No.

1. Executive Summary

Table of contents

Page No.
4

2.

Introduction

3.

Summary of the company and its disclosures

4.

Application of Legitimacy Theory

10

5.

Application of Stakeholder Theory

11

6.

Opinion- rationale for disclosures and usefulness of information

14

7.

Conclusion

15

8.

References

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1. Executive Summary The last fifteen years have witnessed a steady increase in stand-alone corporate social responsibility disclosure in the world. This trend is due to the realization of companies and corporate activities have an enormous impact on the natural environment. This is particularly true when one considers the use of primary resources for the manufacture of products, the utilization of energy and water, the production of waste and emissions, and a growing awareness of climate. For this reason, the activities and behaviours of companies cannot be ignored or overlooked when considering appropriate measures to be taken in relation to environmental protection and sustainable development. A study by consulting firm McKinsey suggests almost half of US executives want to play a bigger role in social responsibility reporting. According to Goldman Sachs, the companies that perform well on governance, social responsibility and environment have performed better than the general share market over last few years (Deegan 2009, p. 397). All listed Australian companies by law are required to lodge their financial reports and provide a review of its financial and operational performance, which is regulated by the Corporation Law and Australian Securities and Investments Commission (ASIC). There are no mandatory requirements for Corporate Social Disclosure but in recent years most of the listed companies under ASIC are taking initiatives by releasing the disclosure on Corporate Social Responsibility. In recent dates to develop corporate social responsibility such as Global Reporting Initiative (GRI) has provided guidelines for sustainability reporting. (www.globalreporting.org). It allows organisations to disclose their sustainability performance in meaningful, credible and comparable. The focus of this report is Westpac Banking Corporation. Westpac Banking Corporation an ASX Listed financial service company, it has published its Sustainability Report for the year ending 2009. They have followed stringent guidelines of providing a range of information to consumer banking, business banking, institutional banking, insurance and funds management services, mainly within Australia, New Zealand and the Pacific Islands. Westpac floated BT Investment Management (BTT) in December 2007, selling 40% of the business to WBC shareholders (23.5%), institutions (8.7%) and employees (7.8%). On 1 December 2008 WBC has brought St George Bank and become one of the largest banks in Australia. Westpac has published its Sustainability Report for the year ending 2009 by following stringent guidelines of Global Reporting Initiative (GRI) guidelines (G3) (www.globalreporting.org) and also Verified by AA1000 Assurance Standard. ``

Banarra Sustainability Assurance and Advice has done limited assurance review of selected environmental and greenhouse data on Westpacs disclosures. Table1: Key sustainability issues that inform Westpacs business priorities include: Table 1: Banarra Findings on Westpac Disclosures: S.No 1. Banarra [Findings] Commitment to engage with customers and employees in its Our Principles statement. Westpac has made an engagement process with each of its identified key stakeholder groups. Our Comments on Outcomes Group-wide employee engagement score of 81 %. Reduce Lost Time Injury Frequency Ratio (LTIFR) to 2.83 but could not achieve in New Zealand increased to 17 days. Launch employee offering to increase product take-up and experience in April 2. Identified a number of errors in the reporting of the outcomes of the Groups assessments, 3. Equator all of Principles which were Westpac has launched a package of products for its employees to increase product take experience. Westpac has also committed to spend $1 million to community organisations to support financial counsellors. Westpac has extended their proactive approaches in year 2009 by assisting 4. Banarra reports that there is no SME customers. Westpac has reported the following: Reduced 1 and 2 emissions by 5% Energy management plans for site by site for all corporate offices in Australia, New Zealand, United Kingdom and other countries. Reduced paper consumptions by more than 10%. Taxi data has been introduced for the first time to take accountability of indirect `` 2009. The Group has successfully integrated financial and non-financial reporting in year 2009.

corrected in the final Report. The Group has made good progress through development of short and medium term targets for the majority of its material issues.

evidence that the performance data listed in the scope, with the exception of Westpac Pacifics environment, employee numbers and community contributions data, is not correct in all material aspects and is not a fair representation of the Groups performance in these areas in FY09.

emissions. Could not reduce water consumption. More than 300 employees attended training on carbon risk. Launched energy commodities, products to Carbon customers and in

Australia, New Zealand and Europe. Held meeting with high priority customer in high-risk sectors. 5. Group has developed a formal Achieved in Australia Westpac is 2nd Highest NPS among major banks but could not achieve 3rd highest NPS as projected. 6. Group has expanded on its GRI disclosures in the reporting year and has also committed to reviewing the areas where there are still gaps. Customer-centric design workshop to inform new products. Strategic review of new products to combat global financial crisis. New products are developed. Provided funding of 1 million to leading community organization. Offered assistance to customers who are in financial difficulty. Expanded Westpac Assist to SME customers in April 2009. Involved in ongoing policy dialogue with Australia and New Zealand Government to advocate for robust emission trading scheme. Encouraged adoption of sustainable business within SME Sectors with St James Ethics Centres national SME project. 2. Introduction

materiality process to identify its most important sustainability issues in the reporting year.

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In recent years the impact of globalisation there is a greater understanding of the effects of business activities and the growing awareness of the impact of corporate behaviour, not just on shareholders, but also on other stakeholders. The World Business Council for Sustainable Development defines corporate social responsibility on its website as the commitment of business to contribute to sustainable economic development, working with employees, their families, the local community and society at large to improve their quality of life. (http://www.wbcsd.ch/templates/TemplateWBCSD5/layout.asp? type=p&MenuId=MTE0OQ). Key concepts associated with corporate social responsibility are principles of accountability and responsibility to all legitimate stakeholders, and a willingness to engage in appropriate disclosure to such stakeholders. Thus there has been greater attention on the extent of disclosure, which listed public companies make about the environmental impacts of their business activities. This has paved the way for corporate social disclosure reporting. This is defined by Laan as This shift from voluntary information provision to demanded information can be viewed as a natural consequence of increasing pressures on being responsible, particularly in light of intensified worldwide attention on unethical corporate behaviour and corporate collapse (Laan, 2009). Many organisations conceive of sustainability as comprising three strands Economic, Social and Environmental which often referred to as triple bottom line approach (Deegan 2009, p. 388). We will try to explore these concepts in the sustainability report of The Westpac Group below. 3. Summary of the company and its disclosure Westpac began trading on 8 April, 1817 as the Bank of New South Wales with a single office in Macquarie Place, Sydney. In 1982, with the merger of the Commercial Bank of Australia, it changed its name to Westpac Banking Corporation. On 23 August 2002, Westpac was registered as a public company under the Australian Corporations Act (2001). Currently Westpac is ranked in the top 5 listed companies by market capitalisation on the Australian Securities Exchange Limited (ASX) with total global assets of $590 billion and is one of the big four banks in Australia. Currently Westpac is ranked in the top 5 listed companies by market capitalisation on the Australian Securities Exchange Limited (ASX) with total global assets of $590 billion and is one of the big four banks in Australia. Westpac Group serves around 10 million customers through 5 key divisions. Westpac Retail and Business, St. George. BT Group, Westpac Institutional Bank and New Zealand Banking. Westpac Group's portfolio comprises of business and retail banking, funds management, private banking, margin lending, brokering and investment banking with aim to help their customers achieve their ``

financial goals. Westpac employs approximately 37,000 people in Australia, New Zealand and around the world. The Westpac Groups 2009 Sustainability Report highlights 6 focus areas to be recognised by customers, employees, investors and the community as a global leader in sustainability and has reported disclosures under each area as noted below; 1. Going Mainstream - Building Sustainability into products and services to help customers become more sustainable. Achieved 2nd highest Net Promoter Score (NPS) among major banks in Australia.

Developing customer centric design workshops to inform the development of new products and at the same time a strategic review of emerging and future customer product needs arising from the impact of GFC.

Conducted special meetings with Community Consultative Council and senior leaders in Australian retail brands in Feb 2009 on financial hardship.

Committed to spend $1 million to community organisations to support financial counsellors.

Westpac has extended their proactive approaches in year 2009 by assisting SME customers.

2. People and Places - Social sustainability including responsible banking and working on issues of concern to local communities. Employee engagement increased to 81% across the Group.

LTIFR was reduced to 2.83% in Australia, a reduction of over 12%. Same could not be achieved in New Zealand which was over 17 days per million hours.

Launched a package of products for its employees to increase product take experience.

Westpac is in the process of implementing a launch of Rollout of local social engagement and investment model for over 2 years from year 2009. This includes local community investment.

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3. Tread Lightly Managing our own environmental footprint. Like-for-like emissions decreased by 5% against the 2008 baseline.

Implemented energy management plans in place for all corporate sites nationally.

Paper consumption decreased by more than 10%.

Westpac has taken increased accountability on indirect emission by reporting taxi data for the first time.

4. Climate Change Facilitating customers and employees transition to a low carbon economy. More than 300 employees attended a training session on carbon risk.

There was continued customer engagement on carbon risk issues via meetings with priority clients in Australia and New Zealand in all high-risk sectors throughout the year.

Westpac has launched Commodities Carbon and Energy (CCE) products, which offers full range of spot, forward and structured trading solutions.

5. Speaking Out - Leading beyond the corporate walls and speaking out in support of sustainable business practices. Continued advocacy for robust emissions trading schemes in Australia and New Zealand.

Involved in the St James Ethics Centers National SME Project to source, refine and develop resources and tools to engage and promote sustainable business practices amongst SMEs.

Actively supported Earth Hour movement.

6. Solid Foundations Corporate governance, risk management, values and ethics. Successfully integrated financial and non-financial reporting in the current financial year.

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Reported that it has polices with all business on Sustainable Supply Chain Management (SSCM) in Australia and 20 top supplier in Pacific Banking.

Could not achieve in developing key sensitive sector and specific lending and investment policies.

In the process of development of governance process to merge BT Financial Group and Advance Portfolio and it aims to implement it in year 2010.

4. Application of Legitimacy theory The theoretical framework, which has been in favour for a number of years in attempting to explain why organizations implement voluntary environmental reporting, is legitimacy theory (Deegan, 2009). Legitimacy Theory asserts that organizations continually seek to ensure that they are perceived as operating within the bounds and norms of their respective societies, that is, they attempt to ensure that their activities are perceived by outside parties as being [legitimate].

An organization is considered to be operating with legitimacy when its operations and associated accountabilities comply with the social contract in place between the organization and the society in which it operates. One of the legitimation processes an organization will use to increase legitimacy is to modify its structure based on isomorphic mechanisms. Specifically, it is considered that an organizations survival will be threatened if society perceives that the organization has breached its social contract (Deegan, 2009).

Suchman (1995) defines legitimacy as a generalized perception or assumption that the actions of an entity are desirable, proper or appropriate within some socially constructed system of norms, values, beliefs and definitions.

We will now discuss the application of Legitimacy theory to Westpac disclosures activities: Westpac has reported that they actively support communities during times of natural disasters including drought, floods and fires. This assertion is supported by various actions

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of Westpac. For example, in February 2009 Westpac provided immediate response to those affected by Victorian bushfires, including providing $1 million to support immediate assistance requirements. Also over $18 million was collected through their retail networks and the employees donated over $800,000 for the cause. Many of the Groups employees are now actively focused on contributing and rebuilding the affected communities. Westpac and its group have reported emissions with air travel, paper and waste. Westpac reported emission under two mandatory schemes; o National Greenhouse and Energy Reporting Act, the focus of the act is to capture a small number of additional sites, which were not reported previously. o Hastings Funds Management a property holding trust that requires separate items and targets to be established under the guidelines of the property sector. o o Policy to have hybrid vehicles throughout the Group. Saved over $1m sheets by reducing the duplication process and reduction of waste by rolling out recycling facilities. Westpac has been named one of only six mainstreamers in the global banking sector to integrate climate change strategy into their core business processes by World Wildlife Fund. Westpac supports targets that are guided by science. Westpac supported both the Copenhagen Communiqu and the Investors Statement on Climate Change. The Agribusiness division has developed dedicated carbon and water strategy and has appointed carbon champions in each state to focus on the unique issues for this sector. Working with St James Ethics Centre and other business leaders. Westpac is working with federally funded projects to encourage the widespread adoption of more responsible business practices amongst Australian SMEs. 5. Application of Stakeholder theory The notion of stakeholders reflects the idea that the conduct of companies can affect a broader range of persons than merely shareholders. The term has no precise or commonly agreed meaning. In broader range it can be defined as any individual or group who can directly or indirectly affect, or

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be affected by, that entity to any person, group or organization that can place a claim on a companys attention, resources or output (Deegan, 2009). Stakeholders include: Shareholders, employees, creditors, employees, customers and financiers as well as institutional investors. Sometimes also include regulators, the financial markets, the media, governments and the community generally. NGOs, local communities or other interest groups may put political or community pressure on companies to adopt certain standards.

While Legitimacy theory discusses the expectation of society in general, Stakeholder theory provides a more refined resolution by referring to particular groups within the society. (Deegan, 2009). Shareholders generally can exert influence through the internal corporate governance structure while Institutional investors and other stakeholders can employ other means of influence, the significance and weight of which are matters for companies to determine in their particular situations (Deegan 2009). We will now discuss the application of Stakeholders theory in the context of Westpac disclosures activities: Shareholders: At Westpac, increasing shareholder value has been the core driver, which can be achieved by maximising profit. Westpac has reported cash earnings of $4,627 million and has declared dividends of 116 cents. Financial Analyst and Business Partners : Westpac believe that corporate governance, risk management are the backbone of any financial institution and the Groups continuing strength and resilience is testament to their long-standing focus on these issues. Westpac identifies issues, risks and opportunities from a wide variety of sources, whistleblowers policies, managers code of ethics including regular stakeholder consultation, media coverage, customer research, benchmarking with peers and many more. The issues identified are then prioritised according to the impact on the stakeholders, business operations and financial outcome. In 2009 the material issues identified were impact of financial crisis, customer service, fees and responsible banking. The identified issues are then worked through the strategy development process. ``

Suppliers: approach.

Westpac believes that it has responsibility to its suppliers in relation social,

environmental and ethical practices and developed sustainable supply chain management

Customers: Westpac states that customers chose to bank with them because they share their views with them on sustainability. Keeping in mind with this objective and with set targets in areas such as customer services and reducing complaints, Westpac innovate with new products and services to meet specific customer needs and also recognise their products with sustainability. It has reported the following in year 2009: Extended its assistance to SME from April 2009. Open branches in rural areas and set up in-store branches. In the process of introducing customer-centric design workshops to inform development of new products to customers. Employees: Westpac focuses on employee commitment and reducing staff turnover. Increase of employee engagement by 81%, LTIFR reduced by 2.83%.

Community: Westpac believes that making changes right across a large, geographically diverse organisation can be a lengthy and challenging process. Westpac manages its own CO2 emission and water usages. Many of the broad improvements have been made and they have in place fiveyear targets for emissions associated with energy and fuel consumption, as well as targets for paper, air travel and waste. Following were reported for year 2009: Reduced like-to-like emission by 5%. Energy plans in its corporate sites and supports Earth Hour movement. Reported indirect emission of taxi data. Launched Commodities Carbon and Energy (CCE) products, which offered range of solutions. Rating Agencies: Westpac has reported that it has achieved second highest NPS amongst the major banks in Australia and third highest in New Zealand.

6. Opinion- rationale for disclosures and usefulness of information ``

Westpacs Sustainability Report 2009 explains the vision of becoming the leading financial services company in Australia and New Zealand. To achieve this, goal group has formulated below 4 Customer Focused Strategy: Vision: To be the leading financial services company in Australia and New Zealand Strategic goals: Most recommended financial services company Meet customer needs Most skilled and engaged people Global leader sustainability Highest return in sector

Driving Principles: Operating as one team and this can be achieved by: Focus on core markets Strong local businesses Easy to do business Common values

Transformation programs: Customer-centric culture Multi-brand People Productivity

Based on the above discussions the following rationales can be drawn: Sustainability report serves as a licence to grow and operate. Fundamental to access to the resources is effectively addressing heightened political and societal expectations related to the environment and social aspects of the business. Various organisations will develop and adopt new practices because of variety of institutional pressures (Deegan, 2009).

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Positive Accounting Theory predicts that all people are driven by self-interest. Accordingly particular social and environmental activities and their related disclosures would only occur if they had positive wealth implications for the management involved (Deegan, 2009).

Companies disclose information voluntarily has positive impact on share prices, cheap interest loan raising, good stakeholder relations etc. Sometimes it avoids possible government intervention. Voluntary social responsibility disclosure entails strong stakeholder confidence in companies operations. Various stakeholders and society can access the performance of the company not only from economic point of view. It gives clear idea how well the scarce resources of the society used. Westpacs Corporate Social Responsibility Disclosures has enabled them to position itself as a sustainability leader with a diverse set of stakeholders. By implementing proper strategies Westpac has achieved 2nd highest NPS amongst the leading banks. Westpac has also increased the confidence of its employees and achieved 81% employee engagement and also offered new product packages to them to increase productivity. Westpac recognized the importance of SME and started assisting them. Westpac has also recognized the community and supported various schemes. The disclosures reported by Westpac make it useful for a variety of stakeholders as the information reported is based on their values and beliefs and its impact on the society. 7. Conclusion Globalisation of business activities has given additional impetus to the corporate social responsibility movement. There are various societal and stakeholder expectations about the disclosures. It is indeed difficult to reach to a consensus view regarding the social, environmental and economic responsibilities of an organisation because of variable nature of expectations. So social and environmental reporting is a rapidly evolving area. There are stages of sustainability reporting and various theories underlie these disclosures namely Stakeholder theory, Legitimacy theory, Institutional theory and Positive Accounting Theory. These theories try to predict what motivates organisations to voluntary disclose their economic, social and environmental performance. Traditionally financial accounting does not appear to provide a foundation for social and environmental disclosures. Hence organisations have to resort to alternatives like Triple bottom line reporting, GDP measures, Global Reporting Initiatives etc. Westpac is a corporate business with core business values. Its independent Business Owners are people who want to make a difference to the communities in which they operate and to the wider

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world community. This is Corporate Social Responsibility (CSR) in action. We included evidence from Westpac sustainability report to illustrate details related to the why, the what, the when and the how processes needed to be understood and mobilized to move latent stakeholder groups to a point where they, and their issues, are more powerful, more legitimate, and more urgent, and ultimately, therefore, definitive stakeholders. Notwithstanding the drivers of voluntary disclosures, the fact now is no company can afford not to disclose this because of the growing awareness among the stakeholders and society. 8. References Australian Centre for Corporate Social Responsibility, Report to Westpac, Westpac Stakeholder Impact, Stakeholder Review, viewed 8th May 2010. <http://www.accsr.com.au/html/casestudies.html> Deegan, C. (2009), Financial Accounting Theory. 2 nd edn, North Ryde NSW: McGraw Hill. Hui, F, Bowery, G (2008), Corporate social responsibility reporting in Hong Kong: Case study of three note-issuing banks (2003-2006). Faculty of Commerce Paper, University of Wollongong. Laan, S. (2009), The Role of Theory in Explaining Motivation for Corporate Social Disclosures: Voluntary Disclosures vs Solicited Disclosures. Australasian Accounting Business and Finance Journal, Vol. 3, No. 4, pp.15-26. Langfield, S, Thorne, H (2009), Information for creating and managing value . 5 th edn, North Ryde, NSW: McGraw Hill. Schuman, M. (1995). Managing Legitimacy: Strategic Approaches and Institutional Approaches, Academy of Management Review, Jul, 20, 3, pp. 571 610. Westpac Sustainability Report 2009, Westpac Group, Sydney, viewed 17 th April, 2010, <http://www.westpac.com.au/about-westpac/sustainability-and-community/social-andcommunity/>. World Business Council for Sustainable Development, viewed 22 th April 2010, <http://www.wbcsd.ch/templates/TemplateWBCSD5/layout.asp? type=p&MenuId=MTE0OQ>. ``