Executive Summary

Westpac group is the biggest and one of the first banking services provider in Australia. It also has branches in Asia, New York, and London. The group is managed by a board of directors alongside the chairman and the CEO of the group who are also board members. Westpac group being a financial service provider has set vision and values that enable it to operate towards its set goals of meeting the best interest and trust of its stakeholders.

Westpac group based on the 2018 annual report provides services to 14.2 million customers with a total of 38,522 employees. Westpac has over the years operated guided by the principles of sustainability, such as environmental, social ethics, and good governance for these are the key pillars of touching the target market which include the community, individual clients and the nation at large. It is due to their work ethics and sustainability forecast that over the years Westpac has grown to become a reputable firm recognized both locally and internationally with several annual surveys and rankings such as the Dow Jones Sustainability(DSJ) indices.

Introduction

The year 2018 has been a harsh one on the banking industry in Australia and for Westpac as shown in the 2018 annual review. Westpac being a financial service delivery firm has to strategically develop sustainable aspects in the main areas of environment, social and governance (ESG). These aspects are the main ways of attracting shareholder’s trust. According to Westpac 2018 sustainability report, the firm faces challenges and opportunities throughout their service delivery. How well to cope with such problems and opportunities has put the firm where it currently is. Various environmental and social strategies have been put in place, and continuous research and development are being carried out by the firm’s able experts to aid in achieving the firm’s sustainability target. This report shows various achievements and works on progress in relation to the ESG sustainability aspects in Australia, New Zealand, and Asia where Westpac is operational. The report weighs on the sustainability of the firm based on its past five years’ performance and recommends on how sustainable the business can be now and in the future.

Environment

Westpac company is the biggest and one of the first banking services provider in Australia. It also has branches in Asia, New York, and London. This simply explains the reason it is a major brand in the banking sector. By so being, Westpac management has set out and assured commitment to environmental sustainability. Being in a finance service delivery sector, Westpac directly has a low environmental impact since it does not majorly deal with large emissions. However, since it is an international firm, and one of the big brands, then they indirectly have a high environmental impact as compared to other companies (Islam, Jain, & Thomson, 2016). The organization may even persuade stakeholders to take part in environmental issues. It has set out policies that are reviewed every two years, and in this year’s sustainability report, Westpac has shown how it, directly and indirectly, has a significant impact on the environment. Based on their 2018 sustainability report, Westpac firm has indicated their awareness of a healthy environment for the success of their firm now and in the future.

Being a reputable brand not only in Australia but in other countries, such as New Zealand, and Asian-based nations, Westpac has a direct impact on the environment through their operations and indirectly through their supply chain. The firm is committed to managing its environmental impacts, opportunities, and risk. This commitment, if well implemented, will ensure the creation of a conducive environment for their business and automatically leads to reduced business cost and hence improved shareholder return (Westpac Group, 2018). In this year’s report, Westpac firm has increased their lending committed to climate change solutions to $ 9.1 billion and has a projection of an increase to $ 10 billion come the year 2020 (Westpac Group, 2018). Westpac ranks among the leading companies’ cognizance of sustainability, both nationally and internationally, as they were ranked 17^h in this year’s Dow Jones Sustainability(DSJ) indices which recognize global sustainability committed firms (Jackson, 2016). As a means to improve and show commitment directly on environmental sustainability awareness, Westpac has emerged as the most prominent financiers of greenfield renewable energy projects in Australia making the sector achieve a 71% rise. In order to ensure environmental sustainability, Westpac for the first time has carried a climate change scenario analysis in Australia, and New Zealand and even went ahead to cover the Australian mortgage book, and assessment of physical risks.

Being one of the largest firms, Westpac has played a significant role in influencing other firms and communities to commit to ecological suitability. Additionally, the firm has vowed to comply with requirements of environmental legislation within their scope as a bid to show their commitment to environmental sustainability. This process will entail monitoring, controlling and reducing waste and waste use, greenhouse gas emissions and thereby managing them. The 2018 sustainability report indicates that Westpac has achieved a 4.4% reduction in greenhouse gas (GHG) emissions compared to the Year 2017 and 18.1% reduction when compared to the Year 2016 (Salim, Arjomandi, & Seufert, 2016). The firm in itself is committed to the creation and provision of products and services that are easy and direct for clients to manage their environmental risks. Westpac has an advocacy and awareness plan that helps in making their staff aware of the need for sustainability aspects. So, this aspiration is achieved through continuous communications and training of their employees on matters environment. The board of the company is tasked with follow-ups and setting targets on environmental issues and reporting to stakeholders through annual meetings and to the public through annual sustainability reports. Indirectly, the firm makes sure that their supply chain is aware and committed to sustainability through monitoring and screening their supplies to ensure they are compliant. According to the 2018 sustainability report, the firm has shown commitment and is willing to do whatever is within their capacity, both directly and indirectly, to ensure they manage if not fully achieve a sustainable environment for their business.

Social

Sustainability is all about making sure that one is able to cope with trending, emerging and foreseen situations so as to remain relevant in their service/ product delivery. The challenges and ways of operation should be such that they lead to healthy social, environmental and economic wellness of an organization for these are the vital interests to stakeholders of the organization (Trireksani, Djajadikerta, & Zhang, 2018). Westpac as an organization has shown commitment and urge to remain relevant to its stakeholders as three key sustainability priorities drive it, such as social, environmental, and ethics. Since it is a financial service provider, Westpac has three key aspects to sustainability, such as making sure their clients make reasonable and better decisions on matters finances, providing them a shoulder to lean on when in need, and help the same clients in developing a successful and prosperous state (Wong, & Wong, 2017). Through these strategies, the firm is the second largest taxpayer in Australia. Based on the firm’s 2018 sustainability report, it is evident that Westpac has intentions to commit to sustainability matters. This standpoint is evident since the year 2018 was a harsh one for banking operations in Australia, and even so, Westpac has shown intent to deal with challenging and pressing issues and thus lead to improved performance and stakeholders’ satisfaction and trust in the firm.

The industry has experienced changes for the last five years mainly in terms of digitization in the banking sector and regulating authorities and government agencies such as the royal commission that push for changes in the industry. Due to these changes, the organization had to change its sustainability and strategic plan so as to cope with such regulations. Being the first banking institution to introduce internet banking, Westpac is now working on modern digital forms such as cheque deposit through mobile phones all to create a conducive environment to their clients. Sustainability of a firm is based on its environmental, social and governance structure. The firm should have a structure that would enable them to overcome even the harsh business conditions as envisioned in the banking sector in Australia in 2018 financial year.

Westpac has shown through its ESG structure that their sustainability structure is viable. One of the critical aspects that Westpac has emphasized is service leadership. Since the firm is a financial service organization, service is a crucial aspect of its growth and future sustainability. The firm has set a strategy to aid in its provision of the best services to its customers, community, and people around them. These strategies are aimed at making the firm the best and leading banking service provider in Australia and New Zealand (Dumay, & Hossain, 2018). The firm is devoted to offering services to customers at any time. For example, the company’s commitment can be elicited when processing client’s needs whenever they are pressed emotionally. Consequently, consumers are likely to feel appreciated and trusted by their preferred service provider at such times. For instance, Westpac helps its customers when they have lost a loved one or during birth. This sample scenario, for the past times, has created trust and a sense of appreciation from the clients. In its 2018 sustainability plan, Westpac has outlined improved and more advanced services and products to aid improve and create better service delivery.

Among the services and products, the firm has introduced the support guide and checklist written by an expert to aid separating or divorcing clients. Home loan parental leave mortgage for expectant clients and an online application form for its Chinese clients moving to Australia. All these products and services have been introduced to cater to current better service delivery thus strong leadership. The firm also makes follow-ups and work on stakeholder’s issues at hand and those that matter most at a particular moment. This process helps them to understand and formulate a strategy to help them cope with current and future issues. The firm in its sustainability plan has a ‘get it right, put it right’ strategy in order to help provide better client service delivery. The policy is such that they attend to clients’ needs right the away the first time and where they get it wrong they get it fixed right. Westpac social strategic plan has also engulfed the indigenous communities of Aboriginal and Torres Strait communities. They take banking services closer and easier to these communities as part of their reconciliation action plan. This method is achieved by taking ‘pop-up’ banking services to remote areas and provide free services to these remote communities.

Governance

Westpac company being a national and international company has set out values and behavior codes that ensure their stakeholders are served with high levels of transparency, fairness, and means. The firm has set strategies for good corporate governance standards aimed at achieving the best stakeholders interest. Since the firm management believes that the sustainability of their business relies on good governance, they continuously monitor and develop ideas in corporate governance from both local and global firms. It is due to these set values and behavior that Westpac has had equity securities listed in Australia by the ASX, New Zealand by the NZX and the United States by the New York stock exchange.

The structure of governance of the firm is led by the board of directors, chairman, and chief executive officer of the firm. The board is mandated to form committees that oversee the various duties and functions of the firm. The duties and responsibilities of the board and its committees are outlined in their corporate governance statement which they also provide online for purposes of integrity and transparency (Benn, & Dunphy, 2017). With a clearly established governance structure, the firm has outlined a framework to oversee sustainability issues as every member is tasked with a duty to coordinate and implement a planned agenda. The board and members of each committee are hired based on their skills and ability to push for the firm’s best interest and on a timely basis thus ensuring competitiveness and best service delivery. Westpac management has also set out an advisory board in Australia and Asia. The advisory board is tasked with offering advice to the administration on the best strategies to implement so as to strengthen the firm’s position in the sector.

Good governance ensures development and prosperity of not only the firm the nation as a whole. Financial service delivery firms such as Westpac provides access to foreign capital to a nation and also provide support to the nation’s investment needs. Since Westpac is committed to developing prosperous nations through its service delivery, then it’s management has vowed always to listen, reflect and take action on any key proposal made by the same country institutions. The royal commission which was enacted by the Australian federal government is one such proposal that Westpac has committed to adhere to its plan and make critical changes in their recommendations.

Westpac believes in designing a remuneration strategy aimed at retaining the best employees while rewarding them accordingly best on their performance. Employees remuneration in this form will automatically reflect how the business has performed throughout a given financial year. Based on the 2018 report, Westpac had a strong balance sheet across credit, liquidity and capital quality. Earnings were below expectation even though the firm made progress in its service strategy. The CEO and Group executives based in Australia generally recorded a 25% reduction in variable reward outcomes in the year 2018 as compared to the year 2017 (Dumay, 2016). Compared to 2015 report, the rewards showed a decline too. Thus, for the last three years, the reward plans were not achieved, which then prompted the awards’ forfeiture.

Ethics

For any business to make profits and prosper, ethical matters must be put first into consideration. Westpac firm realized a long time that for their sustainability, vital ethical issues must be put in place. For stakeholders to have trust and keep in touch with your business, then major key ethical matters are followed. The ethical values, as well as expected behaviors, are set by the collective decisions from the governance structure. Westpac has come up with distinct ethics that have kept them going, and still, they believe the future is brighter. In line with the vision and values, such as integrity, achievement, courage, service, and teamwork, Westpac company has over the years recorded tremendous growth.

It is due to the company’s effective business ethics, Westpac can now talk of having 14.2 million customers and a total of 38,522 employees. It seems everyone is appreciating and wants to be associated with Westpac firm. In the year 2010, Westpac was named as one of the most ethical firms by an annual survey (Ethisphere) which also ranked other international firms. Westpac believes that consistency in matters ethics has kept them where they are at the moment. Fundamental values entailed in their ethical code are such as ensuring that their employees, contractors and whoever is associated with the firm acts with diligence, honesty, and transparency. They do the right thing to the clients; thus the ‘get it right ‘put it right ‘strategy. Teamwork and professionalism, as well as compliance with laws and policies of the firm, are also key ethical codes in the firm.

Confidentiality to information and good management of conflicts of interest have been seen as being key to winning stakeholders trust and therefore highly endorsed by the company. As it is normally believed, good ethics is good business. This is clearly shown from the annual report quoting Westpac to be continually growing even during the harsh times in the banking sector in Australia and all over the world. Westpac has no record of any ethical issue as may have been pointed out by the royal commission. If there were any issues, the firm could have addressed and worked on a solution for the same for they believe in listening to clients concerns and creating better solutions for the same. It is evident that out of their healthy ethical conducts they have managed to prosper and expand as per their sustainability report.

Conclusion

Sustainability of any business group depends on their set strategies on issues relating to the environment, social ethics and governance. A service delivery firm like Westpac has to have a reliable and consistent strategy to enable them to win their stakeholders confidence and trust as this is their only way to ensure their business remains sustainable. Westpac has shown in its 2018 sustainability report that they are committed to creating a favorable environment for their business. This, as shown in the report, is achieved by their compliance with governing and regulatory authorities. They have demonstrated the need for better service for their stakeholders which can be achieved through their continuous research and development on matters surrounding the banking industry such as digitization. Concerning their vision and mission, and their willingness to make a better tomorrow, Westpac rates highly if not the best in sustainability matters of their business.

References

Westpac Group. (2018). 2018 annual report. Retrieved from https://2018annualreport.westpacgroup.com.au/downloads/2018-Annual-Review-and-Sustainability-Report.pdf

Salim, R., Arjomandi, A., & Seufert, J. H. (2016). Does corporate governance affect Australian banks’ performance?Journal of International Financial Markets, Institutions and Money, 43, 113-125.

Westpac Group. (2018). Westpac Group’s Principles for Doing Business. Retrieved from https://www.westpac.com.au/docs/pdf/aw/sustainability/Principles_for_doing_business.pdf

Jackson, S. (2016). No variance for filed orders: Hayes v Westpac Banking Corporation [2015] QCA 260. Proctor, 36(2), 42-43.

Islam, M. A., Jain, A., & Thomson, D. (2016). Does the global reporting initiative influence sustainability disclosures in Asia-Pacific banks? Australasian Journal of Environmental Management, 23(3), 298-313.

Wong, J., & Wong, N. (2017). Corporate tax avoidance or corporate responsibility? AN examination of the NZX 50 companies.

Benn, S., & Dunphy, D. (2017). Leadership for sustainability. Business Management and Environmental Stewardship: Environmental Thinking as a Prelude to Management Action, 56.

Dumay, J. (2016). A critical reflection on the future of intellectual capital: from reporting to disclosure. Journal of Intellectual capital, 17(1), 168-184.

Dumay, J., & Hossain, M. A. (2018). Sustainability risk disclosure practices of listed companies in Australia. Australian Accounting Review.

Trireksani, T., Djajadikerta, H. G., & Zhang, J. (2018). Perceived importance of corporate sustainability disclosure: Evidence from China. In Disciplining the Undisciplined? (pp. 211-223). Springer, Cham.