Sustainability,
governance and
management

Commentary

Context In 1987, the Bruntland Report,
'Our Common Future',i defined sustainable development as 'development that meets the needs of the present without compromising the ability of future generations to meet their own needs.' Co-operative Financial Services recognises the need to develop its business in a sustainable manner. Follow this link for details of CFS' approach to sustainable development. Described in this section are the governance and management systems underpinning this goal. Both CIS and the bank strive to be  leaders in sustainability, and via CFS' first Sustainability Report, Partners have the means to assess the degree to which each business has been successful in this aim during 2003. In order to facilitate Partners' understanding further still, CFS has sourced and/or commissioned research and analysis that seeks to answer the questions of 'which businesses are perceived to be best at corporate social responsibility (CSR) and sustainability, and its various aspects'.

Perception and reputation Described below are the conclusions of research conducted amongst UK Members of Parliament (MPs) and the UK General Public, and the results of an analysis of media coverage carried out in the UK and globally. Taken together, these three measures indicate that the bank is held in high esteem by sections of society, and that CIS is increasingly well regarded. This is a considerable achievement given the generally low esteem in which the financial services sector is held in the UK. It is anticipated that the development of a new Socially Responsible Investment Policy for CIS will significantly enhance CIS' future ratings. Follow this link for details of CIS' project to develop a Socially Responsible Investment Policy for CIS.
The degree to which staff understand CFS' core values is described here, and the degree to which suppliers are aware of, and rate CIS' and the bank's ethical and sustainability policies is described here.

• During 2003, a poll of UK MPs ranked the bank, for a second year, as the 'company best at demonstrating the principles of Corporate Social Responsibility' (CSR): the key reason given by MPs for this choice was 'express principles of CSR in investment'.
• The UK General Public's perceptions were tested in an NOP poll, conducted during April 2004. When asked to spontaneously name a financial provider who takes ethical and environmental issues into account, the bank and CIS were the first and second most cited organisations. Geographically, the highest UK awareness was displayed in the North West of England (14%) and London and the South East (17%).
• In 2004, Echo Research released the findings of their third international CSR Report; consisting of opinion research and analysis of over five thousand CSR related media mentions across the globe. In terms of 'positive coverage', the bank was ranked first in the UK and third in the world. It was singled out for "communicating clearly their differentiated values" and for the fact that "CSR was deeply embedded in their strategy".

Sustainability reporting Openness and honesty are key to building trust with Partners, and both CIS and the bank have devoted significant resources to these areas in recent years. CFS' achievements in this regard have received welcome recognition from across the world.

• In April 2003, the bank was awarded first place in the European Sustainability Reporting Awards 2002 (which prohibited it from entering the 2003 awards).
• In 2004, the bank's Partnership Report was declared as winner of the ACCA ii UK Sustainability Reporting Awards for the third consecutive year. It also received an Electronic Media Commendation for online reporting. In parallel, CIS was declared joint winner of the UK Social Reporting Awards for the second time in three years.
• In the United Nations Environment Programme's most recent Survey of Corporate Sustainability Reporting (2002),iii the bank gained first place, and CIS came 14th.
• Within this, the bank was also ranked first for its 'Environmental Performance' and 'Accessibility and Assurance'. The Report concluded that "The alignment of brand, reputation and reporting is clear, both to the bank and to its stakeholders. A model for others to follow".
• The Employers' Forum on Disability (EfD) launched a Global Inclusion Benchmark iv in 2001.The Benchmark examines how organisations communicate their commitment to disabled people when they describe their impact on employees, customers, suppliers and the wider community. The bank achieved third place in the 2003 index, with CIS ranked fifth.

Engagement indices Business in the Community (BitC)v operates a series of benchmarks that compare the 'engagement' of companies in areas such as Corporate Responsibility, Diversity and the Environment. These indices do, to a small degree, take account of actual performance in some areas, but matters of policy tend to dominate. During 2003, CFS participated in four benchmarking exercises, submitting data separately for CIS and the bank.

• BitC's Corporate Responsibility Index was released in March 2004. The bank was placed seventh of 134 entrants, scoring an 'A' rating in all five assessment categories. Disappointingly, CIS was ranked 40th, scoring four 'A' ratings and one 'B' rating.
• In Business in the Environment's (BiE) Eighth Index of Corporate Environmental Engagement, the bank was placed first in the banking and financial services sectors, and maintained its position in the 'Premier League' of companies by scoring more than 95%. CIS was ranked third amongst the four participating insurance providers, 14th amongst 'financials' and was ranked 76th of 177 participants, achieving a score of 83.65% - down 11.5 percentage points from 2002. Improvements to stakeholder engagement, an increase in quantified targets and the scope of accounting systems have been implemented during 2003.
• The Opportunity Now benchmark examines gender equality in the workplace. Both CIS and the bank achieved a silver rating in the exercise, and will aim to achieve a 'gold' rating by 2006.
• The Race for Opportunity (RfO) benchmark examines how companies are diversifying their workforce, customer base and suppliers, in terms of ethnic minority representation. Both CIS and the bank were awarded a 'certificate of participation' in 2003, but did not feature in the index rankings.

Resource During 2003, CIS' and the bank's ecology, ethical finance, diversity, social accountability and sustainability reporting units were combined to form a new CFS Sustainable Development Team (13 staff). The Team is led by the Head of Sustainable Development. In addition to the aforementioned areas, the Team is broadly tasked with the implementation of CFS' pursuit of sustainable development, which is described on page ten. The Team's remit includes development and implementation of the bank's Ethical Policy (follow this link for details of the bank's Ethical Policy implementation) and development of a new Socially Responsible Investment Policy for CIS (follow this link for details of CIS' project to develop a Socially Responsible Investment Policy). Diversity responsibilities include advice on staff matters and delivery in relation to all other Partners (follow this link for details of CFS' approach to diversity). In parallel, CIS' and the bank's Community Investment functions have been brought together (four staff), and by the end of 2003 all Head Office donations and staff volunteering had been consolidated under the Head of Community and Co-operative Affairs. Follow this link for details of community investment. Merger of CIS' and the bank's Public Affairs units has allowed for expansion of the Customers Who Care team (two staff), The Director of Corporate Affairs has ultimate responsibility for all of the aforementioned areas, as detailed on CFS' website.vi An update on progress with priority sustainability initiatives is provided regularly to CFS' Executive Committee.

Policy, governance and management systems CFS' approach to sustainable development is explained here. This sets out the minimum conditions for ecological sustainability and is heavily influenced by an approach referred to as 'The Natural Step'. Follow this link for details of CFS' approach to Ecological Sustainability. CIS' environmental management systems were certified to the ISO14001.vii standard in May 2003. The bank's management systems are considered to be equally robust, and it is intended that CFS will realise ISO14001 certification for all of its businesses in 2005.

The AA1000 management framework.viii underpins CFS' approach to social responsibility, much as it previously did CIS' and the bank's; ensuring that due regard continues to be paid to the views and opinions of CFS' Partners.

During 2003 and early 2004, there were substantial changes to many aspects of CIS' and the bank's ethics and sustainability policy and governance.

• Sustainability steering committee Late in 2003, a Sustainability Steering Committee was established under the chairmanship of CFS' Resources Director. The Committee's remit encompasses matters of ethics, sustainability and diversity in the areas of procurement, property management, human resources and products and services. The Committee is tasked with establishing policy, development of KPIs and monitoring of performance. In parallel, a new CFS Sustainable Procurement and Supplier Policy has been developed, as described here. Priority works in the area of Diversity for 2004 include enhanced website accessibility, development and implementation of Accessibility and Legibility Guidelines, the promotion of the availability of alternative formats to disabled customers (follow this link for details of service for disabled customers) and further improvement in the recruitment and retention of staff from ethnic minorities (follow this link for details of CFS' approach to diversity).
• Health, safety and welfare Details of a new CFS Health and Safety Policy and governance structure are detailed here.
• Bank, ethical finance The bank's Ethical Policy stipulates who the bank will and will not finance. It has been reviewed a number of times since its launch in 1992. In each instance, the Ethical Policy has been formulated on the basis of an extensive programme of customer consultation, as described here.
• CIS, ethical finance The CIS Environ Trust ix has been guided by an external committee, the Responsible Shareholding Advisory Committee. In 2001, the remit of this committee was extended to provide independent advice on all aspects of Responsible Shareholding (follow this link for details of CFS' approach to Responsible Shareholding), which was launched in 1999. Going forward, a clear customer mandate will be established for CIS' Responsible Shareholding engagement programme, much as the bank's customers currently guide its Ethical Policy.

Assurance During 2003, CFS conducted a review of its assurance and verification processes. justassurance was identified as the external assurance provider best able to develop an expert view of the extent to which CFS is reporting its sustainable development performance in an accurate, complete and material fashion. CFS has adopted the AA1000 Assurance Standard,vii which places emphasis on the importance of stakeholder engagement in the assurance process. Follow this link for the auditors' assurance statement.

Legislative compliance During 2003,
CFS was not subject to prosecution for environmental offences, and had no reportable incidents. There were no prosecutions for health and safety offences in 2003, and just 521 incidents, the vast majority of which were associated with trips, slips and falls. Follow this link for details of health, safety and welfare.

Sustainability value analysis

• Internal annual overhead associated with the maintenance and development of the Sustainable Development Team, £686,000.
• Annual costs relating to ethical and sustainability external research, audit and commentary, £542,000.

Influence and action

Mandatory reporting In October 2003, CFS responded to the Operating and Financial Review (OFR) Working Group consultation x on how directors can assess whether an item is material to their company, and hence must be included in the OFR, which all large UK companies will need to produce in 2006. CFS advocated that the Working Group "join up their thinking with that of other Government consultations, and consider advocating a set of ethics and sustainability Key Performance Indicators, that would be applicable to all large businesses covered by the OFR requirements. These would form the foundation of the consideration of social, ethical and environmental materiality questions." Related to this, early in 2004, CFS supported calls by a Coalition of UK NGOs (CORE)xi for time to be given to a Private Member's Bill which advocated mandatory ethical and environmental reporting for large UK companies.

Project SIGMA  During 2003, CFS formed part of the SIGMA Working Group, and in September 2003, the Sigma Guidelines were published.xii The guidelines detail a suggested approach to developing and implementing a sustainable development management system. During 2004, CFS will work with the British Standards Institute and other organisations to develop, if appropriate, a British Standard in Sustainable Development Management Systems.

BitC indices  In 2003, CFS lobbied on a number of occasions for increased transparency to be built into the BitC indices.v Just 5% of the businesses completing the 2003 Corporate Responsibility Index agreed to share their submissions with third parties. Disclosure of the submissions of leading participants would improve the credibility of the indices and help guard against exaggeration.

i UNWCED (1987). Our Common Future (The Bruntland Report). Oxford University Press.
ii www.acca.org.uk
(This link will open in a new window)
iii www.sustainability.com/trust-us
(This link will open in a new window)
iv www.employers-forum.co.uk
(This link will open in a new window)
v www.bitc.org.uk/programmes
(This link will open in a new window)
vi  www.cfs.co.uk/sustainability2003/resources
vii  www.iso.org
(This link will open in a new window)
viii www.accountability.org.uk
(This link will open in a new window)
ix  www.cis.co.uk/pages/savings/SAV005_4.asp
(This link will open in a new window)
x www.dti.gov.uk
(This link will open in a new window)
xi www.foe.co.uk/campaigns/corporates/core/index.html
(This link will open in a new window)
xii www.projectsigma.com
(This link will open in a new window)