The 2004 Sustainability Report of Co-operative Financial Services (CFS) - the holding company for CIS (Co-operative Insurance Society) and The Co-operative Bank - is now available at http://www.cfs.co.uk/sustainability2004

The report includes my external commentary - below:

This Sustainability Report demonstrates a business with a very sophisticated understanding of the variety of levers it can pull, to have positive value for its various partners (stakeholders). The CIS Socially Responsible Investment Strategy. Active engagement with other companies in which CFS has invested clients' monies. Promoting high environmental (BREAMM) standards in its property portfolio. Assisting suppliers to meet environmental and social tender requirements in ways that represent good business (sense) all round. CFS can credibly do this because it operates "do as we do" not "do as we say."

Being a responsible business - contrary to some ill-informed critics of Corporate Responsibility (CR) - should never mean ducking the tough decisions. Indeed, facing up to the difficult choices is a fundamental part of CR. It is how such decisions are taken, communicated and implemented that CR requires to be done differently. Markets and technologies are changing with bewildering speed. The rapid growth of older bank customers now using Internet banking services (page X) is one illustration. A consequence of these changes is CIS's decision to close its district network. Inevitably, in a time of uncertainty, staff morale and confidence in CFS's commitment to their own people's future take a knock. This is also reflected in high staff turnover. It is a sign of the organisation's maturity, that these impacts are admitted (page Y). It will be interesting to see in the 2006 and 2007 Sustainability Reports, how these changes are felt to have been handled. Ideally, CFS will be able to report on positive outcomes for staff affected - and staff assessments which say: "given that such changes are inevitable, CIS handled them in a responsible and caring way."

One of the growth areas in Sustainability and CR is how far an organisation has responsibility up and down its Value-Chain - and what responsibility it has, not just for the use but also for the misuse of its products and services. In the case of financial services, an obvious area of misuse by consumers is taking on unrealistic levels of debt - being over-mortgaged, too much personal credit and so on. It is good to see this Report addressing these issues (pages A and B). It is also positive to see the Bank's creative development of new products for previously under-served markets such as the financially excluded.

CFS continues to win awards not just for the substance of its commitment to Sustainability and CR - but also for the manner in which it communicates the impact of this commitment through reports like this. Whilst Sustainability reporting is now almost de rigeur for larger companies - and the introduction of the OFR (Operating and Financial Review) in the UK will reinforce this trend - there is great variability in the quality of such reports. Amongst the very positive features of the CFS reports is a willingness to admit failures, to provide benchmark data where available, to signpost which material is likely to be of most interest to which partners, and to name the accountable individuals for specific issues. I particularly like the way that CFS's voting record on shareholder resolutions in the companies in which they invest, is described at the relevant subject sections in this report.
Maintaining consistency between a company's public line on particular sustainability issues and the line they take in their political lobbying - both directly and through trade associations - is a coming CR issue. CFS is to be commended for describing any relevant lobbying stances in the subject sections in this report. It would be helpful if CFS could also reference where the reader might find the organisation's responses to the Government Consultations, which this report refers to having been submitted.

If one is looking for potential innovations in future reports, then it would be to see some specific case-studies of how CFS has gone about resolving issues where partners' views and interests diverge and trade-offs have to be made (alluded to at page X). I would also be interested in more explanation of the voting policy summary (Page) which I assume is meant to show a management by exception approach, describing those instances where CFS did not vote what might be prima facie regarded as the more ethical stance. These are though modest areas for improvement from an already high base.