducted inspections for defeat devices since they were declared illegal in 2007. Only Italy had done so. [2]

Although VW’s defeat devices could be considered somewhat more ingenious than Bosch’s alleged cheat-methods, such incidents in both the automobile and ErP industry reflect a similar lack of comprehensive water-tight legislation, married with apparently lackadaisical enforcement.  Both the FT’s findings and James Dyson’s remarks highlight failure that can be traced back to the European Commission, whose role is to oversee the implementation of rigorous legislation.

The impact of the emissions scandal on VW’s brand, and arguably on German industry as a whole, has been huge, and there are potentially further repercussions to come as consumer trust in these regulatory bodies wanes. In a climate of high demand for increasingly faster, better, greener and more efficient machines, consumers rely on regulators to do part of their homework for them. If they cannot be counted on, consumers will be more likely to switch to alternative products such as electric vehicles and bagless vacuums. Companies like Bosch and VW – if they have indeed been spending time and money on cheat methods rather than true product advancement – will be among those that lose out.

As the complicity of the German government in the VW scandal is questioned, and regulatory bodies are denounced, legislation reform and real-world testing is surely approaching. When it comes, companies need to be alert – ready to focus not on engineering new ways around the rules, but on true environmentally-conscious innovation.

Natasha Richardson, DAS Graduate Trainee, Corporate