Compliance–Cost or Benefit?

Do you remember the Volkswagen emissions scandal? In November 2021 the High Court of Australia dismissed Volkswagen’s attempt to overturn the $AU125 million fine for making false representations about compliance with Australia’s diesel emission standards. In the US the company had already agreed to pay $US2.8 billion.

Earlier Fortune magazine (Oct 2020) reported that VW’s cost of not complying was astronomical:

Only When Someone Is Looking

Unfortunately, the attitude of VW appears to have been “Compliance only when someone is looking”. They wasted their energy designing software which made emissions acceptable only long enough to fool the regulator, then turn back to non-compliant emissions for normal operation. If only they had expended that effort into improving the design, they would have saved billions and produced a better vehicle.

Dare I suggest that the culture of the organisation did not believe in compliance, yet it was their claims of compliance that allowed them to sell around 11 million cars worldwide, 57000 of these in Australia.

What are the Benefits?

The VW story is a good demonstration of the cost of non-compliance, but is avoiding cost the only benefit? It is my belief that any compliance requirement should also be of benefit to the organisation, either by improving internal processes or external delivery or both. Implementation should ultimately reduce costs such as rework or recalls, reduce waste in resources and time, and improve sales.

If you’re not measuring the benefits of compliance, then maybe there is an opportunity to be pleasantly surprised.