Independent assurance statement

Scope and objectives

Two Tomorrows (Europe) Limited has undertaken independent assurance of The Co-operative Group (The Co-operative) Sustainability Report 2011 (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. We have not checked the collation of data for the financial information taken from The Co-operative’s audited Annual Report and Accounts. 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 Responsible finance chapter (pages 33–38).

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 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 sixth 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 Richard Dalley, Rachell Evans, Richard Evans, Adrian Henriques, Mark Line, Kate Martin, Judith Murphy 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:

• Materiality 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 and the Ethical Plan.
• Assessment of supporting evidence for key claims in the Report.
• Review of the processes for gathering and consolidating data using the GRI Quality of Information Principles 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 have 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 Responsible 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

The Co-operative has maintained good levels of performance in many areas, exemplified by the sustained levels of employee engagement. This is impressive given the continuing difficult economic climate. The business has also again provided extensive transparency in its Report.

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.

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, automation would help to reduce the risk of error further. This affects waste, animal welfare, and also employee training for some operating companies.

For health and safety information there has again been a very significant improvement in the performance reported. Although changes in protocols and management practice can account for this, it does mean that comparability across years is difficult.

While the Report clearly signposts many of the detailed protocols underlying the numerous indicators within it, as we have noted in previous years there are some areas for which they have not yet been defined. We welcome the drafting of a protocol for the measurement of the estimated Fairtrade premium. As recommended in prior years, protocols would also make reporting much more robust across site-based environmental impacts such as water, waste and climate change where reporting boundaries need to be aligned and complex calculations performed consistently year on year.

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

The Ethical Plan is a leading example of a commitment to address stakeholder issues, sustainability and ethics. Integration of this commitment into the business planning cycle enables change to be driven through the business.

The Co-operative has a strong historical base of stakeholder engagement on which to build and integration of the Report with the Ethical Plan, itself based on engagement, takes this further. The Report provides detail on the key top-level targets set out in the Ethical Plan and a continued focus on specific and measurable progress in the narrative is to be welcomed.

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

We believe the Report describes the majority of The Co-operative’s material impacts and, as a whole, provides greater transparency than many others.

It is very welcome to see the addition of bonus information and pay ratios this year. There are still some issues for which it would be helpful to have additional transparency, for example, report more information on supplier payment practices.

The position of The Co-operative as one of the UK’s largest landowners makes its commitment and achievement in relation to biodiversity all the more significant. We look forward to further significant initiatives in this area.

The Co-operative has taken a leading position in campaigning on sustainability issues and on its transparency around public policy interventions for a number of years. We look forward to seeing finalisation of the new strategy for public policy engagement, as the issue of corporate engagement with government is gaining increasing public awareness. The new strategy for community investment is to be welcomed and there are opportunities to deepen the measurement of community impact to cover other material areas such as relevant sponsorships, in order to better reflect the extent of The Co-operative’s community investment.

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

In very challenging economic times, it is particularly encouraging to see the continuing commitment by The Co-operative to the support of disadvantaged regions and businesses, particularly small businesses.

To provide clarity on progress of the Ethical Plan, the Report should continue to update on annual progress towards the longer‑term targets. For issues that are important to stakeholders beyond those included in the Ethical Plan, the Report should continue to include clearly measurable and specific targets and to publicly report progress of these activities.

The Co-operative’s substantial achievements in animal welfare have been commended by Compassion in World Farming and the RSPCA. The development of a dedicated supply chain for own-brand milk is another significant example. Within the Report, the associated reporting of performance against particular standards and external benchmarks could be clearer and the provision of additional points of comparison is useful for stakeholders.

The Co-operative has maintained its real commitment to delivering sustainability, and in the light of increasingly challenging economic times, the way it delivers transparency will again come to the fore.

Mark Line
Senior Principal Consultant

Two Tomorrows (Europe) Limited
London
July 2012

Two Tomorrows (Europe) Limited
is part of DNV, a global provider of services for managing risk, helping customers to safely and responsibly improve their business performance. www.twotomorrows.com