4th Annual APAC SME Banking Conference

4th Annual APAC SME Banking Conference

1st June -2nd June 2016, Kuala LumpurPresented By Boon Cheong, Chew and Lay Hong, Tan

Faculty of Technology Management & TechnopreneurshipUniversiti Teknikal Malaysia Melaka (UTeM)

Ethical Banking in Practice: A Closer Look at the Co-operative Bank UK PLC

-Published at Emerald Insight-By: Boon Cheong Chew, Lay Hong Tan and Syaiful Rizal Hamid

The Co-operative Bank as our case study

• The Co-operative Bank with the vision of “ to promote human dignity, environmental conservation and focus on quality’s of life in general”

• World’s most Sustainability Bank in 2010, Europe’s most Sustainability Bank in 2011, 2012.

Our Research Objectives (into this paper)

• The three objectives: (1) To investigate the ethical banking operations base

on the award-winning the UK Co-operative Bank. (2) To conceptualize the Co-operative bank operations

into a solid Ethical Banking Operations Framework (EBOF)

(3) Malaysian bank can learn fro this best practice and gradually shaping its operation become more ethical.

Today

• We aimed to share with you about(a) Concept of Ethical banking(b) Operations of ethical banking/ethical

business which can be embedded into your business/operations.

Banks and their socioenvironmental implications

Explanation• For years, banks = “non-polluting” industry

because of the “non-emitting” nature of business

Explanation

2 facts on banking operations:(a) Massive energy usage to power the buildings,

computerisation, ICT(b) Most of the banks are positioned at the upstream of

a value chain for investment, fund projects.

What constitutes ethical banking ?

Ethical Banking

• With the operations + products/services which take into the consideration of environmental and social impact of the actions.

• Transparency of the operations.• Ethical screening for investment decisions

made (social-environmental implications)• Building thrust with the customers.

Ethical Banking

• Ethical banking is centered on double commitment – (i) economic profitability ; (2) socioenvironmental profitability – that seek to promote sustainable development

• Involve directly ethical commitments around financial decision–making.

Ethical Banking

Business model and operations- Profit making morally, optimisation of socioenvironmental added value.Aim- to achieve ethical business operations.-Operate with a clear set of ethical values, known moral and socially accepted principles.

Business decision- It incorporates principle of economic sustainability and social sustainability into its business decisions. -Consider the direct and indirect implications on the project owner, as well as the relevant stakeholders.

Why ethical banking is important?

Explanation

• Extending from the broad church of Corporate Social Responsibility (CSR), it becomes important to conceive the socio-environmental obligation as a mainstream business rather than as add on business operations.

• Differentiating and positioning strategy of your business.

The Co-operative Bank basic four key business function

• The Cooperative Bank basic four key business functions

Financial Process

Customers and Stakeholders People

Financial Management of the Co-op Bank(1) Liability Management Exercise- Strengthen the bank core businesses- De-risking the non-core assets - Exit from non profitable business- Efficient cost management(2) Co-operative Enterprise Hub - Provide a professional business advisory - Training services to young entrepreneurs.

Business Process of The Co-op Bank(1) Bank governance centralised at Corporate Ethical Policy , and emphasis on : (i)Acting with honesty and transparency (ii) Being a responsible bank that treats customers fairly (iii) Promoting Human rights and equality (iv) Supporting international development (v) Protecting environment (vi) Protecting animal welfare (vii) Promoting economic and social environment (2) Internal operations for green business transformation :- encouraging staff behavioural change and better housekeeping in energy consumption- Energy audit - Renewable energy adoption - Carbon footprint reduction - ISO 14,001certification

Green Services and Green Products Offering to the Customers(1) Eco-model for product offering service offering - ATM or debit cards have been embedded with longer financial lifespan.- Eco-packaging- ICT application ( mobile banking, online transaction

and electronic transaction)

Safeguarding the Stakeholders through Green and Sustainable Project Investments(1) Removed sales-related bonuses, replaced with customer-centric service incentives.(2) Green mortgage (3) Reject business or projects that do not meet the socio-environmental standards.(4)Lobbying for sustainable finance and green investment to the UK Government (5) Business loan to retails and businesses (SME) which are socially friendly (6) Social loans for energy efficiency projects and renewable projects in developing countries (7) Microfinance institutions in 28 countries

(8) Supports social entrepreneurship groups (9) The Co-operative’s Inspiring Young People Programme”- “Skills4Schools”:“Number Partners” and “Fit4finance” to improve numeracy and financial literacy among primary and secondary school pupils.

Developing Manpower for Organisational Performance(1) Recruitment, evaluation procedures and internal training programmes(2) Staff involved in the decision making process.(3) Induction Programme(4) Online environmental training programme

Conclusion

• The Co-op Bank is driven by its ethical strategy for socioenvironmental sustainable development.

• Apart from prioritizing the organisational performance at financial indicators and customers’ needs , the ethical initiatives by the Co-op Bank been widening to embed the macro aspects of socioenvironmental by including the development of the manpower (internal people), as well as the people in a society (stakeholders) within its ethical bank governance process

What are the initiatives your banks or organizations have undertaken toward ethical banking ?

Boon Cheong Chew Email : bcchew@utem.edu.my linkedIN: http://my.linkedin.com/in/bcchewMy Primary Research Interests (a) Renewable Energy Development and Deployment (b) Clean Technologies Innovation & Implementation (c) Green & Sustainability Practices(d) Human Technology Innovation & Introduction • Please google BCChew to follow my work

Lay Hong TanEmail : lhtanjess@gmail.comlinkedIN: https://my.linkedin.com/in/tanlayhongMy Primary Research Interests:(a) Service Quality(b) Green and Sustainability Practices • Angled from /into all relevant service industry