Assurance statement

Scope and objectives

Two Tomorrows (europe) Limited has undertaken independent assurance of The Co-operative Group (The Co-operative) Sustainability Report 2010 (the Report).

The assurance process was conducted in accordance with AA1000AS (2008). We were engaged to provide moderate level Type 2 assurance, covering:

• evaluation of adherence to the AA1000APS (2008) principles of inclusivity, materiality and responsiveness (the Principles) and
• the reliability of specified sustainability performance information.

The performance information included in scope was all key data and claims in the printed Report, together with additional information provided online and clearly signposted from the Report. We have not checked the collation of data for the financial information taken from The Co-operative’s audited Annual Report and Accounts. Source energy data provided by The Co-operative’s Energy Services team have not been subject to review. We did not review the GRI table or GRI application level in the report.

We were also engaged to provide high level assurance on the data and claims in the Ethical Finance chapter.

We used the Global Reporting Initiative (GRI) Quality of Information Principles as criteria for evaluating performance information.

Responsibilities of the directors of The Co-operative Group and of the assurance providers

The directors of The Co-operative have sole responsibility for the preparation of the Report. Our statement represents our independent opinion and is intended to inform all of The Co-operative’s stakeholders in a balanced way.

We were not involved in the preparation of any part of the Report. However, having reviewed and provided feedback on drafts of the Report, in a number of instances changes were made to the final version.

We have had one other contract with The Co-operative in the past year to provide a Tomorrows Value Rating benchmark report. This is the fifth year that we have provided assurance for The Co-operative. Some members of our team have acted as assurance providers to Co-operative Financial Services for the previous three years and to The Co-operative Bank for its Partnership Report for the six years prior to that.

Our team comprised Mark Line, Richard Evans, Adrian Henriques, Anne Euler, Rachell Evans and Elvin Ozensoy. Further information, including individual competencies relating to the team can be found at: www.twotomorrows.com

Basis of our opinion

In our work, designed to gather evidence with the objective of providing the agreed level of assurance as defined in AA1000AS (2008), we undertook the following activities:

• Review of sustainability issues that are of interest to stakeholders, could affect The Co-operative or were discussed with its management.
• Interviews with members of the Social Goals team and selected managers in the businesses responsible for sustainability issues.
• Review of The Co-operative’s approach to stakeholder engagement and the outputs of recent stakeholder engagement. We had no direct engagement with stakeholders other than staff.
• Assessment of information provided to us by The Co-operative on its reporting and management processes relating to the Principles.
• Assessment of supporting evidence for key claims in the Report.
• Review of the processes for gathering and consolidating data and, for selected samples, checking the data consolidation.
• Review of referrals to the bank Ethical Policy Unit to support a high level of assurance that the data presented in the Report are accurate.

Findings and opinion

We reviewed and provided feedback on drafts of the Report and where necessary changes were made. On the basis of the work undertaken, nothing came to our attention to suggest that the Report does not properly describe The Co-operative’s adherence to the Principles or its performance.

We believe the claims in the Ethical Finance section on which we are providing high level assurance are reliable.

In terms of data accuracy, nothing came to our attention to suggest that data have not been properly collated from information reported at operational level, or that the assumptions used were inappropriate. We are not aware of any errors that would materially affect the data reported.

Observations

Without affecting our assurance opinion we also provide the following observations.

Performance Information

Overall we have confidence in the level of accuracy demonstrated by the information in the Report. In particular we believe the Ethical Finance sections are well-founded.

However as in previous years, manual collation and adjustment of data occurs. While The Co-operative has paid particular attention to ensuring the accuracy of performance data concerning climate change and water, automation would help to reduce the risk of error further. We note that it has not been possible to report calendar year data in all areas.

In many areas, suitable protocols setting out procedures and measurements for underlying indicators have been drafted and reported. These are important in ensuring the consistency of information from year to year. Protocols are lacking for some specific measures, notably in the waste and water sections. In some cases protocols are needed to determine the attainment of targets, such as those for recycling.

Over the years, the progressive improvement in performance demonstrates The Co-operative’s responsiveness in many areas. To maintain that level of responsiveness will no doubt require further innovation and it will be important to continue to enhance and simplify the presentation of complex data for the benefit of easier accessibility for readers.

Inclusivity concerns the participation of stakeholders in developing and achieving an accountable and strategic response to sustainability.

The Co-operative has maintained the high level of stakeholder engagement seen in previous years. With the development of the Ethical Operating Plan towards the end of 2010, which was constructed with democratic input, The Co-operative has created a significant opportunity to increase its inclusivity still further, as the plan includes ambitious targets for membership and envisages the use of new technology to enhance consumer choices.

Material issues are those which are necessary for stakeholders to make informed judgments concerning The Co-operative and its impacts.

As in previous years, we believe the Report describes the great majority of The Co-operative’s material impacts. The Ethical Operating Plan provides an opportunity to ensure that the logic for the choice of strategy, implementation and measurable targets all become clearer.

A continuing balance needs to be struck between provision of enough information to support a balanced understanding of impacts and keeping that information accessible. The Co-operative has addressed this challenge well, by filtering out some information that has become less relevant through time and replacing it with information on issues that stakeholders wish to see, such as the Water and Inspiring Young People sections, which appear in the main report for the first time.

We also welcome the progress on The Co-operative’s strategy for public policy positions, about which few organizations are transparent. In the coming year, it will be important that this policy is fully implemented.

The extension of The Co-operative Bank’s Ethical Policy into general insurance products is an important development and demonstrates leadership in an area that has traditionally been little touched by ethical concerns. We look forward to further such pioneering initiatives over time.

As The Co-operative explores new and innovative projects, such as the planned joint venture in China, we expect that appropriate disclosures will be made. This year’s Report provides more complete diversity data from its recent acquisitions, which is welcome. However in some diversity areas, such as the proportion of managers from ethnic backgrounds, additional information should be reported.

Responsiveness concerns the extent to which an organisation responds to stakeholder issues

The Co-operative provides benchmarks in many areas already. However there are some opportunities to provide additional points of comparison in areas that are important to consumers and other stakeholders. A benchmark would be particularly useful for animal welfare and water consumption.

The Co-operative is continuing to experience high levels of organisational change – and is likely to continue to do so. This is challenging for employees but it is noteworthy that, with some exceptions, staff satisfaction levels remain solid.

The Report demonstrates again how The Co-operative has maintained its commitment to sustainability in terms of the extent to which sustainability is integral to its business model and the transparency with which it reports on its sustainability impacts and programmes. The development of the Ethical Operating Plan is a significant positive step which holds the promise of an even more systematic approach to sustainability through its integration with financial planning, improved target setting process and the involvement of key stakeholders.

Two Tomorrows (Europe) Limited

London
April 2011

Two Tomorrows (Europe) Limited trading as Two Tomorrows is an international consultancy that helps companies to perform better and create value by doing business in a sustainable way. www.twotomorrows.com