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How Westpac Got Its Sustainability Strategy Right

by Jane Baxter, Wai Fong Chua and Trish Strong, University of New South Wales, 07 September 2011

topics:
Risk Management

tags:
CIMA climate change corporate social responsibility environment Social Impact report sustainability

Climate change, sustainable business and development more generally are significant issues facing today’s organisations and communities. An increasing amount of research has been carried out in these areas. Our study aims to explore how Westpac, a large Australian financial institution and leader in this field, developed and implemented a climate-change sustainability strategy.

In the last decade, the term ‘sustainability’ is now commonly used to refer to organisational activities that were discussed previously under Corporate Social Responsibility (CSR) and Environmental, Social and Governance (ESG) issues. At Westpac, sustainability is defined broadly and is reported to mean to ‘do right by our people, customers, community and the environment’.

Westpac’s sustainability strategy encompasses more than financial sustainability: it links social, environmental and economic dimensions, indicating that Westpac understands that it needs to adopt a coordinated, long-term and well-resourced approach to its sustainability strategy.

Sustainability and accountants

The main findings arising from this research which are of interest to practitioners are:

An organisation’s sustainability strategy is dynamic and hence the term ‘sustainability’ is a malleable rather than a fixed concept.

Support from top management is crucial to the effective implementation of a sustainability strategy.

Sustainability strategy has the ability not only to change internal practices but also to change relationships with external stakeholders, such as suppliers.

Climate change initiatives are an important but partial element of a comprehensive sustainability strategy.

Carbon management and integrated financial and non-financial reporting are some of the current issues affecting the development and implementation of sustainability strategy. This provides potential ‘space’ for management accountants to become involved in sustainability strategy.

Although accountants may not have full ownership of a sustainability strategy, it is clear that they can play a role in helping to develop broader-based business reporting. If accountants do not take up this challenge, other professional groups, such as engineers and environmental scientists, may well claim this area of expertise.

Community backlash

Westpac’s sustainability journey did not commence as a proactive move to build the organisation’s competitive advantage in terms of product leadership or operational efficiency. It was a response to an organisational ‘crisis of legitimacy’. 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. Traditional Public Affairs (PA) initiatives failed.

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