Resourcing and Structures of Sustainability

In the second part of a series on how Australian financial institution Westpac designed and implemented its sustainability strategy, the focus is to design and implement a fresh approach towards winning internal support and building external shareholder engagement.

 
As noted in the first article, Westpac’s sustainability strategy is supported at the highest levels of management, with a dedicated group created within its Public Affairs (PA) department to determine the direction and requirements of the sustainability strategy. The senior executive team is directly responsible for, and is measured by, its ability to help achieve Westpac’s emission reduction targets, with specific KPI targets being incorporated into senior executives’ personal performance targets.
 
Resourcing sustainability  
How is the new sustainability strategy resourced and supported by the organization?
 
Westpac’s sustainability strategy is supported at the highest levels of management, with a dedicated group created within PA to determine the direction and requirements of the sustainability strategy. This has implications for other organisational resources.
 
New organisational structures and responsibilities have been implemented. New cross-functional mechanisms and organisational processes were instituted to gather and communicate data for sustainability reporting. Numerous organisation-wide consultations were reported to have taken place with internal and external stakeholders, since it was agreed that institutional frameworks were required to enable meaningful stakeholder dialogue.
 
A dedicated sustainability strategy team was constituted from a core PA group. Drawing on various business units, including finance, this team has been given an extended portfolio of engagement, including responsible investing, carbon markets, supply chain management, customer advocacy, financial inclusion and responsible lending, community involvement, media relations, investor relations and government relations.
 
A Social Responsibility Committee (SRC) has been established at board level to review sustainability strategy performance and approve policy. The board-level SRC links into the various executive and business units and two other new structures, the Community Consultative Council (CCC) and the Internal Sustainability Council. These links are designed to go upwards and down, as shown by the illustration below.
 
Click on chart to enlarge
 
 
The overall responsibility for Westpac’s environmental policy and performance, including Environmental Management Systems (EMS), resides with the CEO. The structure for managing the EMS process is shown in the chart below, which displays the SRC role specifically relating to environment issues.
 
Click on chart to enlarge

 

Overall, Westpac has devoted significant time and resources to its repositioning within the marketplace. This is primarily manifested in the establishment and ongoing support of Westpac’s Principles of Doing Business (based on the UN Global Compact principles), processes for regular stakeholder engagement, and the design and implementation of detailed extended performance reports addressing Westpac’s performance on its sustainability strategy. The latter is central to Westpac’s sustainability strategy.

 
Visible top-management support and dedicated resources are clearly necessary for the establishment and ongoing development of the organisation’s sustainability strategy. Embedding this strategy in consistent practices, procedures and ‘institutionalised logic’ throughout the numerous operational/business units remains an ongoing challenge.
 
Building external stakeholder engagement
There are three key thrusts to Westpac’s implementation of its sustainability strategy, each reflecting the particular emphases of the strategy at a point in time. These are:
 
  • Building external stakeholder engagement
  • Achieving more transparent reporting
  • A commitment to experimentation to achieve continuous improvement in its sustainability strategy
 
Early on, Westpac focused on active external stakeholder engagement and dialogue. This approach has its antecedents in the origins of the sustainability strategy, which emerged from Westpac’s efforts to rebuild its reputational capital within local communities.
 
Westpac has adopted numerous different stakeholder engagement mechanisms. For example, it partners with and/or sponsors a dedicated number of community partners and not-for-profit organisations to work on defined community projects.
 
One such project involves bank employees volunteering their services among disadvantaged indigenous communities. In addition, in designing the first Stakeholder Impact Report, Westpac was engaged in a series of consultation workshops with various stakeholders around Australia.
 
Westpac also regularly helps organise conferences or thought leadership forums on sustainable business practices. More formally, the stakeholder engagement process has been institutionalised by the establishment of Westpac’s Community Consultative Council (CCC), which is chaired by the CEO and brings together senior representatives from at least 26 external key stakeholder groups. The council meets annually.
 
Elsewhere in Westpac, various internal working parties hold regular forums to elicit comments on different aspects of Westpac’s sustainability strategy.
 
The Sustainable Supply Chain Management (SSCM) process provides another example of Westpac’s external stakeholder engagement. This process highlights how internal practices (such as the evaluation of suppliers) help change external practices. Suppliers are now encouraged and/or required to meet certain standards of ‘sustainable business practices’ in order to conduct business with Westpac.
 
Public reporting on performance
The implementation of Westpac’s sustainability strategy has focused importantly on reporting and communication processes, because “the reason you’re doing it is not just around straight performance, it’s around transparency, it’s around honesty, it’s around accountability, it’s around frank and fearless conversation with your readers about how you’re actually going,” explains one member of the sustainability team.
 
Extended performance reporting has been a central plank of Westpac’s sustainability strategy. A number of reporting mechanisms, available for public scrutiny on its website, have been used for this purpose. These reports include the annual report, annual review, Stakeholder Impact Report (SIR), PACT newsletters, Extended Performance Reports (EPR), and Environmental Social and Governance (ESG) reports.
7
The SIR has played a central role in the implementation of Westpac’s sustainability strategy. The first SIR was significant because of its values, innovative content and distinctively symbolic artwork. The front cover adopted the phrase ‘A fresh perspective’ and contained a picture of a squashed tomato, which symbolised Westpac’s ‘fresh’ approach to stakeholder relations, responding to community criticism with a commitment to transparently examine Westpac’s internal processes and stakeholder concerns.
 
In response to stakeholder feedback requesting more real time and issues-based reporting, a further report has since been instituted – PACT, a user friendly online newsletter.
 
PACT provides regular updates on Westpac’s progress on its sustainability strategy because Westpac “wanted a more real time flexible form of communication that was not necessarily performance based, that was more initiative or issue based... because it’s online and we can knock it up quickly, it’s not expensive, you can get it out more regularly, you can talk about things that are current right now.”
 
Continuously improving sustainability strategy
Westpac’s sustainability strategy emerged from crisis and continues to change as a result of constant experimentation. Westpac’s initial focus on community engagement has broadened to now actively embrace environmental risk management and climate change issues.
 
Westpac’s core principles convey a strategic intent to manage its environmental footprint and environmental risks, to be responsive to climate change, address water management issues, promote the development of market mechanisms to achieve environmental outcomes, and act as an advocate for ‘greater environmental awareness within the community.’
 
Westpac’s desire for continuous improvement in its sustainability strategy has seen Westpac assume a leading role in sustainability strategy. Westpac was the first Australian bank to report using the GRI framework and to seek accreditation to AA1000 standards.
 
Westpac is also a signatory to sustainability strategy initiatives such as the UN Global Compact, principles of responsible investing and lending, and human rights principles. Moreover, Westpac has actively sought to develop this field and established new indicators relevant to the Australian financial sector under the GRI.
 
Overall Westpac’s implementation of its sustainability strategy is multifaceted and incremental; it is a journey of discovery and experimentation which is continuing.
 
The main challenge confronting Westpac in terms of the implementation of its sustainability strategy, in addition to the emerging carbon management challenges noted above, involves the consistent diffusion of the sustainability strategy into all the activities and processes of Westpac.
 
While the sustainability strategy is strongly embedded into the management values and practices of Westpac, its implementation remains ‘a bit of a patchwork picture of embeddedness across business units.’ A current strategic review by the Executive and CEO aims ‘to achieve more ‘business unit buy in’’, says a member of the sustainability team.
 
About the Authors
Jane Baxter is an Associate Professor, Wai Fong Chua is Pro Vice-Chancellor (Enterprise Systems) and Trish Strong is a lecturer in accounting at the University of New South Wales. This article is Part 2 of the CIMA white paper, Westpac’s Squashed Tomato Strategy, and has been abridged and reedited for clarity and conciseness.
 
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