ANZ Corporate Responsibility Report 2008

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1 ANZ Corporate Responsibility Report 2008 External assurance statement and commentary Introduction Australia and New Zealand Banking Group Ltd ( ANZ ) has commissioned Corporate Citizenship to provide it with external assurance and commentary on its Corporate Responsibility Report 2008 including online content at anz.com and an associated Review, hereafter called the Report. ANZ s management has prepared the Report and is responsible for its contents. Our objectives were to review and advise on aspects of contents and presentation, to conduct selected checks to underlying corporate records, and to provide this statement for which we have sole responsibility. ANZ also reports on its performance against Australia-wide Customer Charter commitments and as part of this assurance process we have commented on this in the stand-alone Customer Charter Annual Report About us Corporate Citizenship is a specialist management consultancy advising corporations that seek to improve their economic, social and environmental performance around the world. A detailed note describing our relationship with ANZ and the assurance process we have adopted appears at the end of this statement. Further information about us including our statement on assurance independence, impartiality and competence is available on our website ( Corporate Citizenship Holborn Gate 330 High Holborn London WC1V 7QG T +44 (0) F +44 (0) Corporate Citizenship Registered in London, number

2 Our opinion In our opinion, this year s report provides a fair and balanced representation of the material aspects of ANZ s corporate responsibility approach and performance over the reporting period. We have examined the management strategies, frameworks and processes ANZ has in place for identifying, understanding and managing issues related to corporate responsibility. Nothing has come to our attention to suggest that the information presented in the Report has been materially misstated. Where we believe material gaps in performance data and stakeholder views on significant issues exist, they are identified below. In forming our opinion and making our comments, we have had regard to the principles underlying the international assurance standard AA1000 AS 2003 ( notably concerning materiality, completeness and responsiveness. We have also had regard to the reporting guidance for content and the principles for defining quality contained in GRI's G3 sustainability reporting guidelines ( Following the guidelines of the ISAE 3000 ( standard for the conducting of non-financial audits, we have provided a limited assurance statement. Commentary We believe that reports about an organisation s corporate responsibility performance should explain how the company impacts on society and how the important concerns of its stakeholders, whether they be economic, social or environmental, are taken into account. Reports should show how crucial decisions are made and how differing, sometimes competing, interests are balanced. Honest about shortcomings, reports should demonstrate how the company is responsive, by listening, learning and improving. In our opinion this Report addresses the key challenges faced by ANZ during the year. It offers a transparent account, including issues where ANZ has been challenged by its stakeholders this year such as those relating to regulatory submissions, controversial investments, the current financial crisis and off-shoring. ANZ s commitment to reporting twice a year increases transparency, with the interim report at half year allowing the company to track progress against goals and take action accordingly.

3 ANZ s has received independent recognition for its performance from various recognised external sources. It was named supersector leader in the Dow Jones sustainability index for the second year running. Its approach to and management of climate change issues was acknowledged as world class by its inclusion in the Carbon Disclosure Project top 50 leadership index. Customer satisfaction, as measured by Roy Morgan Finance Monitor, has remained the highest of any of the major Australian banks, while lead positions were maintained in the Peter Lee surveys for large corporate and institutional banking across both Australian and New Zealand markets. Looking ahead From our assurance work, we have identified seven areas where the materiality, completeness and responsiveness of future reporting could be strengthened. Understanding of the business and its finances ANZ has responded to our comment last year that it should articulate better how the banking industry functions, for example by including an explanation of interest rate changes ( Market pressures and our customers ). Especially given current concerns, we believe reporting would be strengthened further by explaining the different segments of the bank s business and detailing how revenues are earned and profits made. Going beyond summary financial results, this would discuss exposure to bad debt and the increased provisioning for credit losses briefly mentioned in the CEO statement. Restructuring in period of change ANZ is currently restructuring its organisation which will involve some redundancies. Given the importance of human capital to the bank, we believe further commentary on the rationale for these changes, the processes adopted and the likely effects is warranted. A key consideration looking ahead is the possible impact on organisational culture and engagement which have been central in delivering above average returns over recent years. Small and medium sized enterprises ANZ has increased its reporting of issues related to some commercial customers, including sectoral lending policies and incorporating social

4 and environmental criteria into risk and reputation assessments. One area for future attention is small and medium enterprises, and how ANZ can support them, especially as these customers may be greatest affected during the economic downturn. Increased reporting of ANZ s approach to responsible supply chain management is warranted, including what support is offered to smaller suppliers. Climate change and sustainable development ANZ has committed to go carbon neutral across its Australian and New Zealand operations by the end of Given increasing scientific certainty about the impacts of climate change and with Australia recently ratifying the Kyoto Protocol, future reports should show how ANZ is addressing the climate change challenge through its indirect impacts, as well as its own operations. As the business expands into Asia, the sustainable development agenda will come centre stage. Scope of management and reporting systems As previously commented, management systems and future reports should better reflect ANZ s growing international operations. Examples of expanded data coverage should include health and safety performance, ethnicity of senior leaders and executives, and progress with assessing social and environmental risks associated with some clients, particularly within the Asia Pacific region. As ANZ s footprint in this region expands, future reports should identify region-specific material issues. An examination of ANZ s economic impacts in emerging markets would extend understanding of the contribution the bank makes in these markets and to socio-economic development more widely. Performance and targets While performance against targets set in the 2007 report has been variable this year, this reflects the challenge of achieving desired outcomes in one year alone, rather than performance weaknesses as such. With the exception of two yearly environmental targets, ANZ solely challenges itself for the upcoming year alone. At the same time some targets require positive performance against multiple underlying

5 commitments 33 in the case of the Reconciliation Action Plan, for example. As previously commented, we believe the inclusion of some longer-term more aspirational targets, closely aligned with strategic business imperatives and growth ambitions, would provide stakeholders with a clearer vision of ANZ s aspirations and achievements. Responsiveness to stakeholder concerns As the global nature of the credit crunch has shown, banks play a pivotal role in the economy and in the whole sustainability agenda. One bank s own impacts may not be significant, yet through its financing and lending activities the indirect impacts are significant. As stakeholder expectations about transparency grow, so will the need for increased disclosure on diverse topics such as the supply chain, government regulation, responsible lending and bad debts. We believe ANZ has demonstrated an understanding of the challenges that exist for thousands of customers in its chosen markets by developing programmes to identify and assist those facing hardship. In testing times, commitments to corporate responsibility are cemented by listening to stakeholder concerns. ANZ has corporate responsibility structures and management processes in place to support regional growth and strong home market performance. The challenge now is to ensure they are resourced and able to embed responsibility across all operations, and so help maintain a successful and sustainable business. Corporate Citizenship 4 December 2008

6 Note on our relationship with ANZ and on the assurance process Our relationship with ANZ This is the second year running that Corporate Citizenship has provided assurance of ANZ s Corporate Responsibility Report. Apart from that noted here we have had no other contractual relation with ANZ over the reporting period. ANZ is a member of the London Benchmarking Group (LBG) - an evaluation framework for corporate community involvement, which Corporate Citizenship manages on behalf of the LBG's members worldwide. The assurance process As there are no statutory guidelines for social reporting, we have formed our judgements based on emerging best practice among other companies, including the principles of the assurance standard AA1000, the approach of the Global Reporting Initiative (GRI), the stated views of principal stakeholders, and our own professional expertise and experience. A team of four, led by a director of Corporate Citizenship, undertook the assurance and commentary process in connection with this statement regarding the report. A second director acted as adviser to the group. The team has extensive relevant professional and technical competencies and experience. For a fuller description please refer to our website. The work was commissioned in May 2008 and was completed 4 December Detailed records were kept of meetings, assurance visits and correspondence relating to the materiality, completeness and responsiveness of the report, as well as to technical matters relating to the accuracy and presentation of data. Drawing from the ISAE3000 standard for the conducting of non-financial assurance, our process for assuring the 2008 report has involved due consideration of the availability of information, sufficiency of evidence,

7 underlying systems and processes, internal assurance systems, adequacy of resources allocated and relevant legal and commercial constraints. We have judged materiality by considering significant legal, regulatory and financial impacts, business policies, recognised international standards, codes and initiatives, the performance of peers and competitors and stakeholder views. In this we have taken into account the principles of AA1000 AS (2003) and drawn on our experience from working with a number of clients in the financial sector. In particular our approach to external assurance and commentary of ANZ s 2008 Corporate Responsibility report has involved the following: Understanding ANZ, its own and broader cultural contexts; its approach to and understanding of corporate responsibility; how it identifies issues material to its operations. An analysis of best practice among other companies, the principles of the GRI (G3) and AA1000 AS (2003), notably regarding the reliability, materiality, completeness and responsiveness of report s contents. Detailed discussions with ANZ s Corporate Responsibility and Corporate Affairs staff about reporting the company s approach, policies, performance measures, benchmarks, stakeholder relations and future plans. A review of national and international published sources of information about the views and opinions of external stakeholders, including inter-governmental and governmental agencies, media, academics and special interest groups. An appraisal of ANZ s stakeholder engagement activity, principally employee surveys, submissions, discussion papers and other consultation documents as well as investment analyst presentations. Review of independent, third-party surveys, reports and assessments conducted for ANZ including employee engagement; and the SAM company benchmarking report. Benchmarking against peers, competitors, best practice and internationally recognised standards to identify the basis on which to judge ANZ s performance. Reviews of audits and engagement with relevant audit teams have supported our conclusions, notably including internal audit of the

8 customer charter; external audit of the environment data by SGS; and community performance data by Positive Outcomes. An assessment of the internal assurance process, notably the procedures adopted to ensure responsiveness, completeness, materiality and data accuracy. Examination of the report at set stages in its development and testing of the assertions throughout on a section-by-section basis, drawing from evidence and supporting documentation, reporting mechanisms, frameworks and processes. Checks on a sample basis of elements of the report s contents to underlying records, focusing on quoted stakeholder views from employees and on claims made about new initiatives on environment, risk assessment and business assurance. Meetings and discussions with a cross section of ANZ managers and staff both in Australia and New Zealand about its approach to corporate responsibility, its policies and performance, its future challenges and its relations with stakeholders. Our work did not extend to a complete audit of the report s contents. We have not been responsible for the preparation of the 2008 report nor in devising the internal management and reporting systems that yielded the data contained therein. As part of this assignment we have reviewed ANZ s Customer Charter Annual Report and provided a stand-alone assurance statement covering that work. The opinions expressed in this external assurance statement and commentary are intended to extend understanding of ANZ s non-financial performance and should not be used or relied upon to form any judgements, or take any decisions, of a financial nature.