Expert review of ING 2012 Sustainability Report: ING in Society

Company:

ING is a global financial institution of Dutch origin that offers banking, investments, life insurance and retirement services. With more than 84,000 employees, ING serves over 61 million private, corporate and institutional customers in over 40 countries in Europe, the Americas, Asia-Pacific and the Middle East. ING has been reporting on CSR for many years.

 

Content:

At first glance, it is a very complete report, covering all relevant topics which one may find in a CSR report. However, the report is quite big (94 pages) and does not contain many visuals, graphs and tables.

Let’s start off with some feedback on the content of the report. As said, the report is complete with regard to the topics covered. Furthermore, I always appreciate it when companies, like ING does, adopt and include their progress on guidelines like Global Compact and the Millennium Development Goals. I assume that the report was drafted in accordance with application level A+, which at least indicates that the report is complete in terms of the GRI guidelines. The GRI Application Level Check on page 5, however, is illegible and  the application level is not explained in the report. Also the GRI table does not contain the Disclosures on Management Approach (DMA). As a side-note: to me, an A+ report is not necessarily better than a B or C report, as the application level does not say anything about the relevance and materiality of the report. Given the amount of information included, I expect that this report, again, will score quite high in the Dutch Transparantiebenchmark (I would expect a top 20 position).

You can read and feel that this report is focused on stakeholder expectations (I really like the ‘economic contribution to stakeholders’ table on page 11, by the way). In the 2011 report, ING included a comprehensive stakeholder map listing the most relevant issues for each stakeholder group. In the 2012 report, these issues have been translated into nine focus areas. These nine focus areas seem relevant for the business and for ING’s stakeholders. Moreover, the nine focus areas are internally assessed on their potential impact on revenues, costs and reputation. This provides clear insight into the ‘how’ of reporting and managing those focus areas. I have, however, two remarks. Firstly, it would have greatly improved the report if the stakeholder dialogue and stakeholder map had been updated for the 2012 report. Secondly, in my view, the assessment of materiality is not complete when only internal prioritization has been performed, without gathering the expectations of external stakeholders. Such an exercise should result in a materiality assessment or materiality matrix. In such a matrix, all topics would be plotted based on their importance to ING on the one hand and their importance to stakeholders on the other hand. After finalizing the materiality assessment, I would expect it to have implications for both the content of the report (what is included and excluded) and the strategic choices and ambitions.

Following the recommendation by the accountant (it is a big plus that KPMG still includes recommendations in its assurance reports, please also refer to ‘credibility’), I would expect ING to have defined a more dedicated strategy. From the topics included in the report, one can deduce what ING’s strategic choices are, but a dedicated (or integrated) strategy is lacking. This strategy should ideally be linked to the mission and vision of ING and should depict what ING wants to achieve in the coming 3 to 5 years. To be fully complete, the strategic pillars should be translated into KPIs, which would help both ING and its external stakeholders to monitor the progress towards targets. To become 2.0 in CSR, ING could also consider to use the value chain as a basis and research what impacts are made in the different stages. This would certainly impact the current topics in the report, especially when (environmental and social) impacts were to be monetized, following the PUMA example. I have high hopes for the renewed frameworks for 2013-2016.

Currently, ING reports transparently on the progress towards ambitions and targets in Section 3.2 of the report. In case targets have not been reached, this is disclosed as well. Unfortunately, not many targets are actually SMART, and it is sometimes difficult to grasp the reasons why a certain goal (e.g. actively market sustainable products and services) has been achieved. ING is also quite transparent in the disclosure of external issues and its position, as can be seen on pages 23-26. For me, as a stakeholder, this answers many questions and provides clear insight into the vision of ING on important topics. I would even recommend to include the analysis in the aforementioned materiality assessment.

Even more transparency is found in the elaborate disclosure of information in the ‘Better business’ chapter. Almost all information included is deemed relevant. I especially favor the tables on pages 38-40, which disclose the coverage of the Environmental and Social Risk (ESR) framework, combined with the position of ING on issues depicted on pages 40 and 44. Also, the information regarding the application of the equator principles on page 41 and the corresponding screening results on page 42, offer the reader much insight into ING’s position on the environmental and social risks in financing.

 

Communication:

The report can be easily found on the website, and it is very readable (not too much jargon) and easy to navigate. The different hyperlinks are a big help in finding the relevant topics both in the report, the annual report and on the website. The corresponding website is also easy to navigate and lists all relevant topics and information. I also favor the short movie included on the website. The GRI table is very extensive and provides all relevant considerations. Unfortunately, the DMAs are not included. The report holds quite a number of pages, which negatively affects its readability. I do understand, however, that it is always a big challenge to balance having a concise report and making sure to report according to GRI A, score high on the applicable benchmarks and include all relevant information of a company as diverse as ING. One recommendation for the readability of the report would be to include more visuals, graphs and tables. Also, a (separately downloadable) factsheet containing all quantitative information would be a plus. In this report, data are included in the text and they are not always compared with performance in earlier years and/or performance in the sector. Also, not all trends in the data are explained or elaborated on. Currently, the report is not yet integrated. On page 4 of the report, we can read the efforts ING has undertaken to integrate CSR and financial reporting, and ING’s ambition to have an integrated report. Although ING reports transparently on external factors, internal policies and corresponding dilemmas, the report would greatly improve if a ‘lessons learned’ (please also refer to the new BP report) or a ‘what still went wrong’ (refer to the DSM report of 2011) section or chapter were to be included.

 

Credibility:

Companies have the possibility to (voluntarily) have their reports assured by an independent external assurance provider. Such external assurance greatly improves the credibility of the report. ING has recently switched from Ernst & Young to KPMG as its external assurance provider. For several years now, ING has been engaging an external assurance provider to provide external assurance on its reports. This is a true added value for the reports! Additionally, it is a big plus that KPMG is willing to include a recommendation in its assurance reports for the public to read. Unfortunately, KPMG is the only assurance provider active in the Netherlands including such a recommendation (PwC used to include a recommendation, but no longer does).

KPMG has provided limited assurance in accordance with the guidelines as set out by the international auditing standard ISAE3000. I have two remarks on this. Firstly, I would expect that a mature reporter such as ING would be ready to increase the level of assurance to reasonable assurance (the higher level of assurance) for at least the most important KPIs. Secondly, it is remarkable that the ISAE3000 standard was adopted instead of the Dutch COS3410n standard, which was specifically designed for assurance of CSR reports.

In my opinion, the legitimacy of the report would improve if the assurance were to be enriched with stakeholder involvement. This could be achieved by setting up a stakeholder panel (refer to Shell and several reports in the US and Japan). Also, ING could consider including the more stakeholder-oriented AA1000 guideline (issued by AccountAbility: www.accountability.org) in the engagement with KPMG. I would also expect the supervisory board (or a dedicated committee) to be more closely involved than is disclosed in the report.

Regarding the data included in the report, it has come to my attention that not all data have a high FTE coverage (e.g. carbon, 75% coverage). Also, data related to carbon have been extrapolated, while the reasons for and the basis of extrapolation are not completely clear (p. 57). Apart from this, most trends seem plausible and the limited number of restatements are very well explained.

 

Recommendations:

1.       Further emphasize the link between materiality, stakeholder dialogue, CSR Strategy, KPIs, and targets.

2.       Increase the relevance of assurance (e.g. AA1000) as well as the level of external assurance.

3.       Further integrate the annual reporting and increase the report’s readability by using more visuals.

 

Nick de Ruiter is one of the partners of Sustainalize (www.sustainalize.nl), a global CSR consulting firm which specializes in CSR, CSR reporting, CSR strategy, performance monitoring and external AA1000 assurance.