Credit Union Social Responsibility Tool GOVERNANCE AND MANAGEMENT FOR CREDIT UNION SOCIAL RESPONSIBILITY

Transcription

1 Credit Union Social Responsibility Tool GOVERNANCE AND MANAGEMENT FOR CREDIT UNION SOCIAL RESPONSIBILITY NOVEMBER 2011

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3 ACKNOWLEDGEMENTS Credit Union Central of Canada (Canadian Central) would like to acknowledge Coro Strandberg, Principal of Strandberg Consulting for researching and writing this tool on governance and management for credit union social responsibility. In addition to being a former director at Vancity Credit Union (Vancity), Coro is a global thought leader in the areas of sustainable governance; sustainable purchasing; sustainable human resource management; and sustainable finance, insurance, and asset management. She has provided facilitation and training on social responsibility to credit union managers and directors and has helped more than a dozen credit unions develop credit union social responsibility and sustainability strategies. Canadian Central is extremely grateful to the many credit union staff and board members who have contributed their time and advice to the research found in this guide. Their generosity in this way is an investment in the continued strength of Canada s credit unions and the communities they serve.

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5 TABLE OF CONTENTS INTRODUCTION... 6 CHAPTER 1: What is CSR Governance and Management?... 8 CHAPTER 2: Components of a CSR Governance and Management Framework CHAPTER 3: CSR Governance and Management Framework Checklist APPENDIX Credit Union Central of Canada, All Rights Reserved. Credit Union Central of Canada s use of third party marks in not intended to indicate sponsorship or affiliation with the owner of the marks. This publication is provided for informational purposes only. The information in this publication is summary in nature and does not constitute legal or business advice. Credit Union Central of Canada hereby disclaims all warranties as to the accuracy of any of the information in this publication and disclaims all liability for any actions taken in reliance on this information. You may display on your computer, download, print or photocopy this publication for non-commercial, personal or educational purposes only, provided that the content is not modified and that each copy identifies the source and bears our copyright notice " Credit Union Central of Canada" and the terms of this limited license. Any copying, redistribution or republication of this publication, or its content, for any other purpose is strictly prohibited.

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7 INTRODUCTION Many credit unions have proven themselves community leaders in social responsibility. As financial co-operatives, credit unions are founded on internationally recognized principles of member ownership and control, training and engagement of staff and volunteers, and concern for the community. These principles continue to be realized in the approaches credit unions take in their communities across Canada. Recently many credit unions have decided to become more systematic in how they contribute to community and environmental sustainability locally and internationally. These days credit unions are adopting more explicit approaches to governing and managing their social and environmental performance, as are many companies in Canada and elsewhere. However, while credit unions social responsibility (CSR) instincts are strong, many are less familiar with the processes involved in embedding their CSR commitments throughout their organization. Indeed, as with many organizations, there is a governance and management gap in implementing CSR policies and strategies. This guide is designed to help those credit unions close that gap and ensure continued community leadership in social and environmental responsibility in the years to come. This guide to CSR governance and management provides an overview of the components of a strong framework to support credit unions to remain CSR leaders and contribute strongly and effectively to improving quality of life for their members, employees and communities. It defines CSR Governance and Management, and provides a checklist for credit union board and managers to consider in the development of their CSR Governance and Management systems. The appendix includes useful resources for further reading and reference. This tool builds on the Credit Union Social Responsibility: A Road Map for the Development of a Sustainability Strategy, produced by Credit Union Central of Canada in partnership with the Filene Research Institute. In particular, it addresses steps six through ten: govern, implement, monitor, report and improve, following steps one through five in which you develop your CSR commitment, vision and policy and identify your priorities and set targets. Specifically, this guide elaborates on aspects of those steps concerning governing and implementation. You may find it helpful to refer to the Road Map to situate the governance and management framework in the context of your overall CSR strategy development and implementation. To help busy credit union leaders, this tool includes a CSR governance and management checklist on page 18. The checklist includes the components recommended in this guide and will help you identify and track progress on areas of leadership for your credit union, and gaps which your board and managers may wish to address going forward. 6 CUSR Tool GOVERNANCE AND MANAGEMENT FOR CREDIT UNION SOCIAL RESPONSIBILITY 2011 Credit Union Central of Canada. All Rights Reserved.

8 START SMALL: Adopting a CSR approach is not an all-or-nothing proposition. How your credit union approaches this topic will depend on the time and resources you can dedicate to it. To demonstrate this, this guide sets out a list of the six essential practices for good CSR governance and management in the START SMALL tip that accompanies the checklist. Each of these aligns with the six governance and management components. These essential practices are a way to scale the overall approach of this guide in a way that better fits your credit union s time and resources, as well as its values. 7 CUSR Tool GOVERNANCE AND MANAGEMENT FOR CREDIT UNION SOCIAL RESPONSIBILITY 2011 Credit Union Central of Canada. All Rights Reserved.

9 CHAPTER 1: WHAT IS CSR GOVERNANCE AND MANAGEMENT? CSR governance and management refers to the structures and practices an organization puts in place through which it decides upon and implements those actions that it believes will lead to continuous improvement of its social and environmental performance, along with its economic performance, consistent with its CSR vision or strategy. It builds your CSR commitments into your pre-existing framework through which you achieve results, considering such things as the interests of stakeholders and the impact of the credit union s products, services and processes on society and the environment. In short, CSR governance and management principles guide decisions and actions, ensuring that your credit union can fulfill its CSR aspirations. Organizations that say they build CSR into everything they do, and that CSR is the way we do business around here are those with a strong CSR governance and management system that reinforces their goals through all steps from decision making, implementation and reporting. Likely most credit unions already have elements of a CSR governance and management system in place. However, once you have adopted a CSR vision, commitment, policy and strategy, it is especially important to ensure the fundamentals are established and working effectively. [See Credit Union Central of Canada s (Canadian Central) tool, Developing a CSR Vision and Policy Statement for guidance.] Organizations lacking a strong CSR governance and management system to guide decision-making and actions are likely to bump into inconsistent application, irregular decision-making, confused staff, and brand and reputation risks. But beyond managing the downside risks of not having one, there are a number of benefits from having a strong CSR governance and management system. Organizations starting out often find there is considerable ambiguity regarding CSR, and misunderstanding of what it means and entails. A CSR governance and management system creates the conditions for boards and management to understand and implement their CSR commitments over time. It allows for more consistent behaviour and reduces staff confusion about what is expected of them; thus it can build morale and help attract and retain staff. Managers may see enhanced operational performance, both as a result of the gains from improved social and environmental performance, but also from shedding light on how decisions are made in the organization and refreshing protocols and standards for daily operations. Board members will be more involved in setting overall CSR strategy and may expect greater progress to achieving those strategic goals. Some organizations also find that a CSR governance and management system can enhance risk management, identifying emerging risk issues and opportunities. And, importantly, it helps build trust in an organization s decisions and activities on the part of stakeholders. As credit unions with strong board governance systems in place know very well, it is very important to have clear boundaries between the role of board and management. Boards are responsible for providing direction through policy and strategy level oversight; management is responsible for creating procedures and tools to implement policies, and for implementing the strategic direction and reporting back to the board on the 8 CUSR Tool GOVERNANCE AND MANAGEMENT FOR CREDIT UNION SOCIAL RESPONSIBILITY 2011 Credit Union Central of Canada. All Rights Reserved.

10 organization s performance. Thus, this tool profiles the separate roles for board and management within the CSR governance and management framework. See Table 1 below for elaboration of these separate roles. TABLE 1: Roles of Board and Management in Credit Union Social Responsibility As with any aspect of credit union operations, board and management play different roles in the development and implementation of a CSR approach. Basically, boards govern and managers manage. In the case of CSR, boards and managers are responsible for these distinct roles for the aspects of a CSR framework. CSR Aspect Board Management Policy and Procedures Approve governing policies which direct how management is to manage the credit union s affairs (e.g., a CSR policy, an environmental policy, a responsible lending policy, a policy on financial inclusion, a sustainable purchasing policy, etc.) Strategy Approve long-term strategic CSR direction for the credit union Approve annual CSR deliverables and budget as a component of annual corporate business plan Risk Management Provide oversight of CSR risk management Roles and Incorporate CSR into CEO Responsibilities position description Performance Include CSR in CEO Management compensation and overall compensation philosophy Training Board education sessions include CSR Monitoring Monitor progress of policy implementation and CSR strategy Reporting Approve annual CSR performance report for disclosure to members and other stakeholders (e.g. annual report, stand-alone report, etc.) Draft and implement CSR policy and procedures Propose strategies for how to achieve desired CSR state, including goals, key performance indicators, and targets Propose annual CSR deliverables and budget as a component of annual corporate business plan Include CSR risks in enterprise risk management program and put management plans in place to mitigate CSR risks Assign responsibility for CSR implementation to staff Include CSR in staff performance management system Implement CSR staff training across the credit union Provide board with reports that demonstrate how the credit union is implementing the policy Provide board with reports on performance of CSR strategy Identify and implement opportunities for course correction / improvement Produce annual disclosure report on CSR performance 9 CUSR Tool GOVERNANCE AND MANAGEMENT FOR CREDIT UNION SOCIAL RESPONSIBILITY 2011 Credit Union Central of Canada. All Rights Reserved.

11 CHAPTER 2: COMPONENTS OF A CSR GOVERNANCE AND MANAGEMENT There are six basic components of a comprehensive CSR governance and management framework which are laid out in detail below. As Figure 1 illustrates, the oversight component runs through the application of the five other components. The checklist on page 18 breaks these components into 32 practice areas. FIGURE 1: The six CSR Governance and Management components Commitment & Strategy Execution Performance Engagement Monitoring & Reporting Oversight 1. OVERSIGHT It has been found the role of the board of directors is key to successful CSR. Boards set the tone at the top and play an important role in signalling the organization s CSR commitment by adopting a CSR vision, mission, values and policy and ensuring the corporate strategy incorporates CSR deliverables. Boards also hire CEOs, set compensation philosophies, and provide oversight over the credit union s progress on its CSR objectives. As such, they are central to advancing a CSR program. Most public companies in Canada now have CSR committees of the board, to provide greater oversight over CSR strategy and policy implementation. Canadian Business for Social Responsibility and the author produced a set of CSR Governance Guidelines for companies on behalf of Industry Canada. These guidelines build on the emerging trends identified in a Conference Board of Canada study and include approaches and practices for boards in areas such as vision and strategy; oversight and accountability; risk management; board composition and expertise (e.g. training) and external disclosure (i.e.: reporting). It is recommended that credit unions review them as part of understanding the role of their board in CSR oversight. 10 CUSR Tool GOVERNANCE AND MANAGEMENT FOR CREDIT UNION SOCIAL RESPONSIBILITY 2011 Credit Union Central of Canada. All Rights Reserved.

12 Sustainability Board Training at inova Credit Union As part of their ongoing commitment to corporate social responsibility, every Board member and staff person at inova Credit Union in Nova Scotia took an online course on environmental sustainability and watched An Inconvenient Truth, a documentary on climate change featuring Al Gore. They then came together over a weekend to reflect on what they had learned, create a CSR committee and start work on a sustainability plan. Board and staff have said that this marked a noticeable shift in the credit union's focus beyond its own operations, to include sustainability in the local community and its environment. "What I took away from the course was a better understanding of how companies can be better stewards of the environment and also to work within their communities to help others achieve their sustainability goals." - Steve Flynn, Board Member, inova Credit Union 2. COMMITMENT AND STRATEGY A necessary component of CSR governance and management is to have a common definition of, and a clear commitment to CSR embedded in the credit union s mission, vision and values. This commitment informs both company culture and the company s strategic CSR direction. After this, effective CSR requires the development of a CSR strategy, including goals, along with targets, and metrics (key performance indicators KPIs) to measure progress. Importantly, the credit union s CSR goals should be incorporated into the overall corporate strategy signalling to staff the importance of achieving the credit union s CSR goals. It is desirable for board and management to collaborate on these tasks. The credit union s risk management program should also flag key CSR issues for the strategy to address. While traditional risks include financial, operational and strategic risks, increasingly these days companies are identifying CSR risks, such as demographic trends, changing customer preferences, diminishing natural resources, brand risk, etc. As regulated institutions, credit unions typically have strong risk management systems in place. The aim of a CSR risk management approach is to ensure the credit union: (1) has sufficiently captured the social and environmental risks and opportunities which could have a material impact on the credit union s success and (2) is managing them through its CSR strategy. Typically managers would prepare the risk register and strategies for managing risks CSR risks in this case and boards would be responsible for oversight. For more information on CSR strategy development, see Canadian Central s Credit Union Social Responsibility: A Road Map for the Development of a Sustainability Strategy. 11 CUSR Tool GOVERNANCE AND MANAGEMENT FOR CREDIT UNION SOCIAL RESPONSIBILITY 2011 Credit Union Central of Canada. All Rights Reserved.

13 3. EXECUTION Once the credit union has adopted its CSR commitment and strategy, it is important to formally embed its CSR philosophy into day-to-day business, and to deliver on its CSR goals and targets. There are different means by which a credit union can give effect to its CSR priorities, from embedding CSR principles into its employee code of conduct, to integrating its CSR ethic into its products, lending portfolios, or purchasing. Execution also requires assignment of roles, responsibilities and accountabilities within the organization. Typically an executive is assigned leadership responsibility for implementing the organization s commitments, if not the CEO or General Manager directly. There are various ways to guide the execution of a CSR plan. Some organizations establish a coordinating unit to support CSR strategy implementation and act as internal advisors or subject matter experts within the organization. To support implementation and achieve necessary buy-in, organizations often engage staff from different functional areas with diverse skill sets and perspectives. This is usually accomplished through some form of a cross-functional implementation committee with equitable representation and access across the organization s departments and business units. It is important that the committee have decision-making authority. Organizations with the resources often use both a coordinating unit and implementation committee to guide the execution of their CSR. 12 CUSR Tool GOVERNANCE AND MANAGEMENT FOR CREDIT UNION SOCIAL RESPONSIBILITY 2011 Credit Union Central of Canada. All Rights Reserved.

14 Servus Credit Union s CSR Office and Interdepartmental Committee Servus Credit Union in Alberta formally established a CSR office in 2008 (a version of the office existed prior to the three credit union merger which formed Servus). The office currently consists of four positions: Director of CSR, Manager of CSR, Manager of Community Investment, and Community Investment Specialist (for the entire province). The Director of CSR's principal role is to develop and maintain the credit union s CSR strategy, facilitate CSR thinking through all activities and decisions and report on measurable progress to the Executive Leadership Team (ELT) and though them, to the Board of Directors. When the new credit union was formed in 2008 CSR was determined to be an organizational priority, thus it was given a direct reporting line to the executive. The Director reports to the Chief Marketing Officer who sits on the ELT and has corporate communication, CSR and marketing in her portfolio. To assist in the development of its CSR strategy, Servus struck a CSR Interdepartmental Committee, including representation from: Internal Audit, Finance, Banking Services, Corporate Strategy, Information Technology, Human Resources, Facilities/Property, Risk Management and Credit, and Marketing and Corporate Communications. 13 CUSR Tool GOVERNANCE AND MANAGEMENT FOR CREDIT UNION SOCIAL RESPONSIBILITY 2011 Credit Union Central of Canada. All Rights Reserved.

15 4. PERFORMANCE A key tool for embedding CSR into the organization and achieving results is to ensure employees are rewarded for contributing to the achievement of your social and environmental goals in the same way as they might be for financial ones. This includes integrating your CSR commitments into your performance management systems and informal reward and recognition programs. In order to promote take-up of CSR goals and responsibilities across your organization, it helps to have CSR included in the corporate training program. See an Industry Canada sponsored study: The Role of HR Management in CSR for more ideas on integrating your CSR commitments into your HR program. Kootenay Savings Credit Union s Performance and Development Plan Kootenay Savings Credit Union (KSCU) in British Columbia incorporates its CSR values into its performance management system (referred to as a Performance and Development Plan ) and its organization-wide reward program, called CU Fit. Its performance management system sets out performance expectations for the year. The 2011 plan incorporated a number of CSR components including member satisfaction, employee satisfaction and community involvement. The plan s component for community involvement included a goal of having at least 80% employee participation in one KSCU sponsored community or CSR event or activity. Employees are also evaluated on CSR-related competencies, including involvement and contribution to the community. The company s CU Fit program provides points towards a yearly grand prize draw which are also redeemable for items in an online catalogue. Points can be earned monthly by going green at home or work, volunteering, donating blood, health and fitness, safety and learning. 5. ENGAGEMENT Most credit unions excel in stakeholder relations, particularly when it comes to their members, employees and the community. Now standards are rising for a more managed stakeholder relations approach in which organizations are expected to identify a full suite of stakeholders all those who affect and could be affected by your business operations and to methodically prioritize those whose perspectives are important to the organization s success in both business and societal terms. In CSR this is referred to as stakeholder engagement, which can include individuals or organizations, and should include practices beyond simply informing stakeholders. Effective stakeholder engagement is a dialogue, involving two-way, interactive communication, at times for consultation and involvement purposes, and at other times to collaborate on joint projects, or possibly to empower and delegate decision-making. The engagement format varies, depending on the purpose, and can consist of surveys, focus groups, individual meetings, workshops, round-tables, stakeholder panels, advisory committees, community councils, structured consultations, web-based forums, co-managed services, board seats, etc. In the case of employees, many credit unions support the efforts of participative and interdepartmental green teams to unlock innovation in the environmental stream of CSR. 14 CUSR Tool GOVERNANCE AND MANAGEMENT FOR CREDIT UNION SOCIAL RESPONSIBILITY 2011 Credit Union Central of Canada. All Rights Reserved.

16 Key factors for successful green teams Strong executive support Close alignment with the company s sustainability goals Presence of a centralized leader to act as a conduit for communicating corporate goals to the Green Teams and taking the ideas back into the company High diversity among team members Systems for creating, measuring and tracking initiatives From Generating Sustainable Value: Moving Beyond Green Teams to Transformative Collaboratives, Ackerman et al, 2010, p. 6. This guide identifies some key steps to effective stakeholder engagement (including both internal stakeholders such as employees, and external stakeholders such as members and communities). A credit union s CSR is enhanced if it has in place ongoing methods to keep abreast of, and address, the views of important stakeholders while also finding ways to collaborate with stakeholders on shared goals. mecu credit union in Australia adopted a formal approach to engaging its stakeholders in providing input into how it conducts business on an on-going basis. It defined its stakeholders to include: customers, employees, key representatives of its strategic communities, suppliers and contractors, regulators and political leaders, and credit union industry representatives. It has a goal to align its values with those of its stakeholders and ensure that their expectations form a key part of the organization s strategy, culture, operations, and products. mecu s Stakeholder Engagement Policy provides a framework for the management of its stakeholder engagement process. Specifically, the policy aims to: Provide a basis for the identification and selection of the credit union s major stakeholders. Allocate roles and responsibilities for the prudent management and control of stakeholder issues. Provide regular reporting to the board, relevant committees, senior management, and stakeholders. Articulate forms of stakeholder engagement and principles that will be adhered to. Specify how information from stakeholder engagement will be used and the type of information that is expected to be generated. Report on stakeholder engagement actions to the board s Sustainable Development Committee quarterly. In 2011, mecu s stakeholder engagement processes greatly influenced its decision to become Australia s very first customer owned bank and adopt the new name bankmecu. 15 CUSR Tool GOVERNANCE AND MANAGEMENT FOR CREDIT UNION SOCIAL RESPONSIBILITY 2011 Credit Union Central of Canada. All Rights Reserved.

17 6. MONITORING AND REPORTING Credit unions advancing along their CSR path need to ensure they take stock of their performance. They need to monitor achievement of their social and environmental goals, as much as they monitor the achievement of their financial performance. A review of progress on the goals, targets and KPIs identified in the CSR strategy stage can help identify underperformance for course corrections, and opportunities for celebration of achievements. This performance information is also useful internally to inform future phases of CSR strategy. It is also the basis on which the credit union can disclose its performance to internal and external stakeholders, as part of its commitment to accountability and transparency to stakeholders. Management would be expected to have procedures in place for regular performance monitoring. Typically boards receive quarterly performance reports on progress as with other corporate reports. In the case of annual CSR reports to stakeholders, boards should provide input into the scope and content of the report which management prepares. Ultimately the board of directors should approve the CSR report for public release, much as it does for the annual financial report. For those boards that combine their CSR reports with their annual reports, this would naturally be a one-step process. Metrics and reporting for credit union social responsibility is the subject of a companion guide by Credit Union Central of Canada. It will be released in late 2011 for the Credit Union Social Responsibility InfoHub. 16 CUSR Tool GOVERNANCE AND MANAGEMENT FOR CREDIT UNION SOCIAL RESPONSIBILITY 2011 Credit Union Central of Canada. All Rights Reserved.

18 CHAPTER 3: CSR GOVERNANCE AND MANAGEMENT FRAMEWORK CHECKLIST The following is a checklist of practice areas within each of the six components that should be considered in the development and maintenance of a strong CSR governance and management framework. Examine the checklist and provide an honest appraisal of the status of your credit union s approach on a scale of strong/complete, modest/partial, or just starting. It is also possible that some components may not apply to your credit union s approach to governance and management; you should note that too. Your completed checklist will help your credit union benchmark its current practices, celebrate successes, and prioritize gaps to improve effective implementation of your policy and strategy, and enhance the management of your social and environmental performance. START SMALL: Six Essential Practice Areas of Good CSR Governance and Management For smaller credit unions, or those just starting out or with limited time and resources, here are the six essential components of good CSR governance and management: 1. Secure Board and management CSR commitment and oversight 2. Adopt CSR vision and plan 3. Create CSR reward and recognition incentives for management and staff 4. Assign CSR responsibility to executive member 5. Engage employees on CSR priorities 6. Measure, monitor and report on CSR performance 17 CUSR Tool GOVERNANCE AND MANAGEMENT FOR CREDIT UNION SOCIAL RESPONSIBILITY 2011 Credit Union Central of Canada. All Rights Reserved.

19 CHECKLIST: CREDIT UNION CSR GOVERNANCE AND MANAGEMENT FRAMEWORK COMPONENT AND PRACTICE AREA STATUS OF OUR PRACTICES IN THIS AREA (e.g. strong/complete; modest/partial; just starting; or not applicable) RECOMMENDATIONS TO ADDRESS GAPS 1. Oversight: Board of Directors provides oversight of corporate CSR strategy and performance. See CSR Governance Guidelines, a Canadian Business for Social Responsibility publication. 2. Commitment and Strategy: Credit union s CSR commitment is included in the corporate mission, vision, values and strategy. 2.1 CSR is incorporated into the credit union s mission, vision and values. 2.2 Credit union has a board-approved CSR policy or commitment statement. 2.3 Board and management share a common definition of CSR as it relates to the credit union and the financial sector and have developed a common understanding of the credit union s business case for CSR. 2.4 Credit union has a board-approved long-term CSR strategy, annual plans (as component of annual corporate business plan), targets, KPIs, and metrics for measuring progress; its CSR goals are included in the corporate strategy. 2.5 Credit union s enterprise risk management program considers material CSR risks which are managed through the corporate and CSR strategy. 3. Execution: Credit union has processes to integrate CSR into structures and procedures and to assign resources and accountability to implement and monitor progress. 3.1 There is executive level responsibility for CSR. Senior CSR officer has direct access to the Board and CEO. Senior leaders are held accountable for CSR performance. 3.2 The Employee Code of Conduct incorporates CSR. 3.3 Processes are in place to enable CSR impacts, issues and opportunities to be taken into account clearly and consistently in major decisions and day-to-day decisionmaking (e.g. responsible lending policy, CSR Purchasing Guide policy, etc.) 3.4 Credit union has a process to integrate CSR into its products and services. 3.5 Credit union integrates sustainability into its strategic performance management tools, such as a balanced scorecards, cost-benefits assessments, environmental, health and safety management systems, etc. 3.6 CSR is considered in budgets and financial modeling/business cases and a system is in place to measure and quantify financial impacts of CSR activities. 3.7 Staff resources and budgets are dedicated to CSR implementation. 18 CUSR Tool GOVERNANCE AND MANAGEMENT FOR CREDIT UNION SOCIAL RESPONSIBILITY 2011 Credit Union Central of Canada. All Rights Reserved.

20 3.8 There is a representative, interdepartmental, cross-functional senior decisionmaking forum with implementation authority and responsibility for influencing strategic direction and monitoring progress on CSR. Senior leaders are responsible to: Develop long-term CSR strategies. Review annual CSR plans to ensure alignment with CSR goals and targets. Review progress on CSR goals and targets regularly. 4. Performance: CSR is incorporated into performance management systems. 4.1 CEO and executive have explicit accountability for CSR performance reflected in their personal and divisional scorecards. Executive compensation packages and variable incentive plans are linked to performance on CSR goals and targets. 4.2 CSR is included in credit union-wide and departmental goals. 4.3 Strategy objectives and targets are assigned to key employees, and included in performance systems (including job descriptions, annual performance plans and appraisals and at-risk remuneration for eligible employees). 4.4 Credit union competencies include behavioural expectations that address CSR capacity. 4.5 Promotions, raises, benefits and recognition awards recognize and reward CSR performance. Team CSR awards are in place. 4.6 All employees undergo CSR training; CSR is included in credit union-wide training programs; training addresses CSR strategy and policies, CSR trends, and CSR competencies. 4.7 CSR is included in recruitment interviews, offer letters and early employee contact and in the orientation and probationary review processes. 4.8 CSR is included in leadership development, career-pathing, secondment, succession planning, and change management programs. 5. Engagement: Credit union has robust internal and external stakeholder engagement programs in place. 5.1 Credit union has systematically mapped its stakeholders and regularly engages with priority stakeholders on CSR trends, issues, expectations, concerns, risks and opportunities in an ongoing, in-depth and timely manner, involving all appropriate parts of the business. Senior leaders participate in stakeholder engagement processes which inform strategy, risk management and enterprise-wide decision-making. Credit union seeks to understand and respond to stakeholders material issues, concerns and expectations. Credit union is open to input from its stakeholders and uses a variety of channels to obtain it regularly. 5.2 Credit union has a range of stakeholder engagement practices in place from input and consultation, to partnership and collaboration, to empowerment and designated decision-making; credit union assesses stakeholder perception of its alignment on CSR policy and CSR performance. 5.3 Credit union discloses how it incorporates stakeholder input into corporate strategy and business decision-making. 5.4 Credit union has an internal communication plan to regularly communicate CSR objectives, plans and progress to employees to inform and motivate employees; credit union also regularly communicates to employees on CSR matters (e.g. trends, industry updates, community information, etc.) 19 CUSR Tool GOVERNANCE AND MANAGEMENT FOR CREDIT UNION SOCIAL RESPONSIBILITY 2011 Credit Union Central of Canada. All Rights Reserved.

21 5.5 Credit union engages employees through champion teams, events and campaigns, has a process in place to solicit employee feedback on its CSR efforts and celebrates its achievements and accomplishments with employees 6. Monitoring and Reporting: Credit union regularly reviews, reports and improves its performance. 6.1 Credit union conducts annual progress review of CSR strategy implementation to ensure the strategy is working as intended and targets are on track. Discussion is held on key problems and challenges and future directions. Credit union takes corrective action as necessary. 6.2 Credit union regularly discloses significant CSR performance data and targets relating to its direct operations, subsidiaries, joint ventures, products and supply chains. Disclosure covers how the credit union is managing material issues and progress on its CSR strategy. The report is balanced, covering challenges as well as positive impacts. 6.3 Credit union ensures quality information, measurement, monitoring and reporting systems are in place. 6.4 Credit union releases CSR information through a range of disclosure vehicles, including stand-alone reports, annual reports, websites and social media. 6.5 Credit union verifies key CSR performance data to ensure valid results and engages independent, credible third party to review and validate its disclosures. 20 CUSR Tool GOVERNANCE AND MANAGEMENT FOR CREDIT UNION SOCIAL RESPONSIBILITY 2011 Credit Union Central of Canada. All Rights Reserved.

22 APPENDIX RESOURCES 1. ISO International Standard: Guidance on Social Responsibility 2. CSR Governance Guidelines (Canadian Business for Social Responsibility) 3. The Role of Human Resource Management in CSR (Strandberg Consulting for Industry Canada) 21 CUSR Tool GOVERNANCE AND MANAGEMENT FOR CREDIT UNION SOCIAL RESPONSIBILITY 2011 Credit Union Central of Canada. All Rights Reserved.

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24 300 The East Mall, Suite Sparks Street Toronto, ON M9B 6B7 Ottawa, ON K1R 7S8 (416) (613) HANDS & GLOBE Design is a registered certification mark owned by the World Council of Credit Unions, used under license.