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bank claims ethics can pay

June 2001

The Co-operative Bank has broken new ground in the field of corporate social responsibility by putting a figure on the business benefit of its ethical policies.

The UK bank has estimated that between 15 and 18 per cent of last year’s pre-tax profits – or around $22.8million (£16m) – can be directly attributed to its ethical stance, while the cost was around $3.7m. That suggests the net financial benefit of its social and environmental policies was around $18.4m during 2000.

The figures used to compile this ‘sustainable cost benefit analysis’ – believed to be the first such analysis by a major UK company – are based on a study by an in-house team and the Brand Finance consultancy. The figures take into account estimates of how the bank’s ethical policies enhance the value of its brand.

Part of the calculation also rested on a Mori survey that found more than 20 per cent of current account customers were influenced to open an account with the bank for ethical and environmental reasons. During 2000, the bank’s account base grew by 280,000 customers.

The bank stresses that the analysis, which is outlined in its fourth annual Partnership Report, is in a ‘formative’ stage, but says it will ‘develop and verify’ its approach over the next few years.

Co-operative Bank partnership advisor Jayne Beer told EP: ‘It’s a starting point and obviously we’ve had to make some assumptions, but we are confident that the figures are fairly accurate.’

Chris Moon, manager of business ethics and corporate social responsibility at the professional services firm Andersen said: ‘It’s important that they have tried to quantify the business benefit of their ethical policies. They now have a benchmark and methodology they can refine over time.’

Beer said the bank would commission new research to fill gaps in its knowledge about the influence of the ethics policy on customer choice of financial products, and on its corporate accounts. The analysis has also been sent to environmental cost benefit experts for comment.

‘It will take at least two or three years to get it to the accuracy we would like,’ said Beer.

Richard Evans, director of the consultancy ethics etc, who verified the Partnership Report, said the cost analysis was an important innovation. ‘It’s not easy because there are no accepted standards for such reporting, and it will be controversial because it challenges traditional limits to corporate transparency,’ he said.

Beer added that the bank had decided it was essential to quantify any benefits arising from its ethical policies. ‘In the past we’ve asserted that ethics has helped the bank’s profitability but some critics have said: “Prove it” and we’ve not been able to give a figure. Now we have a figure. The policy means we turn away business, so we wanted to show that it also makes us money.’

The analysis shows the bank’s biggest cost last year was the $3.5m spent on community investment.




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