1. Background of Westpac
Westpac Banking Corporation is a public company that was founded in 1817 as the first and oldest bank in Australia. In 2008, after the St.George Bank Limited was merged with Westpac, it is ranked in the top 5 listed companies by market capitalization on the Australian Securities Exchange Limited (ASX). Currently, it contains five business areas (Business and Consumer Banking, Wealth Management, Westpac Institutional Bank (WIB), New Zealand Retail and Pacific Banking) and reaches global assets of $654 billion.
The origin of the CSR reporting can be concluded as “Shaping the future landscape and managing the current landscape”. It contains several meanings. For the external stakeholders, the …show more content…
company seeks to not only focus on increasing the shareholder value, but anticipate the most pressing emerging societal issues to benefit the customers and the wider community as well.
For the internal stakeholder, the company wants to continually improve the staff morale by creating a company where people want to work. In order to achieve this, the company has issued its 'Social Impact Report ' since 2002. The report shows clear measures of performance against more than 70 indicators covering social, environmental and economic dimensions.
2. Situation of Westpac
1.1 Key issues
The issues that are currently most material to Westpac group are illustrated as follow. The first issue is customer service that focuses on how to build deeper relationships with customers. The second issue is regulation that considers how to ensure productively engage in regulatory discussions to create a better financial system. The third issue is multi-brand that focuses on how to ensure keep the brands distinctive and respect customer choice. The fourth issue is …show more content…
future growth that given global uncertainties and lower rates of domestic credit growth. The fifth issue is IT systems that concerns about IT stability and security across the industry and what Westpac are doing about it. The sixth issue is employee development that concerns how to ensure employees are given opportunities to develop and how to equip them with the skills to address the challenges of the future. The seventh issue is responsible lending and investment that concerns how to make sure Westpac group take account of the challenges of their changing world by considering environmental, social and governance issues in their investments and lending. The eighth issue is climate change that includes the challenge of reducing emissions whilst growing business and transitioning financing activities to low emission activities and industries. The last one is diversity and flexibility that considers how to build on early progress to ensure that Westpac group continues to be a place where the best people want to work. As the commitment to corporate responsibility of Westpac group is by fully integrating corporate responsibility into the way do business that they can sustainably enhance shareholder value and sustainability is a core component of Westpac’s culture and corporate strategy including managing environmental impact.
1.2 Key stakeholder
The major stakeholder of Westpac group includes suppliers, shareholder, employees, partners, customers, environment, and community. Westpac’s CEO has overall responsibility for the Group’s environmental policies and performance with Board oversight via the Board Sustainability Committee, which includes monitoring strategic and operational response to climate change. Westpac’s Environmental Coordinator co-ordinates the environmental policy development and ensures that the implementation of its objectives and reporting responsibilities are consistent group wide. Westpac’s Environmental Advisory Group is central to the management of operational issues including taking account environmental impact into lending process for customers across the group as well as development and implementation of energy management and emissions reduction programs.
1.2.1 Suppliers
The sustainable supply chain practices of Westpac group were top-rated for the banking sector by 2011 Dow Jones Sustainability indexes. Westpac group have continued to roll out their sustainable supply chain management (SSCM) framework to suppliers with continuous improvement of the SSCM framework, which allow Westpac to target suppliers more efficiently comply with SSCM requirements. Paper is a core resource of Westpac and is created from limited global resources by production processes that can have negative social and environmental impacts. The objective of Westpac is to minimize the quantity of paper purchased and maximize the sustainable qualities of the paper used consistent with business requirements. The Westpac Group requires its suppliers with sustainable forestry management practices and clean production processes. Also Westpac is committed to working with its suppliers to improve the social, ethical and environmental business practices of its supply chain and reduce packaging. If suppliers do not meet the criteria outlined in paper purchasing policy, Westpac will work with them to remedy gaps in performance or end relationships with those suppliers who fail to demonstrate sufficient improvement over time. Westpac also engage suppliers, business partners, industry colleagues, customers and other stakeholders, and seek to collaborate with them to implement the paper purchasing policy.
1.2.2 Customers
The most significant impact Westpac group can have is to assist its customers’ transition to a low carbon economy by managing the emissions from their products and services. Sustainability objectives of customer set by Westpac in 2011 was that to be ranked as the top 1&2 for net promoter score (NPS) in Australia amongst the major banks and St. George banking group, achieved NPS scores of +1 for retail and -12 for business in Westpac New Zealand and to be top 3 regional player in carbon related markets by 2013.
1.2.3 Employees
Employees of Westpac were encouraged to participate in initiatives through sustainability employee program, ‘Our Tomorrow’, with membership of more than 2500 employees. Additionally, 85% of Westpac employees have participated in volunteering or fund raising activities like charity walks, charity bike rides, donations and so on. As the program of getting off the treadmill, the proportion of women in management at Westpac has risen from 14% to 45% between 1994 and December 2006. In 2011, sustainability objectives of employee set by Westpac is to increase the percentage of women in senior management roles to 40% by the end of 2014 and implement initiatives to address outcomes of diversity audit.
1.2.4 Environment
Westpac started concern about the environment impact since 1992. For example, In 1992 Westpac was a founding signatory to the United Nations Environment Program Finance Initiative. In 2006 Westpac formed the Australian Business Roundtable on Climate Change, which commissioned significant research on the economic impact of climate change, with five other corporations and the Australian Conservation Foundation. In 2007 Westpac formed a further group of nine companies, which commissioned further research into the barriers to the rapid development and deployment of low and zero emission technology. Westpac continue to participate in the carbon Disclosure Project and it is the only bank to achieve a 100 point that AAA rating in the 2007 climate Disclosure Leadership Index. Also, Westpac volunteers rolled up their sleeves to help turn destruction into something positive like helping create a walking trail in the overgrown wilderness of rain forest bush adjacent to the school after the fires hit the east coast in 2001. The major problem of environment for Westpac is Climate Change. The approach of Westpac to climate change is to minimize direct environmental footprint; manage climate risks and build capacity across the business; develop products and services that drive positive environmental outcomes; engage employees around climate change issues and impacts; and communicate and advocate within the wider community.
1.2.5 Community
Westpac group has community partnership program based on the premise that they can have a bigger impact on society by working closely with several key community groups over the long term and helping their partners find innovative ways to address the social issues. Westpac group piloted local working groups focused on environmental and community projects at four of their large key sites, in addition to existing local community engagement across their brands. Westpac group provides not-for-profit organization community groups with access to specialized business and finance tools and training that help them grow their capacity to deliver community services and support, such as business and financial management workshops, Westpac community solutions package and pro-bono support. Westpac has also committed to helping sustain indigenous communities that Westpac has worked together with indigenous Enterprise Partnerships since 2001. Additionally, Westpac has been a national sponsor of the JDRF Walk to Cure Diabetes since 1998. Each year employees will help raise money. Furthermore, the Westpac foundation helps to provide disadvantaged young people with training and a new chance in life. In 2011, Westpac set sustainability objectives of community that is to reduce scope 1 and 2 emissions by 30% on 2008 levels by 2013, embed organizational mentoring into operational process by 2013, provide management on your money program to 45000 new Zealanders by 2013 and launch a major initiative to help address social disadvantages.
3. Analysis of CSR Reporting Issues Using GRI Approaches
According to analysis above, there are nine material issues which will influence CSR reporting of Westpac. The following paragraphs will try to analyse these issues with GRI approach.
1.3 Economic Perspective
According to the annual report of Westpac, the increase of 4% in interest income was due to the 6% increase in housing loan and the offset by the 1% decline in business loan. The decline in business loan indicated the unsatisfactory economic environment. The increase in housing loan indicated that Westpac had a very good relationship with customers. This could be verified by the increase of customer number which is from 11.8 (millions) in 2010 to 12.2 (millions) in 2011. However, Westpac still failed to achieve some objectives in relation to customer service. For consumer NPS which seeks to measure advocacy of customers, St.George and Westpac were ranked 1 and 4 respectively in 2011 amongst the major banks rather than 1 and 2. Furthermore, Westpac in New Zealand has not achieved NPS scores of +1 for retail and -12 for business either. Therefore, customer service still needs to be improved.
Table 3.1: Net profits of Westpac
2011 $m
2010 $m
2009 $m
Interest income
38,098
34,151
30446
Net profit attributable to owners of Westpac
6,991
6,346
3446
It can be seen from Table 3.2 below, salaries and other staff expenses increased by $ 65 million compared to 2010. One factor that contributed the increase was the average salary increase of 4% from January 2011, which indicated that Westpac aimed to increase employees’ benefits. Equipment and occupancy expenses were $1,115 million, an increase of $33 million compared to 2010. The increase was largely associated with refurbishment and expansion of brand and ATM networks.
Table 3.2: Operating expenses of Westpac
2011 $m
2010 $m
2009 $m
Salaries and other staff expenses
4,055
3,990
3,806
Equipment and occupancy expenses
1,115
1,082
926
Other expenses
2,236
2,344
2,439
Total operating expenses
7,406
7,416
7,171
1.4 Social Perspective
As Westpac is a multi-brand company, different brands will have different ways to improve customer service and develop deeper customer relationship. For example, Westpac Retail & Business Banking launched ‘Local Business Sentiment Survey’ to give the company’s business customers insights into local issues and the strategies to deal with them. However, Westpac New Zealand used new innovations to improve customer service.
Westpac has made a very good process on their objectives this year to achieve gender equality. Westpac now has 37.5% women on the leadership role compared with that of 35.4% in 2010 and has been working hard to move towards its 40% goal. Westpac and business bank also provides women with education, information and networking opportunities.
Westpac has improved the reliability of IT system significantly during 2011. The number of technology related outages has reduced by a further 40%, which made critical customer related systems now available for customers. For example, Westpac New Zealand adopted Smart Deposit machines and Cash Exchange machines, which successfully helped the company to reduce branch queues by 40%, in order to provide better customer service.
Westpac needs to make its service more efficient and improve its products continually. By process improvements, Westpac has achieved the reduction of customer complaints by 42%. This is due to the efficiency of service which will reduce the waiting time of customer. Westpac also tries to develop more innovative products to make customers more satisfied. For example, the Altitude Platinum Card was awarded Smart Investor’s ‘best full featured credit card’ and Cannex was awarded five stars to the Altitude Classic/Gold/ Platinum and Earth Platinum cards in 2011.
Westpac also cares much about employees’ education level. For example, Bank of Melbourne invested over 7,000 hours of training and development in all of the people. Westpac has a very high employee engagement. Annual Employee Survey indicated that our employees remain highly engaged, with the employee engagement in 2011 result up one percentage point to 81%. Encouragingly, the People Leader Index of Westpac has again improved and is now at 83%, placing us above the Global High Performing Norm of 82%.
Table 3.3 Community Investment
2011
2010
2009
2008
Community investment – Financial reporting basis ($m)
135
136
84
64
Community investment – GRI reporting basis ($m)
155
116
84
64
One performance indicator of social responsibility is the community investment. It can be seen from table 3.3, community investment increased significantly in 2011 compared with that in 2010 from GRI perspective. By comparison, from financial perspective, the community investment decreased slightly. However, if the company compares the data in 2010 and 2011 with the years before, it can be seen that the community investment increases significantly.
1.5 Environmental Perspective
The climate change is a global issue faced by all organisations. The amount of CO2 emission released by organisations is a very important factor which could be used to measure the company’s corporate social responsibility. The process of replacing outdated equipments with more energy efficient ones helps Westpac to reduce the release of CO2 emissions, with the estimate of 15000 tonnes reduction during the year. According to CSR report of Westpac, total scope 1 and 2 emissions has reduced from 189,425 tonnes in 2010 to184,124 tonnes in2011 and total scope 3 emissions reduced from 70457 tonnes to 57163 tonnes which is a satisfactory result. The reduction of paper use from 6655 tonnes to 6262 tonnes contributed a lot to the reduction of emission.
4. Recommendation for Solutions and Explanation
According to the behaviours that Westpac undertook to solve the CSR problems based on GRI approaches, it seems to be the right way to achieve the ambition of CSR reporting like respect, sustainability and responsibility.
1.6 Economic Perspective
The actions Westpac took may decrease the profit in dollars in short term, but in long run, since Westpac tried to establish a strong relationship with customers as well as increase employees’ values, a lot merits may occur to underpin the profit generation process and achieve a sustainability of profit of Westpac.
1.7 Social Perspective
Based on analysing the issues of suppliers, Westpac decided to do business with the suppliers that comply with SSCM in order to reduce the paper usage so that CO2 emission would decrease.
It is a necessary way to discharge the responsibility of Westpac to protect the sustainability of environment, and helpful to sustain a long-term profitable development of the organisation. However, a problem occurs. Concerns only about one aspect of suppliers cannot help achieve overall sustainability of organisation. For example, reducing the paper use for serving the customers may not satisfy the customers thus impede the development of Westpac. The way to tackle it is caring about the relations among different stakeholders and trying to balancing them when there is conflict among each
other.
In terms of the aspect of customers, Westpac launched surveys, improved the reliability of IT systems, and provided services that are more efficient as well as changing product portfolio along with the changing tastes of customers, all these actions contributed to the sustainability of Westpac. Firstly, surveys identified customers’ preferences and Westpac was able to follow them in order to achieve a sustainable development. Secondly, advanced IT systems reduced complaint rates and enhanced efficiency helps retain customers, build reputation, saving resources and attract potential customers. Finally, launching different products according to different needs may enlarge the range of customers and increase the economic scale of organisation. However, there is still a gap between the objective of rank 1 or 2 and the real situation, thus there should be a deeper analysis about whether Westpac did focus on certain customers rather than other else, which damaged the long-term development of organisation.
Westpac also concerned about employees’ sustainable development. It paid attention to equity of gender, education level and safety of working environment, which helped achieve the aim of CSR reporting of respecting the employees’ rights like equality, self-development and safety. In addition, since Westpac had done a lot in this area, employees may work even harder and stay longer in return, which contribute to the sustainability of organisation.
Additionally, Westpac invested a lot in communities so that money goes into different areas where needed and social sustainability can be improved.
1.8 Environmental Perspective
Finally, in relation to the environment aspect, Westpac endeavoured to reduce the emission of CO2, which would assist in attaining the environmental sustainability. Furthermore, since more and more people concern about environment, Westpac’s actions may establish reputation and help achieve long-term development by discharging responsibility to public.
5. Conclusion:
In conclusion, it can be found that Westpac concerns a lot about its sustainable development. Through issuing the CSR report about analysing and solving issues of CSR based on GRI approach to major stakeholders, Westpac is doing right thing to show respect and discharge responsibilities to stakeholders, which may facilitate the long-term development. However, relations and trade-off among each aspect need to be considered.
6. References:
Article 13, viewed at 1th November 2012, .
Corporate responsibility and our business, viewed at 3th November 2012,
Dr Suzanne Young 2008, LA TROBE university, viewed at 1th November 2012, .
GRI G3 and G3.1 Update – Comparison Sheet, viewed at 1th November 2012, .
Our paper purchasing policy, viewed at 3th November 2012, .
Sustainability Report Guidelines, viewed at 9th November 2012, .
Westpac Annual Review and Sustainability Report 2011, viewed at 9th November 2012, < http://www.westpac.com.au/docs/pdf/aw/WestpacGroup_2011_Annual_Review.pdf>.
2004 Social impact report, viewed at 3th November 2012, .