Undertaking a sustainability rebuild

The financial crisis of 2008 was quickly followed by a crisis in finance, with some serious incidents of misconduct within the sector coming to light. RBS has featured heavily in the reporting of these issues, and has experienced considerable financial, operational and reputational damage since this time. The company is determined to turn itself around and is embarking on a multi-year transformation to build a truly customer centric bank. A well established board level Sustainability Committee, as well as a progressive approach to stakeholder engagement, are supporting this objective.

In 2008 RBS posted a £24.1bn loss – one of the largest corporate losses of all time. The UK Government subsequently took a majority shareholding in the company and most of the Executive management team was replaced, including the former Chief Executive Fred Goodwin. The company had its work cut out to manage the scale of the debt as well as re-assure shareholders that the company was being effectively and prudently managed.

Andrew Cave, Chief Sustainability Officer at RBS notes: ‘Whilst we were producing a Sustainability Report back then, sustainability wasn’t core to the business. It’s also fair to say that at the time the culture was different. We were a confident company, expanding rapidly and sustainability wasn’t particularly high on the priority list.”

Fast forward to 2009 and the company was in the midst re-building itself. “We needed to frame the business differently” says Cave, “the Government investment in RBS led to a fundamental change in the operating environment. The bank was under far more intense scrutiny than ever before, with all stakeholder groups taking a greater interest in our activities.”

“So we got buy in from the Board to establish a Sustainability Committee, comprised of Executive Committee members as well as Non-Executive members. This gave us a structured approach to initiating and implementing real change. We’ve essentially given sustainability more teeth.”

The remit of the Sustainability Committee is to oversee and challenge how management is addressing sustainability and reputation issues. It is fair to say that the scrutiny on the company has continued with barely a day passing without it making the UK news headlines. This has coincided with a growing demand for greater corporate responsibility – stakeholder groups have enhanced expectations, and the Sustainability Committee plays a crucial role in understanding their concerns, and guiding the bank’s response.

In 2013 the Group Sustainability Committee was given a significantly enhanced remit, bringing in broader sustainability issues including conduct, culture, reputation and, most importantly, how the bank deals with customers.

Alongside the Committee meetings the company holds additional regular stakeholder engagement sessions, which are run in a similar way to a panel advisory board. “These sessions are where we invite our most challenging stakeholders, and sometimes harshest critics, to meet with the most senior decision makers in the Bank,” explains Cave.

Since 2011, the Committee has met with over 40 civil society groups, NGOs, Government bodies and Investors and posed the question ‘What aspects of our company’s policies or practices would you like to see improved?’ The company structures the sessions around issues that have garnered attention and impact customers, employees, local communities and/or wider society. The meetings have covered a wide array of topics, from how the bank serves low-income customers to transparency around its lending policies in high-risk sectors. A meeting will typically consist of three to four key stakeholders who have a keen interest in engaging the bank in the subject being discussed.

“What sets these sessions apart is that the agenda for the meeting is very much set by the external attendees. This is their time to put across their views in an open and encouraging environment. In the old RBS there wasn’t this level of access to Executives. That has all changed, as we seek to build a culture of frank and open conversations,” explains Cave.

In order to maintain the constructive approach to these sessions – no topic off limits, agenda set by external attendees – there are no formal plans agreed at this meeting. They have, however, instigated real change within the organisation. A recent example related to a session on the topic of managing its environmental impacts. A campaigner, and resident of a coal mining town in Appalachia, US attended a stakeholder session, outlining the considerable impacts on the environment and on the local communities.

After extensive research and consultation, RBS decided that the environmental, social and ethical impacts of mountain-top removal coal mining in Appalachia were unacceptably high. A decision was made not to provide further finance to companies with significant mountain-top coal mining operations in this region.

Another example of change originated from a session focussed on employee well-being and resilience, which highlighted the high levels of stress within the organisation. “The financial crisis hit many of our employees too,” says Cave. “Across the Financial Services sector employees have found it challenging, considering the operating environment as well as the element of job insecurity.” On the back of this session RBS reviewed its health review process and made it more rigorous and robust.

RBS is a bank that has undergone a significant restructure and is still coming out the other side. The company’s work to become more customer-centric, as well as the work of the Sustainability Committee, shows that it is committed to change.

“Five years on and we are making progress on addressing the issues of the past,” Cave concludes. “We are a much more safe and stable organisation. We are now focused on earning back the trust of our customers as well as that of wider society.”