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on the record
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"Honesty is praised and left to shiver."
(Juvenal, Roman social commentator, AD c.60-130)
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Tough times In 2002, the FTSE100 index fell by
a quarter - the third consecutive year in which the
London stock exchange finished lower than it began. In
Japan, the Nikkei 225 index fared even worse, finishing
lower than it had at any time in the preceding two
decades.i On Wall Street, the Dow fell by 17% in 2002,
its worst performance for 28 years. Taken together, this
represented the most severe bear market since the
Great Depression more than 70 years ago.ii Many
predicted that the prophets of doom and gloom would
now be vindicated: the fragile shoots of corporate
Sustainable Development and Ethical Consumerism
would wither under the pressure of an economic
downturn and there would be a return to the situation
where "the business of business is business".
Ethics stands firm In fact, the opposite has
happened. As predicted in the first Partnership Report
in 1998, an increasing number of companies are taking
a triple bottom line, or sustainability, approach to
management. Ethical Consumerism is also slowly
growing. Follow this link for further information on the growth of ethical consumerism. At the centre of
this revolution is enhanced corporate governance, more
rigorous risk management and internal control, much
improved accounting and reporting and a complete
overhaul of independent audit and assurance. External
forces are of course playing a large part. June 2002
saw not only the biggest corporate failure in history,
WorldCom, but also a series of multi-million pound
accounting frauds.iii Now it was not just the public and
NGOs who were taking corporate utterances with a pinch of salt, but also financial analysts and investors.
Across most of the world the rules governing those
who watch over business - from auditors to non-executive
directors - are being tightened. The option of
not disclosing environmental information (and, in some
cases, social information) is increasingly being
removed. In France, Norway, Denmark, the
Netherlands, Australia and Sweden iv there exists some
form of mandatory environmental disclosure
requirement. The bank and CIS are firmly of the opinion
that mandatory reporting is also required in the UK for
large companies; and in July 2002 just under one
hundred Members of Parliament welcomed the bank's
position in the form of support of an Early Day Motion.v
Shareholders are now also much more willing to
question corporate actions - and the way they are
rewarded. For example, in 2002, CIS launched a first for
the UK investment industry by putting its entire UK
investment voting record on its website.vi
But trust still at a low Of course, this
'revolution' is currently little more than 'ethics lite',
which may satisfy some investors, but has done little to
tackle the wider lack of trust in business amongst the
general public. There is now a considerable body of
research showing that the public's trust in organisations
and institutions of all types is deteriorating. Some of
the research also reveals that, arguably, there is one
area where there has been a persistent deterioration in
trust over the last decade - business. Since the early
1980s, opinion pollsters MORI have researched levels of trust associated with the UK's different occupations.
They have found that, over the period 1993-2002, trust
in 'doctors' and 'teachers' has increased and that
these professions are trusted by more than 80% of
those polled. By comparison, trust in 'Business
Leaders' shows a persistent decrease over the same
period. 'Business Leaders' are trusted by
just over 20% of those polled and are viewed as
only marginally more trustworthy than journalists and
politicians.vii Other research by MORI has found that
the proportion of the UK public who feel that industry
and commerce does not pay enough attention to its
responsibilities has increased from 68% in 1997 to
73% in 2002, and that the number of people able or
willing to name any company that contributes to
society and the community has remained static at
33-34%. Such trends are particularly worrying for
business considering that, compared with five years
ago, the proportion saying corporate responsibility is
very important in their purchasing has almost doubled,
from nearly one in four (24%) in 1997 to more than two
in five (44%) in 2002.viii
General lack of quality As explained, with
some exceptions, the surge in environmental and
social reporting has not delivered an improvement in
the public's perception of business. This is principally
because the quality of much of the reporting that has
taken place is questionable. This is a view shared by
the European Commission which, in the introduction to
its Recommendation on Environmental Reporting, noted that "environmental information disclosed by
companies is often inadequate and unreliable." ix Many
firms which produce environmental reports comment
that the investment community does not take them
seriously. However, perhaps this is due to the generally
poor quality of output. A Business in the Environment
survey in the UK found that, whilst 90% of analysts and
82% of investors say 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.x The
absence of robust independent third party verification
of data and commentary is another major factor
undermining ethical and environmental reporting,
although matters are improving. Research undertaken
in 2002 by KPMG found that 27% of reporters included
a third-party verification statement, compared with
18% in 1999.xi Verification rates are by no means
uniform across the world: in the UK 53% of reports
surveyed were verified, whilst in the USA and Germany
just 3% and 6% respectively were verified. Where
independent audit and verification is undertaken, the
work can be 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 favorable areas (and these omissions often pass
without comment in verification statements).
Leadership Six years on from the bank's first
Partnership Report, The Co-operative Bank and CIS are
still the only UK financial services organisations to
produce externally verified sustainability reports; and,
although growing, ethical and environmental reporting
is still not undertaken by the majority of FTSE350
companies. As described on the inside of the front
and back covers, The Co-operative Bank has been
recognised as having robust sustainability accounting,
management and reporting systems, and there is now
evidence to suggest that in recent years this has led to
an increase in trust in the bank (information on which follows). The bank
believes this has contributed to its profit growth, follow this link for more information on how the bank believes trust has contributed to its profit growth. In addition to managing
their own performance, the bank and CIS are both
involved in the development of a range of standards
that seek to set the benchmark for social accountability
and sustainability reporting. In 2002, the bank and CIS
sponsored the development of AccountAbility's
Assurance Standard, AA1000as, which will be used to
improve the preparation of independent third party
verification statements worldwide (published March
2003). The bank is also currently co-chair of the
Technical Committee, which is charged with reviewing
the whole of AccountAbility's AA1000 series. It has also
worked with the British Standards Institute and others
on Project Sigma, which in the summer of 2003 will
produce the world's first guidance standard for
sustainability management. In particular, the bank, as
the only representative of the financial services
industry, has been heavily involved in the sustainability
financial accounting workstream. Late in 2002, the
bank, CIS and eight other financial institutions from
around the world launched SPI Finance and a basket of
key Social Performance Indicators, currently one of only
two sector supplements recognised by the Global
Reporting Initiative (GRI). Also in the summer of 2003,
Co-operatives UK (the new name for the Co-operative
Union) will announce a set of environmental, social and
co-operative indicators applicable to co-operatives of
all sizes, and from all sectors. Co-operative Financial
Services played a full part in the development of this
project, with the bank, Lincoln Co-operative Society
and Oxford, Swindon and Gloucester Co-operative
Society constituting the working group which
proposed the indicators.
Developments This year, the bank is extending
its project to provide information on its sustainability
performance in a variety of languages on the website.
A summary of the Partnership Report 2001, provided in
Bengali, Cantonese, Gujarati, Hindi, Punjabi, Urdu and
Welsh, has been downloaded over 1,200 times. The
bank also provides, for the first time, a detailed
breakdown of the rationale behind each of the
instances where business was declined in 2002 as a
result of its Ethical Policy (follow this link for further information on ethical policy declines). This year, for
the first time, the bank begins to analyse the impact of
donations to affinity partners and provides details of
the wide range of community volunteering engaged in
by the bank's staff (follow this link for more details of staff community volunteering activities). In terms of ecological
sustainability, the bank has responded to feedback and
now discloses further details of its ecological
purchasing manual xii and a rationale for decisions taken
(follow this link to find out more about the bank's ecological purchasing manual). As per GRI guidance, details of corrections
to information provided in previous Partnership
Reports are now provided.xiii
Looking ahead As described in the Chief Executive's statement, in
April 2002, Co-operative Financial Services (CFS)
was created to bring The Co-operative Bank and
Co-operative Insurance Society (CIS) under common
leadership. These developments will necessitate a
review of the currently independent sustainability
accounting and management systems of the bank and
CIS. There is a substantial amount of work to be done;
however, this should not prove to be overly problematic
as both organisations have worked together on a
variety of projects, and just as importantly, both are
strong advocates of robust sustainability reporting.
There is, therefore, already an underlying convergence
of sustainability systems upon which a strong ethical
partnership can be built.
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- Guardian (31.12.2002). Oil majors grease rally
- Financial Times (31.12.2002). Stock markets down third year in row
- Guardian (30.12.2002). At least the monkey will be missed
- Adams, C. (4th Quarter, 1999). AccountAbility Quarterly 11
- edm.ais.co.uk
- www.cis.co.uk
- What's trust worth? (2002). New Economics Foundation. ISBN: 899407502
- MORI Annual Corporate Social Responsibility Study, 2002. MORI
interviewed a representative quota sample of 2,000 adults aged 15+ in
Great Britain in July 2002.
- DN: IP/01/814 at www.europa.eu.int
- www.business-in-environment.org.uk/s_stakeholder.html
- KPMG International Survey of Corporate Sustainability Reporting 2002
- www.co-operativebank.co.uk/ethics/partnership2002/pr/epm.html
- www.co-operativebank.co.uk/ethics/partnership2002/pr/gri.html
To follow any of the links mentioned within the Partnership Report 2002,
please visit the links page. |
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world class trust (2002-03)
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The Co-operative Bank is regularly cited by a variety of Partners around the world as being an
organisation which enjoys a high level of trust. This performance is particularly impressive
considering that the bank's operations are virtually wholly restricted to the UK, and that other
companies listed in global indexes are all multinational organisations. Further information on the degree to which the bank is 'trusted by its Partners' is detailed in the 'Delivering Value' section for suppliers.
Trust Builders, 2002 (UK)
1. The Co-operative Bank
2= Nationwide Building Society
2= Marks & Spencer
Source: New Economics Foundation (1)
Companies best at demonstrating Corporate Social Responsibility (CSR), 2002 (UK)
1. The Co-operative Bank
2. BT
3. BP
4. Marks & Spencer
5. Tesco
Source: The BPRI Group(2)
CSR Perception Index, 2002 (Global)
1. Ford
2. BP
3. IBM
4. GlaxoSmithKline
5. The Co-operative Bank
Source: Echo Research(3)
Companies that best manage environmental resources - Media and NGOs' responses, 2002 (Global)
1. Ford
2. Microsoft
3. BP
4. Greenpeace
5. The Co-operative Bank
Source: Financial Times / PwC(4)
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- What is Trust Worth? (2002). Research conducted amongst forty
journalists, consultants, consumer activists and business people asked 'who had done the most to increase trust'.
- Survey conducted among 96 Members of Parliament (MPs) on
the Political Opinion Panel (June-July 2002). Steps taken to
ensure that the panel reflects the political composition of the
House of Commons, length of service in the House, size of
majority and age of MPs.
- Based on analysis (January 2002-March 2002) of over 1,000
media items across China, France, Germany, South Africa, UK
and the US. Favourable impact score was applied to each article
on a scale from 0 to 100. Criteria affecting the extent to which
the coverage was favourable included placement prominence,
visuals, the strength of the message for and against CSR,
sources quoted, content and tone.
- World's Most Respected Companies Report (2002). More than
80 media commentators and non-governmental organisations
(NGO) were questioned between October and November 2002.
Data weighted by GDP of the respondent's country.
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The Co-operative Bank's Partnership Approach
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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 by 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 (77 in total this year). Alongside
each target is the name(s) of the staff member(s)
charged with delivery. In this way, it is clear, both
internally and externally, where operational
responsibility lies.
Follow this link for a description of the bank's governance structure and management systems.
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