justassurance i is a social enterprise dedicated to working with stakeholders, or 'Partners' in Co-operative Financial Services' (CFS) language, to provide assurance of sustainability reports.

justassurance was paid £65,000 to provide assurance in connection with the CFS Sustainability Report 2003.ii justassurance has no other relationships with CFS that might compromise its independence.

justassurance has sought to act impartially with respect to CFS' various stakeholders. Statements of independence, impartiality and conflict of interest, together with the qualifications of the Principal Assurance Providers, are detailed at www.cfs.co.uk/sustainability2003/assurance.

Responsibilities of the directors and the Assurance Provider The directors of CFS are responsible for the content of the CFS Sustainability Report 2003. In addition to this Assurance Statement, CFS has commissioned opinion statements on its performance from respected third parties. This statement represents the justassurance view of the Sustainability Report, excluding the opinion statements on performance.

Assurance standards In assessing the Sustainability Report, we have used the AA1000 Assurance Standard.iii This requires us to review the completeness, materiality and responsiveness of the Report.

Scope and basis of the Assurance Provider's opinion To prepare this statement we reviewed the scope of the Sustainability Report, assessed areas of risk, contacted stakeholders, conducted stakeholder research, interviewed managers and scrutinised the Report and underlying data and documents. Unrestricted access to senior managers was facilitated where we had specific issues to investigate. However, we were not granted some requests for general interviews with senior management. We have relied on the work of KPMG regarding claims based on the bank's and CIS' Financial Statements, which they audited. We have also carried out an independent review of the bank's Safer Chemicals campaign.iv
We provided feedback to CFS during the assurance process. Further details of our approach to assurance may be found at www.cfs.co.uk/sustainability2003/audit/approach.htm.

Opinion
On the basis of the work we have done, we believe this Report fairly represents CFS' activities during 2003, its economic, social and ecological impact on its stakeholders and its responses to their concerns.

Our review against the AA1000 Assurance Standard is set out below.

Completeness Overall, CFS has an effective process in place for identifying and understanding material aspects of its sustainability performance. It has included in the Report, as far as we have been able to ascertain, all material information on all activities that are relevant to its Partners. The accounting, auditing and reporting principles applied by the CFS Sustainable Development Team are sound and comprehensive, and reflect its reputation as being a worldwide centre of excellence. In what is a considerable achievement, control and data-gathering systems across CFS have now been integrated, and always to the highest standard. However, at the outset of our investigations some work remained. For example, it initially proved challenging to collate environmental data across CFS.
The bank continues to be unique in its commitment to, and disclosure of, a detailed set of ethical and ecological policies that are based on its customers' views as to how it should conduct business. We believe that there is strong evidence of the bank adhering to its Ethical Policy. In particular, the ethical screening of new accounts and business opportunities was found to be managed very effectively. It is noteworthy that CIS was the first UK investor to put its entire UK voting record on its website. We believe its voting activities and attendance at AGMs have influenced the corporate sector and investment community. However, we found that systematic accounting of voting on overseas company shareholder resolutions was incomplete (in respect of 'support for management'). More generally, the Responsible Shareholding Unit's (RSU) case-studies were found to be thoroughly researched and collaboration with other institutional shareholders is good. However, data and documentation in the RSU were not organised systematically and in a way that allowed us to establish satisfactory evidence of the links between research and engagement or risk analysis and investment decisions. For the future, we note and welcome the RSU's commitment to better demonstrate how engagement activity and ensuing outcomes are related, and to disclose full particulars of overseas voting. We also welcome the significant commitment by CFS to engage in consultation with CIS customers on its responsible shareholding and engagement policies, and the intention to launch a new Socially Responsible Investment Policy in 2005.

Materiality We believe the Report describes the principal social, ethical and ecological issues of which CFS is aware, and that issues material to Partners have been identified in the Report. However, we believe that there is now a need for CFS to review the stated priorities of certain Partners, particularly customers and suppliers. Furthermore, in our opinion, CIS Financial Advisers should be more fully recognised within those sections of the Report relating to staff, and any additional material issues identified. It is a very positive development that CFS is now reporting on its activities relating to regulation and the way it is using the influence available to it.

Responsiveness Responsiveness concerns CFS' reactions to stakeholder issues, including the quality of communication with them. CFS is making a sustained effort to work with its stakeholders. Furthermore, the presentation of this Report is good and the design and accessibility of print and website versions of the Report are of a high standard. We welcome the introduction of separate sections to deal with the environmental, human rights and animal welfare impacts of purchasing, investment assessments and the provision of banking services.

In general the targets set are appropriate to the challenges CFS' performance presents. While specific targets are generally clear, in some areas, such as financial inclusion, it is not entirely evident what CFS' strategy is. While we observed a marked inconsistency between CIS and the bank in the number of targets reported upon for 2003, most targets for 2004 are CFS targets and make demands more evenly across the organisation. We recognise CFS' acknowledgement that present performance in relation to gender diversity and the employment of ethnic minorities is unsatisfactory and welcome the commitments set out in targets for recruitment and career development. While we also welcome CFS' reporting on its new Well-being Policy, a significant proportion of staff continue to raise concerns about pressure at work. This Report contains many targets in respect of the ecological sustainability of its operations - in some instances there is little room for improvement. However, whilst CFS has done much to reduce the environmental impact of its car fleet, and has committed to action in relation to hire cars, there is still only limited understanding and management of mileage arising via employees' and CIS Financial Advisers' use of their own vehicles. We note the lack of targets for financial performance, which is understandable given the current business context. We hope that integrated sustainability targets can be developed at some point. Lastly, while CFS acknowledges that the interests of its Partners may sometimes be in conflict, it would be useful to understand CFS' approach to dealing with such conflicts.

Adrian Henriques, Principal Assurance Provider, justassurance

Richard Evans, Principal Assurance Provider, justassurance
25 May 2004

i www.justassurance.org
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ii CFS includes The Co-operative Bank plc ('the bank') and
Co-operative Insurance Society (CIS). The bank is taken to include all aspects of smile.
iii www.accountability.org.uk
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iv www.cfs.co.uk/sustainability2003/saferchemicals