BUS287 Management Accounting

The sustainability reporting of any organization represents its strategy in dealing with the Social, economical, environmental and corporate governance issues. It is important that activities of any organization should be sustainable enough to support the society and its needs in which they are functioning. In case they fail they need to disclose the same in their annual reports. Base on that the investors will decide whether they want to invest in the company or not.

Comparing of sustainability report between two companies helps the investors to understand which company is more sound than the other company when it comes to working for the organization and what are the ways in which organization are functioning (Abdullah & Said, 2017). The main purpose of our study is to clearly reflect the differences or the extent of sustainability reporting made by the NAB and Commonwealth Bank for the year 2017. In last few years a paradigm shift has been noticed in the perception of the people, who once used to consider it irrelevant due to its non-financial, proprietary and management accounting in nature on sustainability reporting.

At the same time our study reflects that every entity should continuously evaluate the effectiveness of its sustainability reporting practices by comparing the same with the best competitors within and outside the industry, that is must to gain the competitive advantage and sustainable relationship with all its stakeholders (Belton, 2017).

Key Indices

Sustainability Strategy, Objectives or Principles of NAB

As stated in the Sustainability report of the financial year 2017 of NAB that the goal is to make a positive and lasting impact in the lives of their customers, people, shareholders and communities and its environment (Boghossian, 2017).

The major sustainability strategies, objectives or principles adopted by NAB are as follows:

Value-aligned culture, Positive customer outcomes, Information management and security, Environmental and social impacts and risks of products and services, Governance, Improving the Customer experience, Transparency and disclosures, Financial Inclusion and Resilience, Diversity and Inclusion, Human rights, Climate Change, Minimizing Bio-diversity loss and ecosystem degradation and Minimizing resource scarcity.

Whereas the major sustainability strategies, objectives or principles adopted by CWB are as follows:

Improving customer experience, diversity and inclusion, financial stability, transparency and disclosures, workforce wellbeing, conduct and culture, responsible lending, investing and procuring, digital innovation, privacy and data security, macroeconomic and demographic trend analysis, climate change risks and opportunities (Borit & Olsen, 2012).From the above-mentioned sustainability strategies of both banks it is quite clear that these objectives or principles are almost similar in both the cases.

The stated reasons for adopting sustainability approach The major reason for adopting the sustainability approach by NAB are as follows:

1. The Bank understands that banking is nothing but to support its customers by making their lives much better and the success of the Bank is attributable to the contribution made by those people, businesses and communities who received the support from the Bank in the past, hence it becomes an obligation for the bank to contribute positively and significantly in return to these groups which became the primary motive of adopting the sustainability approach by the bank(Iggers, 2018).
2. In its report it has clearly stated that to achieve its vision of achieving the position of the respected Bank of Australia and New Zealand, an everlasting positive effect in the lives of its customers, people, shareholders, communities and environment was considered inevitable by it, hence adopted this approach to convert its customers into advocates, ensuring its people’s engagement and generating of effective returns(Charles H, et al., 2015).

The major reason for adopting the sustainability approach by CWB is as follows:

1. The common wealth bank’s vision and commitment of achieving excellence through securing and enhancing the wellbeing of people, communities and businesses for which the guided values as accepted by it as collaboration, integrity, excellence, service and accountability have motivated then to adopt the practice of sustainability reporting(Grundy, et al., 2017).
2. The objective of gaining the trust of its customers together with delivering value to its shareholders, customers and its community also acted as a drive to adopt it.
3. Effectiveness of reporting on key stakeholders, interests and engagement approaches

The extent of effectiveness of the reporting on key stakeholders, interests and engagement approaches by the NAB can be understood from the following:

1. The sustainability report for the year ending 30^th June 2017 has clearly incorporated the key information relevant to all stakeholders by referring to the reporting period, organizational boundary, geographic scope, prior years statements, forward looking statements etc(Coate & Mitschow, 2017). and it also tried to improve its disclosures through restructuring the report to align the data with the group which gets highly affected by the bank’s financial hardship assistance programmed (Kusnadi & Wei, 2017).
2. It tried to make most of its data to be reflected visually and transparent and focusing on those issues which have been considered as most important for its Business and stakeholders(Svahn, et al., 2017).
3. Not only this, but to build the higher-level trust amongst its stakeholders on its reporting, the renowned Big 4 Firm E & Y has been engaged by it to provide limited assurance on the key metrices included in its 2017 sustainability report, 2017 Annual review, which identified and reported all material themes (which means full disclosure)
4. Further KPMG has also been engaged to provide reasonable assurance on NGER (Australian National Greenhouse and Energy Reporting(Kang, et al., 2016).

The extent of effectiveness of the reporting on key stakeholders, interests and engagement approaches by the CWB can be understood from the following:

1. The Bank has engaged the PWC to provide an Independent Assurance Report to the Bod of CWB, which clearly explained its limitation of work, reporting criteria and the activity performed by them which finally concluded that nothing came to their notice while performing this function that the non- financial metrices of CWB has not been prepared by meeting with the materiality requirement of Corporate sustainability report for the year ending 30^th June,2017(Covaleski, et al., 2003).
2. A commentary on areas of strong sustainability Performance of the company

The major areas of strong performance for the NAB are discussed hereunder:

1. It achieved the target of 59% employee engagement.
2. The rate of employee engagement survey response achieved by it during year 30^th June,2017 was 83%.
3. It was found that 77% employees felt that they were comfortable enough in raising their concerns through Whistleblower programmed.
4. It was found that 97% customers who were facing financial difficulty and opted for NAB Assist were made up to date within 90days in Australia.
5. All employees received mandatory training on information security.
6. The active users of internet banking services consisted of 73% of those customers registered with internet banking facility.
7. Only 15 complaints relating to privacy was received during the year.
8. The project finance supported 6561MW renewal energy installation.
9. In Australia $597m socially responsible investments were made(Egelund-Mu¨ller, et al., 2017).
10. In terms of governance 25% of non-executive directors were Women reprinting the Board. The gender diversity reached to 33% with the appointment of Ann Sherry to the Board in November,2017.
11. In Australia 42% of Customer complaints were received at the first point of Contact.
12. It published the Tax Transparency report for the year ending 30^th September,2016.
13. The assistance of microfinance products and services were provided to 64000+ Australians and New Zealanders.
14. The amount of micro finance loan distribution was $28.6m.
15. In Australia 19652 customers received financial hardship assistance.
16. A target of 80% of gender diversity in 2017 was achieved.
17. A target of 73% of inclusion index was achieved.
18. ESG risk assessment was performed on 100% new and re-contracted suppliers in high ESG risk sensitive sectors.
19. The amount of waste diverted from landfill was 54%.
20. There had been a major reduction in use of paper of 20% noticed since 2015.
21. The finance in renewable energy consisted of 58.2% of NAB’s electricity generation portfolio.
22. The number of customers received online only statements.

 The major areas of strong performance for the CWB are discussed hereunder:

1. It invested $16million+ in education during the year 2017.
2. Through the School Banking 50% of School Students regularly started saving.
3. In terms of education research grant $571000 was distributed by the Bank.
4. The number of student who participated in the start smart financial education programmed was 574246.
5. The fellowship of $45000 each was provided to twelve teachers.
6. The Bank established innovation labs in which 40000+ global visitors visited during the year.
7. International money transfer facility provided to 200 countries across the globe.
8. The development of quantum computing simulator was done.
9. It incorporated 44% women in Managerial and above roles.
10. It succeeded in arranging $1.02bn climate Bonds.
11. It made the community investment of $272m.
12. It noticed 48.2% reduction in direct emission since 2009.
13. The hours spent in per employee training was 39.1 hrs.
14. Only 1.1 incidents noticed in per million hrs. LTIFR.
15. The rate of waste recycling from office spaces was raised to 90% level(Kusolpalalert, 2018).
16. A commentary on areas of weak sustainability Performance of the company

The major areas of weak performance for the NAB are discussed hereunder:

1. It found 1613 breaches of code of conduct during the year.
2. It received 2417 Financial ombudsman complaints.
3. It observed Australian priority segments net promotion score of -13.
4. The number of customer complaints were 225011.

The major areas of weak performance for the CWB are discussed hereunder:

1. It didn’t provide key information.
2. Utilization of established reporting frameworks

The NAB had used the Global reporting initiative (G4) sustainability reporting guidelines. Again, it has a plan to align the GRI standards in the year 2018.As per this framework it included strategy and analysis, organizational profile, identified material aspects and boundaries, stakeholder engagement, report profile (Johan, 2018). In terms of specific disclosures, it included customer service and satisfaction, customer security and responsible financing. It also followed United Nation’s Global compact and United nation’s guiding principles together with the united nation’s sustainable development goals (Ghofiqi, 2018).

The CWB had also followed the Global reporting initiative together with sustainability Accounting standards commensurate with the sustainable development goals.

External assurance, awards, sustainability ratings and other forms of recognition

The NAB obtained the Limited Assurance from E& Y on its key metrices incorporated on the Annual review 2017, 2017 sustainability report and E&Y has provided limited assurance that the NAB has reported and identified all material themes which meant the disclosure was complete in its 2017 Annual review (Kaufmann, 2017).

In addition to it KPMG also provided reasonable assurance on its NEGR along with the limited assurance on:

1. Cumulative environmental financing for addressing climate change and supporting low carbon emission(Yadao, 2018).
2. Project finance as a proportion of total PF portfolio value expressed as Egad.

• Specific GHG emission and offset data in relation to NAB(Webster, 2017).
• Conclusion and Recommendations

From the above detailed study, it is quite evident that this report through which comparative study of financial reporting of two renowned Australian Bank has been done provides a very strong evidence of its relevance and scope for further improvement.Whereas the CWB got an independent assurance report received from PWC which states that nothing came to their notice during their work that something material non- financial theme has not been reported in their sustainability report.

It is important that efficient steps should be taken to make sure that both the companies are performing in a sustainable way and in areas where they lack necessary steps have been taken to make the same better. Thus it is important that proper rules and regulations should be followed and the auditors of these companies should provide clear opinions in their audit report.

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