Despite much progress in ESG reporting and push for more sustainability funding, digital transformation continues to be the focus in family-owned companies. These are the companies employing 2/3 of the global workforce. As a 2021 PWC survey, https://pwc.to/3y8T091 shows family-owned companies prioritize Digital Transformation (DT) over ESG. In the survey over 50% of companies focused on DT investments and only 16% on sustainability and ESG. This is the case of the world’s largest car manufacturer, Volkswagen, a German family-owned business with $260 billion in annual revenues. www.volkswagenag.com/

When Volkswagen used digital technologies to create “smart” engine management capable of detecting the US EPA (Environmental Protection Agency) test, the CEO congratulated his R&D team.
The software reduced the nitrogen dioxide emissions of a Diesel engine to the US  The 11 million “smart” cars sold in the US were emitting 40 times more noxious gases. Nitrogen Dioxide www.epa.gov/no2-pollution/basic-information-about-no2 causes harm to humans and through acid rain to plants and animals. An ecological disaster directly linked to DT.

Our analysis shows that the main failure was the disconnect between Digital Transformation and the ESG.
The whole idea of using digital technologies to cheat on EPA and ESG emission standards demonstrates the lack of understanding of Digital Transformation by the Volkswagen board of directors. In short, a governance failure in the first place. An internal culture failure and a disdain for rules, society, and the planet. A black eye to Digital Transformation. And the list is long.

What if in the early 2010s, Volkswagen would have integrated the ESG and Digital Transformation in a single transformation framework guiding the governance, ecological, economic, social, and technological as proposed by the AKFI?

• The ensuing Dieselgate scandal cost the company over $34.5 billion in damages and fines, a junk bond rating, and a public outcry.
• Did the company learn the full lesson? The answer is ‘work in progress’ at best!
• From the ESG perspective, yes. A sustainability council is now in place advising the board, and efforts are made to comply with ESG mandated ratings. Also, a large investment in electric cars is listed as an ESG initiative.
• From a Digital Transformation perspective, there is a strong link only to the use of technology for profitability. For example, the use of AI in factory automation.
• A bright spot is, Volkswagen has an active Digital Transformation  workers reskilling program

• Integrate the ESG and Digital Transformation  initiatives
• Use AKFI framework for business sustainability for ESG and DT governance
• Ensure company longevity through “black swans” extreme risks strategic planning