The introduction of The Co-operative Bank’s ethical policy in 1992 kicked off a process which has led to rapid and far-reaching changes in the way the bank operates. Recognising that customers’ ethical priorities change over time, with social issues being resolved or passing in and out of public awareness, the bank understood that their ethical policy would need to be regularly reviewed and redrafted. The bank aims to update the ethical policy every three years, but in practice this has developed into a rolling dialogue between customers and the bank’s Ethical Policy Unit. For example, the bank’s web site invites visitors to email their comments and a more formal research instrument is mailed to every customer during the triennial reviews.37
Cynical observers might argue that it is easy for an organisation to produce an ethical policy but this may be purely rhetorical and not backed up by genuine conviction and effective action. The Co-operative Bank has, however, made great efforts to back its words with action and sets great store on accountability and transparency in its dealings. In-house training and management systems attest to their commitment to turn words into deeds, and external auditing by a number of ethically-concerned organisations evidences their openness to examination and willingness to be held accountable for the findings.
Bank staff are supported in their efforts to uphold the ethical stance of the bank in several ways. The transition from training to practice is made rigorous through a signing-off procedure which gives individuals ownership and accountability for designated targets and decisions whilst also creating a paper audit trail. Any decisions that staff cannot make easily are referred to the Ethical Policy Unit whose main task is to undertake research into the issues raised and argue through the tensions among the different ethical perspectives involved. This entails an exacting process of consideration of alternative points of view, weighing of the arguments against published policy, taking external advice and thinking things through in order to reach a decision. This is a process which can produce surprising results. For example, a loan application to establish an ostrich farm was turned down with the argument that ostriches are wild (as opposed to domesticated) animals so it would be cruel to subject them to the conditions entailed by farming them for human consumption, especially since the UK lacks the relevant specialist expertise.
A developmental outcome of the bank’s change process has been the rolling out of its ethical and co-operative perspective to other stakeholder groups in addition to its customers. The bank is now operating the Partnership Approach to strategy, which it adopted in 1997. This approach is founded on a commitment to serve the interests of the seven partners, or stakeholder groups, involved in the bank’s activities i.e. shareholders, customers, staff and their families, suppliers, local communities, national and international communities, and past and future generations of co-operators. The aim is to deliver value, as defined by these partners (and not by the bank), in a socially responsible and ecologically sustainable manner. Under the leadership of Mervyn Pedelty, appointed as Chief Executive in 1997, a Partnership Development Team has been established, internal policies and procedures put in place to enable the Partnership Approach to be enacted, and external auditing widened in scope with the first Partnership Report having been published (and audited) in 1998.38
Just one of the many changes involving the bank’s primary stakeholders (shareholders, customers, staff and suppliers) consequent upon the partnership approach has been that the supply chain has come under scrutiny. Potential suppliers are now being evaluated on their ethical performance, sometimes with the help of outside agencies, for example the Omega Foundation which traces the complex and often opaque provenance of arms worldwide. As partners, the suppliers are invited to engage in a process of dialogue with the bank in a similar way to that used to create a dialogue with customers.
The introduction of the partnership approach appears to have had a strengthening effect on the bank’s business in its own right, with the number of customer accounts having increased by 30% and profitability nearly doubling over the subsequent three years. In addition, the application of technology has also had a profound impact on the business success of the bank. As the URLs cited in the footnotes to this piece testify, the Internet has been incorporated into the bank’s response to the changing marketplace. The establishment of ‘smile’, the first full service Internet bank, indicates the ability of the bank to identify new markets and emphasise business efficiency.
The Bank also took the decision to change the tangible face of the bank by moving away from the traditional high street branches and creating high-tech Service Centres enabling customers to carry out their transactions without leaving their homes or offices. This centralised resource, which enables telephone and on-line banking, has been shown to have a positive impact on levels of service and customer satisfaction. The partnership approach to workplace issues has done much to address the reputed negative effects of call centre working on employees. However, the Service Centres are an illustration of how balancing partners’ interests is by no means easy or uncontentious. The bank has been criticised for the loss of jobs amongst branch personnel, although this was balanced to some extent by the creation of Service Centre jobs; and by making banking services available at Post Offices and through Co-op retail outlets. In the context of similar strategies by other banks, the partnership approach has proved relatively benign in its human outcomes.
Specific aspects of ethical operation have come into focus for development over recent years and dialogues with external organisations seeking to promote their individual perspectives on ethical practice have had a significant impact on this process. In 1996 the bank established an Ecological Mission Statement in response to an upsurge in customer concern for the environment.39 In particular, the bank’s ecological performance has been guided by input from the Natural Step organisation, a science-based environmental sustainability initiative. Although the bank’s shareholding arrangements are unusual, to say the least, they still carry with them a commitment to succeed in business terms. To this end the bank has fruitfully worked with the Centre for Tomorrow’s Company, which challenges businesses to broaden their idea of value to include the views of all stakeholders. The bank has also developed a Community Involvement Policy as a result of a review of its activities in conjunction with the Business in the Community organisation which aims to promote socially responsible business in terms of the impact on society. These collaborations exemplify the bank’s willingness to respond to feedback from ‘warts and all’ exposure to external scrutiny.
The most stringent test of The Co-operative Bank’s pledge to openness, accountability and change takes the form of the yearly social and environmental audit. This is the procedure through which external auditors examine each of the bank’s major stakeholder groups, or partners, and evaluate the extent to which ethical policy and the partnership approach are being implemented i.e. the extent to which the bank is actually doing what it says it is. The annual Ethical Policy Implementation Report is published by the auditors, ethics etc…(sic), and made public, for example through the bank’s web-site.40 There is also an audit of the bank’s self assessment as presented in the yearly Partnership Report. Not only does this document represent the bank’s honest appraisal of its activities but it also acts as a jumping-off point for the auditors’ investigations. The auditing process is extremely thorough, as Richard Evans, Director of ethics etc…, explains:
“I have assessed the completeness and balance of the whole Partnership Report and investigated and tested the accuracy of statements, data and the reporting of Partners’ opinions. I have assessed the completeness and reliability of the report by reviewing the management practices, data systems, and Partner dialogue processes which support the bank’s ethical and ecological values and practices. I have reviewed the bank’s campaigns on Climate Change and Combating Financial Exclusion. I have also reviewed the bank’s performance against the three core principles of the SIGMA (Sustainability Integrated Guidelines for Management) Framework, which are accountability, capital enhancement and environmental sustainability.”41
In addition to the audit by ethics etc…, the Centre for Tomorrow’s Company delivers an assessment of the extent to which the bank delivers value to its partners, Business in the Community provides an evaluation of the bank’s efforts to be responsible in relation to its social impact, and the Natural Step organisation contributes feedback on progress towards ecological sustainability.42
The feedback from this social audit not only speaks plainly about the areas where the bank is not coming up to scratch but equally clearly identifies the positive outcomes of the bank’s activities. The bank’s responsiveness to areas identified as weaknesses is evident from reading successive auditor’s and assessors’ reports. For example, in his April 1999 assessment Richard Evans noted that the bank may not be treating all groups equally but by his March 2002 report he was able to comment that Human Resources specialists at the bank were addressing the need to recruit people with special needs and from ethnic minorities.
One of the most challenging aspects of the partnership approach is the commitment it entails to making a difference at the more remote societal level of national and international communities. Even in this most demanding area Richard Evans was, despite initial reservations about the level of partnership dialogue which the bank had established with more remote communities, able to point to three areas where the bank has had a positive impact on international issues, namely, refugees, human rights and oppressive regimes, and third world debt. As well as practical actions, such as offering bank accounts to refugees and organising ‘Debt Bonds’ through which customers pledged £360,000 to poverty alleviation in developing countries, the bank also made an impact through its continuing use of advertising.
In conclusion, since 1992 The Co-operative Bank has developed a well-grounded reputation for conducting its business with moral integrity. The following statements from the bank’s assessors challenge the once accepted corporate wisdom that business success can only be compromised by a concern for ethics and that the only social responsibility a business has is to create wealth:
“The Partnership Report portrays a commercially successful organisation which has committed itself to a mission of economic, social and ecological responsibility.”43
“All credit to The Co-operative Bank for its transparency and for consistently practising what it preaches.”44
“… the bank is continuing its leading role as a socially responsible corporate citizen and represents a model many companies would do well to replicate”45
“The fact that The Co-operative Bank has again obtained a number of prestigious awards for its reports and actions in the last year clearly demonstrates that it still occupies a leadership role in addressing sustainability issues within a business context.”46
2002 saw the tenth anniversary of the launch of the bank’s original ethical policy. The previous eleven years saw the bank establish a process through which continuing change and development occurred as a result of willingness to publicly engage with interested parties in open dialogue, to undertake the intellectual effort of rigorous ethical decision making, and to accept the challenge of turning ideas into realities. Ethical business is a ‘work in progress’, that is, an ongoing and dynamic human concern rather than a static, achievable goal comprising some envisioned state of perfection. The Co-operative Bank case study is a practical example of ethics in action which demonstrates that moral integrity in a sustainable business is possible. The case has been presented here, not to be copied, but as a stimulus to thinking about business ethics in general and, more particularly, about how stronger threads of moral integrity might be woven into the fabric of your business or organisation.
37 The most recent statement of the bank's ethical policy is available at: http://www.co-operativebank.co.uk/ethics
38 To view the latest Partnership Report visit: http://www.co-operativebank.co.uk/ethics
39 http://www.co-operativebank.co.uk/ethics/ethical_ethics_mission.html
40 http://www.co-operativebank.co.uk/ethics/ethical_ethics_pol_implementation.html
41 Richard Evans' auditor's statement: ethics etc… on p82 of the Co-operative Bank's Partnership Report 2001.
42 See pp 83-85 of the Co-operative Bank's Partnership Report 2001.
43 Assessment of social responsibility: ethics etc… by Richard Evans in the Co-operative Bank's Partnership Report 1998.
44 Assessment of delivering value: the Centre for Tomorrow's Company by Mark Goyder in the Co-operative Bank's Partnership Report 2001.
45 Assessment of social responsibility: Business in the Community by Sue Adkins in the Co-operative Bank's Partnership Report 2001.
46 Assessment of ecological sustainability: the Natural Step by Jonathon Porritt in the Co-operative Bank's Partnership Report 2001.
