5.1 Why It Matters: Ethics and Social Responsibility
Why learn about regulations and ethics?
Generally speaking, students believe that there are two primary reasons to act ethically:
- Acting ethically is the right thing to do from a moral perspective,
- If you act unethically, then you might get caught and be punished.
Businesses need to make decisions to act. How are they guided? Laws or regulations are the constraints and considerations that define what you CAN do and MUST be followed to operate your business within an industry, geography, or jurisdiction. Marketers have many legal considerations as we will explore in 5.3. Business ethics are what you SHOULD do. Ethics and laws are linked within society by creating standards and rules. Society has many stakeholders. Business ethics is the social obligation a business has to its stakeholders, including employees, customers, institutions, and communities. Under the umbrella of business ethics, Corporate Social Responsibility (CSR) began to emerge in the 1950s and took hold as a brand consideration and management concept in the 1970s. CSR has evolved into Environmental Social Governance (ESG), which holds companies accountable not just for their intentions but for measurable impact. ESG affects a company’s access to capital and brand value.
In most cases, strong ethical behaviour leads to strong business results. Behaving ethically is actually good business. Let’s look at two different auto companies whose track records on ethical behaviour have had very different outcomes.
Tesla and Social Responsibility
Tesla, Inc. was founded in 2003 by a group of engineers who set out to prove that electric vehicles could outperform traditional gasoline-powered cars. They aimed to create vehicles that offered power, comfort, and style without compromising environmental sustainability. From the beginning, Tesla committed to making each new generation of electric vehicles more affordable, advancing its mission to “accelerate the world’s transition to sustainable energy.”1
To meet this goal, Tesla developed a range of proprietary technologies that initially gave the company a competitive edge. In 2014, Tesla made a surprising move by opening access to its patents. CEO Elon Musk explained that this decision aligned with the company’s core purpose. “Tesla Motors was created to accelerate the advent of sustainable transport. If we clear a path to the creation of compelling electric vehicles, but then lay intellectual property land mines behind us to inhibit others, we are acting in a manner contrary to that goal.”2
Tesla has positioned its mission as a form of corporate social responsibility. Analysts and consumers have pointed to this as a key brand differentiator. Investment publication Seeking Alpha noted:
Companies like Toyota and Honda continue to invest in hybrid and electric vehicles, seeking greater fuel efficiency and sustainability. Tesla is not driving this change alone, but it remains a central figure in the movement to reimagine what a car can be. The company challenges traditional views of luxury, redefines vehicle manufacturing, and envisions a more integrated and sustainable energy ecosystem.3
However, Tesla’s reputation for social responsibility has become more complex in recent years. Critics have pointed to labor rights concerns, the environmental impact of lithium extraction, and public controversies involving leadership. As of 2025, Tesla remains a high-profile example of how ethical and environmental goals must be balanced with transparency, governance, and stakeholder trust.
Volkswagen and Ethical Behaviour
Volkswagen, part of the larger Volkswagen Group, has long stated its goal is “to offer attractive, safe, and environmentally sound vehicles that can compete in an increasingly tough market and set world standards in their respective class.”4
In September 2015, the U.S. Environmental Protection Agency revealed that Volkswagen had installed software in its diesel vehicles designed to cheat emissions tests. The software detected when a vehicle was undergoing emissions testing and temporarily reduced emissions output, giving a false impression of regulatory compliance. CEO Martin Winterkorn resigned, and the company’s stock dropped nearly 30 percent overnight.
Since then, Volkswagen has paid more than $30 billion in fines and settlements. The “Dieselgate” scandal became a case study in the high cost of unethical behavior. As of 2025, Volkswagen is investing heavily in EVs and carbon-neutral production, but the scandal continues to affect its brand image.
Tesla Today and the Global Auto Market
As of 2025, Tesla remains the world’s most valuable automaker by market capitalization, reaching approximately $1.4 trillion.5 Despite this, Tesla’s global sales performance declined in early 2025. In Q1, U.S. deliveries dropped by 8.6 percent, and European sales fell by 43 percent amid competitive pressure and backlash against company leadership.67
Meanwhile, the global EV market is shifting. BYD now leads with 21 percent of global EV sales, followed by Tesla at 16 percent, and Volkswagen at 7 percent.8 Market dynamics are now shaped by regulation, cost, reputation, and global supply chains more than just brand prestige.
According to US News, Tesla has the highest Market Capitalization in May 2025.
| Car Company | Market Capitalization* |
| 1. Tesla Inc. (TSLA) | $1.1 trillion |
| 2. Toyota Motor Corp. (TM) | $238.7 billion |
| 3. Xiaomi Corp. (OTC: XIACF) | $169.3 billion |
| 4. BYD Co. Ltd. (OTC: BYDDY) | $166.1 billion |
| 5. Ferrari NV (RACE) | $88.9 billion |
| 6. Volkswagen AG (OTC: VWAGY) | $57.9 billion |
| 7. Mercedes-Benz Group AG (OTC: MBGYY) | $56.4 billion |
| 8. Bayerische Motoren Werke AG (BMW.DE) | $53.1 billion |
| 9. General Motors Co. (GM) | $48.4 billion |
| 10. Maruti Suzuki India (MARUTI.NS) | $47.8 billion |
Source: US News. 2025-06-11 https://money.usnews.com/investing/articles/the-10-most-valuable-auto-companies-in-the-world
- About Tesla,” Tesla, accessed September 23, 2019, https://www.tesla.com/about
- Musk, Elon. “All Our Patent Are Belong To You,” Tesla, June 12, 2014, https://www.tesla.com/blog/all-our-patent-are-belong-you
- “Tesla: Social Responsibility Scorecard Shows Strengths And Weaknesses,” Seeking Alpha, January 6, 2015, https://seekingalpha.com/article/2801365-tesla-social-responsibility-scorecard-shows-strengths-and-weaknesses
- Jurevicius, Ovidijus. “Mission statement of Volkswagen,” Strategic Management Insight, September 14, 2013, https://www.strategicmanagementinsight.com/mission-statements/volkswagen-mission-statement.html
- Dey, Esha. “Tesla Adds 14 Billion A Day To Valuation As Big Money Dives In,” Bloomberg, July 6, 2020, https://www.bloomberg.com/news/articles/2020-07-06/tesla-adds-14-billion-a-day-to-valuation-as-big-money-dives-in
- “The biggest winners from Tesla’s sales slump,” Business Insider, April 2025, https://www.businessinsider.com/tesla-sales-slump-automakers-winning-gm-vw-byd-2025-4
- “Tesla sales have ‘significantly underperformed’ in all key regions, analyst says,” MarketWatch, February 2025, https://www.marketwatch.com/story/tesla-sales-have-significantly-underperformed-in-all-key-regions-analyst-says-41d8e507
- “Global top 10 EV automotive groups’ sales share Q1 2025,” Counterpoint‑Techloy, April 2025, https://www.counterpointresearch.com/global-ev-sales-share-q1-2025/
Creation note: This content was updated with the assistance of ChatGPT, a language model developed by OpenAI, and was subsequently reviewed and edited by the author for clarity and accuracy.
