Case study: Westpac: Westpac: Sustainability as a corporate way of life by elnara nasirli

CASE STUDY: Westpac: Sustainability as a corporate way of life Background Westpac is a major Australia-‐based international bank. It comprises the Westpac Retail and Business Banking (WRBB) with around 5 million consumer and business customers in Australia under the Westpac and RAMS brands; the Australia-‐based St George Bank; BT Financial Group, a wealth management branch; Westpac Institutional Bank; and Westpac New Zealand. It has around 10 million customers in Australia, New Zealand and smaller Pacific islands. It is Australia’s oldest bank, having been founded in 1817 as the Bank of New South Wales, changing its name to Westpac in 1982. Sustainability: A reaction to crisis In the early 1990s, Westpac suffered the largest corporate loss in Australian history. It subsequently embarked upon a downsizing programme that provoked a serious backlash from many communities: over bank branch closures in rural areas, and increased charges, in particular. There was considerable reputational damage, caused by these episodes. Westpac was not alone; there were other corporate failures in Australia in the 1990s. A report commissioned by the bank, and carried out by the Australian Business School, observed: ‘During the late 1990s, the chairman, board and executive were under intense media and community pressure, with protests targeted at Westpac by customers, unions and environmental activists. Increased bank fees and branch closures, particularly in rural areas, incensed regional communities. Extensive negative media coverage resulted in a major decline in Westpac’s reputational capital and employee morale.’i

Initial responses that were confined to press relations were ineffective. In the late 1990s the bank’s executives embarked on a broader agenda. They sought to reframe the issue as a broader challenge of re-‐engaging with external stakeholders. Simultaneously, increasing awareness of environmental challenges was growing within the bank’s management. These initiatives quickly grew to make sustainable and ethical stewardship an integral part of business strategy.

A background of crisis had a hidden benefit: it meant that the business benefits of managers engaging more with staff and external stakeholders, rebuilding reputation, were more obvious. Tim Williams – Head of Sustainability Strategy at Westpac, says: ‘The banks are high-‐profile companies; shareholders would be pretty disposed to positive action. We had had high-‐profile corporate failures in the 1990s; there was plenty of value-‐destruction and there were government inquiries; changes to director duties in corporate law.’ A relatively dispersed shareholder ownership and longer-‐term investment strategies were helpful factors, he adds: ‘In Australia there is compulsory super-‐annuation in the pension funds, so there tends to be very wide share ownership, and there are some reasonably progressive pension funds.’ Sustainability is not a cost to the business As Marks & Spencer has also found (see Chapter 4), the business results from enhanced reputation and engagement can be considerable. Tim Williams says: ‘From the value generation point of view the proposition is quite compelling; these issues go to the heart of [the matter] … value-‐generation is a strategic issue. What we have been doing is driving convergence of what would have been a discrete agenda item at one time. It is a drive throughout the business, including the operational business.’

In contrast to the conventional financial accounts in the annual report, Westpac’s reports now encompass a range of measures. As well as showing the social commitment, they also convey business intelligence. Implementation of the sustainability strategy has been in three broad areas, according to the analysis by the Australian School of Business: • Engagement with stakeholders, •

Public reporting,

•

Continuous improvement.

On the question of reporting, it is not just a question of public information and transparency. Traditional accounts are historic, and limited to the financial dimension. As discussed in Chapter 1, this cannot encompass such complex matters as risk assessment, human potential and other forward-‐looking indicators. The People section in the annual report lists indicators such as employee engagement (82 per cent of employees feeling positive about the company’s leadership in 2010), proportion of women in senior management (35 per cent). Westpac’s reports are as much about informing the business to improve its operations, as they are about demonstrating to the public and to administrators that its conduct is environmentally and socially responsible. The 2010 © Neela Bettridge and Philip Whiteley 2011 New Normal, Radical Shift

Australian School of Business report listed business benefits as: ‘Improved staff morale, improved reputational and social capital, both locally and internationally; and a better understanding of the long-‐term drivers of value creation, profitability and cost savings’. Helping the employer brand considerably has been the succession of awards granted to the bank, including World’s Most Ethical Companies, and Employer of Choice for Women. Westpac has been placed in the top 1 per cent of the Governance Metrics International Global Governance Rating. The reports published by the bank, available on its website are set out in the following table: Report name

Annual report Annual review Stakeholder Impact Report PACT newsletter Extended Performance Reports

Audience

Investors analysts, shareholders Investor groups All stakeholders, inc community, employees, customers Employees, customers, suppliers, NGOs, etc Investors, analysts, other interested parties

Comment Financial data Concise annual report Fully accredited sustainability info Online newsletter on how Westpac implements sust’bility ½-‐yrly updates on finance & non-‐finance indicators

The chief executive and the Board take responsibility for the sustainability strategy. The Social Responsibility Committee is at Board level. This approach means that sustainability is likely to remain a core part of Westpac’s way of doing business, even if there were en economic downturn that affected the business. It would not be jettisoned as too costly, as it does not represent a cost; moreover it is so tightly woven into both strategic and operational management that it is not a discrete enterprise. Alison Ewings, Senior Adviser Sustainability, comments: ‘It is not a technical function that you can cut; it is a component of our business strategy – it’s not something you can put your arms around and say “We’re not going to do it any more”.’ Social engagement means professional development Westpac runs educational programmes in all the major countries in which it operates– New Zealand, Australia, and the Pacific region. ‘On some islands we offer basic help on how the financial system works; much of the population is unbanked,’ says Alison Ewings. ‘In New Zealand we tie into some of our core business offerings: during the global financial crisis, business customers had to make redundancies, or reduce hours. We helped them with that process, with budgeting tools; helped individuals when they were moving from ten days a fortnight to nine. We have an organisational mentoring programme. We have engaged in capacity-‐building: working with existing partners, traditional relationships. We also helped indigenous communities, social enterprises: our © Neela Bettridge and Philip Whiteley 2011 New Normal, Radical Shift

employees will work with those organisations for a couple of years, one day a week – it is formally part of their professional development programme. There are performance discussions and personal development discussions with their manager.’ The bank also works with charitable organisations. One of the most effective ways of doing this is to lend its corporate expertise to help with specialist needs of certain departments within the charity. One example was for a charity specialising in research on child diabetes. They had a problem with retention of staff. Secondment of analysts from Westpac’s human resources department helped the agency devise diagnostics and systems that reduced the staff turnover rate from 40 per cent to 10 per cent. It often helps NGOs put in effective financial controls. There are some advantages that come back to Westpac from such initiatives, Ms Ewings reports. ‘These [secondments] tend to be for employees who are identified as high performers – they might not otherwise get experience of an end-‐to-‐end project.’ Some 455 of the bank’s employees have contributed approximately 72 years in voluntary work with the Jawun Indigenous Corporate Partnerships, primarily by sharing skills with businesses run by indigenous people, and extending financial education to individuals and families. • From New Normal, Radical Shift, © Neela Bettridge and Philip Whiteley

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