Achieving a meaningful Corporate Responsibility

1
Achieving a meaningful Corporate Responsibility
Sustainability Program
Address to AICD ConferenceGraham
BradleyChairman, HSBC Bank AustraliaShanghai
May 2007
2
Corporate Responsibility Sustainability are hot
topics in the boardroom in 2007

• While not mandatory, publication of sound CRS
  policies is becoming market expectation
• A meaningful CRS program will enhance corporate
  brand fully consistent with shareholder value
  creation
• Achieving a value-enhancing program means real
  work for directors

3
Sound Corporate Responsibility policies are no
longer optional

• In the war for talent, staff respond positively
  to sound corporate values
• Genuine corporate responsibility policies enhance
  corporate brand and command a premium from
  shareholders
• Customers and suppliers will follow
• Environmental sustainability policies are now a
  ticket to the game, especially with government

4
Corporate Responsibility is on the agenda

• Our goal to deliver sustainable shareholder
  returns can only be achieved through doing
  business as a responsible corporate citizen.
  Michael Chaney, NAB
• The greatest risk facing insurers in the next
  four years and beyond is climate change.
  Michael Hawker, IAG
• This is a time period where environmental
  improvement is going to lead to profitability.
  This is not a hobby to make people feel good.
  Jeff Immelt, GE

5
CEO comments on Global Warming

• Some form of carbon abatement is absolutely
  necessary - Paul Anthony, AGL
• Global warming is the biggest single issue facing
  the community and business Terry Davis, CCA
• Westpac has cut emissions by 45 in the past
  decade and is committed to further reductions
  David Morgan, Westpac
• BHP has actively managed and reported its
  greenhouse emissions since the mid-1990s Don
  Argus, BHP
• Global warming is a freight train coming you
  deal with it proactively or you get hit Matthew
  Quinn, Stockland
• Source BRW CEO Survey Dec. 2006

6
CRS Reporting still optional

• CAMAC and PJC reviews did not recommend mandatory
  reporting
• Sustainability reports published by listed
  companies rose from 42 to 119 from 2004 - 2006
• ASX Corporate Governance Council Nov 2006
  consultation paper posed three options
• Majority of submissions opposed mandatory if
  not, why not reporting most opposed guidelines

7
Case against CRS guidelines

• CRS is too important to be relegated to
  material business risk reporting
• Mandatory risk reporting opposed- Risks too
  dynamic- Commercially sensitive
• Fear of legal liability will lead to boilerplate
  and formulaic conformance
• Mandatory reporting will discourage proactive
  embrace of CRS policies
• Other groups better placed to evolve guidelines
  (e.g. GRI, DJSI)

8
The Stockland CRS Story

• Aims
• Make full public disclosure
• Raise awareness across organisation
• Demonstrate top level and mid-level
  commitment
• Choose best framework and tools available
• Make real difference to the future

• Actions
• Publish CRS Report to shareholders
• Appoint CRS executives
• Create new board and employee CRS Committees
• Report against 4 themes and choose a global
  standard (GRI in 2006)
• Set and publish genuine targets for improvement

9
CRS Board Committee

• Two NEDs plus MD
• Aim assist Board to oversee its commitment to
  operate business ethically, responsibly and in a
  sustainable way
• Committees role- review social, environmental
  and ethical impacts of our operations- oversee
  CRS policies and practices- consider proposed
  management initiatives- identify reputation
  issues- vet external reporting

10
(No Transcript)
11
Our 4 CRS Themes Stakeholders
Maintaining ethical and responsible marketplace
practices
Customers Investors Suppliers
1
Respecting and engaging our people
Employees Customers
2

• Taking care of the environment in which we
  operate

Customers Regulators Employees
3
Strengthening our place within the community
Employees Customers The Public
4
12
Marketplace Theme

• Relevant Policies
• Ethical communications with customers
• Code of Conduct
• Health and Safety practices
• Privacy policies
• Supply chain management policies
• Whistleblower policy
• Political donations policy

13
People Workplace Theme

• Relevant Policies
• Culture and values in the workplace
• Diversity/antidiscrimination policies
• Talent/succession management practices
• Learning/development practices
• Performance management, reward and recognition
• Employee engagement

14
Communities Theme

• Relevant Policies
• Community engagement/consultation practices
• Alignment of corporate sponsorships and donations
• Employee giving and volunteering policies
• Community-building initiatives

15
Environment Theme

• Relevant Policies
• Natural environment conservation policies
• Water consumption policies
• GHG emission abatement policies
• Energy saving policies
• Environmental design criteria
• Supply chain policies

16
Stocklands GHG Footprint
GHG Source 2006 Paper Consumed Car Fleet Air
Travel Gas Consumed Electricity Consumed
Tonnes/year
150
430
780
1,140
138,670
Travel to/from workplaces and shops Energy
embedded in existing assets Supply chain emissions
Not measured
17
At Stockland, we have set improvement targets
Key Targets
18
Influencing Supply Chain may be largest
opportunity

• Wal-Mart Example
• Direct emissions
• 20MT
• Indirect emissions from suppliers
• 200MT (e.g. transportation)
• Emissions from the use of products sold
• X times100MT?

19
Targeting improvement looks easy

• Build new, energy efficient buildings
• Use more green fuels (e.g. biomass)
• Plant trees to become carbon neutral
• but is it that simple?

20
Beware simple solutions

• Build Energy Efficient Buildings
• An old, energy-inefficient building near the
  subway beats a new 5 star rated one near the
  expressway
• Use Green Fuels
• Ethanol from maize or sugarcane risks flattening
  rainforest for cropland, and higher food prices
  in poorer countries
• Plant more Trees
• One firm advised to plant 400 trees p.a. to be
  carbon neutral but needed 30,000 trees p.a.
  to offset its raw materials supply chain, plus
  drought insurance

21
Sobering Facts about GHG

• Worldwide fossil fuel emissions currently 7
  GtC/year
• Rising to 14GtC per year by 2050 (BAU scenario)
• By 2015, 10 reduction across industrialised
  world will equal lt 4 years growth by developing
  world
• Only 2 of electricity produced by new clean
  technologies (biomass, geothermal wind solar)
• cf coal (38)
• gas (19)
• oil (7)
• To save 1 GtC/year requires
• 2 million more 1 MW windmills (50 x current
  capacity 1.2 x area of UK) or
• 100 x current Brazil biomass production (1/6th of
  worlds croplands 10 x area of UK)

22
(No Transcript)
23
(No Transcript)
24
(No Transcript)
25
(No Transcript)
26
(No Transcript)
27
(No Transcript)
28
(No Transcript)
29
(No Transcript)
30
(No Transcript)
31
(No Transcript)
32
(No Transcript)
33
(No Transcript)
34
(No Transcript)
35
(No Transcript)
36
(No Transcript)
37
(No Transcript)
38
(No Transcript)
39
(No Transcript)
40
(No Transcript)
41
(No Transcript)
42
(No Transcript)
43
(No Transcript)
44
Lessons from Stocklands CRS Journey

• Make concrete top-level commitment- Appoint CRS
  Executive Sustainability Managers- Board and
  employee committees
• Articulate a coherent brand strategy around CRS
  policies- Embrace wider themes- Set meaningful
  targets- Engage with complexity avoid
  simplistic solutions
• Commit to publish report on CRS principles and
  practices - Design strategy to embed CRS
  principles- Enrol middle management - Tie
  remuneration to CRS objectives- Refine tools
  and targets in future years- Engage with supply
  chain and consumers- Consider external assurance
  (e.g. AA1000AS)