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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.    

©  Neela  Bettridge  and  Philip  Whiteley  2011   New  Normal,  Radical  Shift  

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            


      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      



 Westpac’s  Squashed  Tomato  Strategy:  Case  study  –  sustainable  strategy  in  practice  at  Westpac.  Jane   Baxter,  Wai  Fong  Chua  &  Patricia  Strong,  Australian  School  of  Business,  March  2010  

©  Neela  Bettridge  and  Philip  Whiteley  2011   New  Normal,  Radical  Shift  

Case study: Westpac: Westpac: Sustainability as a corporate way of life