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

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     Audience           Comment  Annual  report     Investors  analysts,  shareholders       Financial  data  Annual  review     Investor  groups           Concise  annual  report  Stakeholder  Impact     All  stakeholders,  inc  community,  employees,       Fully  accredited    Report       customers           sustainability  info  PACT  newsletter     Employees,  customers,  suppliers,  NGOs,  etc     Online  newsletter  on  

                how  Westpac                     implements  sust’bility  

Extended  Performance   Investors,  analysts,  other  interested  parties     ½-­‐yrly  updates  on    Reports                   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  

   

  i  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