|
on the record
|
"Honesty is praised and left to shiver."
(Juvenal, Roman social commentator, AD c.60-130)
Trust at a premium Trust in business is at a
low across much of the developed world. Two-thirds of
respondents to a recent global surveyi claimed that
corporations only care about profits, while well over
half stated that non-governmental organisations
(NGOs), such as Amnesty International and
Greenpeace, represent "values I believe in". Another
study found that half of consumers believe that British
firms are less ethical than they were a decade agoii.
Thankfully, the overwhelming majority of The
Co-operative Bank's Partners state in survey after
survey that they trust the bank and approve of its
ethical and environmental performance. This has made
a sizeable contribution to the bank's ongoing success,
as demonstrated by the 'ethical and ecological value
analysis' contained within this Report (follow this link for our Ethical and Ecological value analysis), and
the announcement of record profits in 2002 for the
eighth consecutive year. These high levels of trust will
certainly not be taken for granted by the bank.
Striving for excellence In 2001, the bank
received an unprecedented number of awards and
commendations for its Partnership Approach and its
ethical and environmental performance; winning,
amongst other titles, the 2000 UK Environmental
Reporting Awards, the 2000 UK Social Reporting
Awards and Business in the Community's accolade of
'Company of the Year' 2001 (follow this link for details of the Business in the Community Awards). However, this
has not led to complacency. There is still scope for
improvement, and many of the bank's competitors are
beginning to take their social responsibilities much
more seriously. It is, therefore, welcome that
recognition of the bank's endeavours looks set to
continue. Early in 2002, for the third year running, the
bank was commended as part of the UK Social
Reporting Awards; it was declared a Premier Award
Winner at the Business Commitment to the Environment
Awards; was confirmed as a joint winner of the new
prestigious 2001 UK Sustainability Reporting Awards
and in 2002 was named as winner of a Queen's Award
for Enterprise in the Sustainable Development Category
for its Partnership Approach to Management.iii A further
example of the bank striving for excellence came late in
2001, when the bank embarked upon its fourth, and
most extensive, Ethical Policy consultation (follow this link for details of our 2001 Ethical Policy Review).
The review involved two million bank customers, and is
possibly the largest piece of ethical consultation
undertaken in the world.
Sustainability reporting on the
increase Back in 1998, when the bank produced
its first Partnership Report, it was one of a handful of
companies producing an independently verified
account of the way value is delivered to Partners in an
ecologically sound and socially responsible manner
(sometimes referred to as 'triple bottom line reporting'
or 'sustainability reporting'). It is most welcome that
corporate transparency and sustainable development
are continuing to find their way on to the agenda in
the boardrooms of businesses around the world.
Around 70% of FTSE100 companies now publish
environmental reports, and the UK is now credited as
having the world's highest incidence of environmental
reporting. Currently, social reporting is not as
prevalent, although it is growing rapidly.
Many reports of poor quality
Unfortunately, the picture is not uniformly positive. Five
years on, The Co-operative Bank is still the only UK
financial services organisation to produce an externally
verified sustainability report, and ethical and
environmental reporting is still rare outside FTSE350
companies. Furthermore, with some exceptions, the
surge in environmental and social reporting has not
delivered an improvement in the public's perception of,
or trust in, business. This may be due to the fact that
the quality of much reporting is questionable. The
European Commission, in the introduction to a recent
Recommendation on reporting, notes that "environmental
information disclosed by companies is often inadequate
and unreliable.iv A Business in the Environment survey
in the UK found that, whilst 90% of analysts and 82%
of investors say that they use environmental and social
information from companies, only about a third find the
information of good quality, and independent third
party sources are considered more useful.v
Importance of independent
assurance and benchmarking The
absence of robust independent third party verification
of data and commentary is possibly the single biggest
factor undermining sustainability reporting - less than a
fifth of reports are externally verified. Moreover, where
independent audit and verification is undertaken, the
work is all too often of questionable quality. A
particularly problematic area is that of 'balance': many
reports devote pages of commentary to the highlights
of their performance, whilst making little or no
comment on less favourable areas (and these
omissions often pass without comment in the
independent verification statements). To remedy the
situation, AccountAbility, with sponsorship from The
Co-operative Bank, CIS and the Co-operative Group,
are developing a standard for the auditing of social and
environmental reports, as well as the preparation of
independent third party verification statements. This
key standard should serve to improve the quality of
sustainability reporting across the world, and will feed
into a host of other guidelines and standards, such as
the assurance guidelines of the Sigma Project and
the Global Reporting Initiative (GRI). Staff at The
Co-operative Bank were amongst a handful of key
specialists invited to help craft the standard. A list of all
the guidelines and the sustainability standards
considered and utilised, and the bank's level of
involvement, is detailed on the website vi. This
includes an update on the Co-operative Union's
follow up to the Co-operative Commission's
recommendations to develop a social reporting
methodology and key social performance indicators for
the Co-operative movement.
Need for a robust reporting framework For over five years, The Co-operative
Bank has been arguing that businesses should focus
less on attaining independent certification for their
ethical and environmental management systems, and
focus more on developing independently verified
sustainability reports which contain hard targets. This
is contrary to many businesses and pressure groups
which claim that the presence of certified
environmental management systems is a robust proxy
for good environmental impact, and that reporting of
actual performance is an expensive additional cost that
adds little value. However, research sponsored by the
European Unionvii has found that, in general, those
companies with a certified environmental management
system do not perform significantly better than those
without. Indeed, in some cases they appear to perform
worse! The authors of the report suggest that policymakers'
attention should be focused on encouraging
and rewarding 'reporting', not merely 'management
systems'. The presence of management systems alone
is not sufficient to drive the desired improvements in
environmental and ethical performance. During 2001,
The Co-operative Bank was a member of the UK
Company Law Review consultative committee, and
urged that the disclosure of ethical and ecological
issues should be mandatory or, failing this, that stiff
penalties should be introduced for wilful omission of
such matters where they are material to financial
performance. The bank also called for a widening of
the scope of the audit review (drawing in appropriate
external expertise) to include how directors discern
which ethical and ecological matters are material. The
UK Government is expected to respond to the
Review's recommendations in 2002 with a draft UK
Companies Bill. The bank will play a full part in any
ensuing debate and endeavour to continue to draw
these important matters to the attention of its Partners.
Ethical consumerism This year's Partnership
Report describes the bank's performance on more
subjects, and in more detail, than ever before and,
hopefully, continues to set a standard for sustainability
reporting. It is the bank's belief that such reporting is an
essential prerequisite for any growth in ethical
consumerism. Research sponsored by the bank shows
that ethical consumerism is on the increase, and that
many more members of the public would purchase in
this way if only they had access to trusted information.
In 2001, The Co-operative Bank published the first ever
UK Ethical Purchasing Index (EPI) and found that
spending on green products and services had
increased by 18 per cent between 1999 and 2000.viii
The Co-operative Bank's ethical spending barometer,
produced in conjunction with the New Economics
Foundation, followed research published by the bank
in 2000, which revealed that, in the previous twelve
months, just over half of the population had bought a
product or recommended a company because of its
responsible reputation.ix A third of consumers were
seriously concerned with ethical issues when shopping
and a quarter had investigated a company's social
responsibility at least once. However, a massive 60%
of those surveyed stated that they did not have enough
information on companies' social or environmental
behaviour to make a purchasing decision. To those
who wish to see the ethical consumerism market
stimulated, mandatory sustainability reporting
requirements should be welcome. It is unlikely that
there will ever be widespread, robust social and
environmental reporting in the absence of legislation.
Moreover, without widespread reporting, benchmarking
cannot develop; and without benchmarking consumers
and other Partners will be denied the opportunity to
compare performance and exercise choice - and the
'ethical consumer' will remain confined to a relatively
small number of proactive purchasers. The bank's
research indicates that the potential for ethical
products and services in the UK could be as much as
30% of consumer markets. However, in order for this to
be realised, there needs to be an explosion in robust
ethical and environmental reporting in the UK. Trust
needs to be earned.
Developments This year, the bank has
increased the depth and transparency of its ethical and
ecological value analysis. The disclosure last year of an
estimated economic value of the contribution made by
the bank's ethical and ecological positioning was
greeted with widespread approval. Many
commentators noted that there is an urgent need for
companies who lead the pursuit of social responsibility
and ecological sustainability to present a robust
business case, lest investors and other Partners view
such initiatives as peripheral activities. This year's
analysis indicates that the contribution made by the
bank's ethical and ecological positioning is possibly
even greater than previously estimated (follow this link for our Ethical and Ecological value analysis). In
another development, the bank has had to delay
providing further details of the differential impact of its
major service channels (e.g., branches, internet, etc.)x.
As explained previously, the bank is keen to support a
number of emerging sustainability reporting standards
in order that Partners can compare the social and
ecological performance of different businesses. Over
recent years, this has entailed the bank adopting a host
of indicators, in addition to those specified by its
Partners. Many of the these indicators do not lend
themselves to disaggregation on the basis of service
channel, or require many years of data before
meaningful trends are discernible. However, the bank is
still adamant that such analysis is important. Where
appropriate, commentary has been provided in this
year's report, and this will be expanded on in future
years. Lastly, in response to feedback from Partners,
the bank has more clearly signposted all benchmarking
exercises (noted by  ); developed a concise table
(follow this link for Performance at a glance over time) which shows performance in key areas over
time; amended the partnership index (follow this link to the Partnership Index page) to
show the source and comparability of its indicators;
created a glossary; and developed a navigation tool
for the GRI sustainability reporting standard.
Looking ahead In January 2002, the
Co-operative Group Board agreed that the best
interests of both The Co-operative Bank and CIS would
be better served by bringing these complementary
and successful financial services institutions closer
together under common strategic leadership. This
mirrors the increasingly integrated markets in which
both operate, where an ability to offer customers a full
range of financial services is becoming a significant
competitive requirement. In April 2002, it was
announced that, in future, the Co-operative Group's
ownership of the bank and CIS would be held through
Co-operative Financial Services Limited (CFS), a new
Industrial and Provident Society. Mervyn Pedelty will be
the Chief Executive of CFS and the Board will be drawn
initially from the Boards of the bank and CIS. Both CIS
and the bank will continue to trade under their
respective brands. These developments will, in time,
necessitate a review of the currently independent
sustainability accounting and management systems of
the bank and CIS. This should not prove to be overly
problematic as both organisations have worked
together on projects such as the Co-operative Union's
KSPIs and SPI Finance and, just as importantly, both
are strong advocates of robust sustainability reporting.
There is, therefore, already an underlying convergence
of sustainability systems underway, upon which a
strong ethical partnership can be built.
|
 |
- Undertaken by Edelman PR Worldwide in 2000.
Cited in Community Affairs Briefing, February/March 2001.
- Undertaken by ERM in 2000. Cited in the Observer, 9 December 2001.
- For an update on these and other awards/commendations visit
www.co-operativebank.co.uk/ethics/ethical_ecology_awards.html
- www.europa.eu.int
- www.business-in-environment.org.uk/s_stakeholder.html
- www.co-operativebank.co.uk/partnership2001/pr/standards.html
- www.environmental-performance.org
- www.co-operativebank.co.uk/ethical_consumerism_purchasing2001.html
- www.co-operativebank.co.uk/ethics/ethical_consumerism.html
- for background information visit
www.co-operativebank.co.uk/1998/page_64.html
- www.co-operativebank.co.uk/partnership2001/glossary.html
- www.co-operativebank.co.uk/partnership2001/gri.html
- www.co-operativebank.co.uk/partnership2001/standards.html
To follow any of the links mentioned within the Partnership Report 2001,
please visit the links page. |
The Co-Operative Bank's Partnership Approach
|
Balance The Co-operative Bank is committed
to serving the interests not just of shareholders or
customers, but of all seven Partner groups involved
in the bank's activities. The bank seeks to deliver
value (as defined by the Partner, not the bank) to all
Partners in a socially responsible and ecologically
sustainable manner. Of course, conflicts of interest
can arise: situations where giving to one Partner will
mean taking away from another. Therefore,
alongside 'profitability', which is absolutely vital to
the bank's continued existence, the pursuit of
'balance' is a key concept within the Partnership
Approach. Is the bank getting the balance right over
time? The bank believes it is; but this 'warts and all'
Report allows all Partners to review the bank's
performance and decide for themselves.
Responsibility In addition to a detailed
analysis of how the bank has performed in the past,
each Partnership Report describes a wide range of
targets for the future (64 in total this year). Alongside
each target is the name(s) of the staff member(s)
charged with delivery. In this way, it is transparent,
both internally and externally, where operational
responsibility lies.
|
|
|
