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A Message from the chairman

Dear Stakeholder,
Corporate sustainability, in a broad sense, is about an organisation’s capacity to endure and be endeared. It is not only about ensuring the long term survival and growth of the corporate entity itself, but is also about taking responsibility for the use of the earth’s resources and engaging with local communities. By integrating the two, we at Commercial Bank adopt a responsible business approach that creates long term stakeholder value through sustainable environmental, social and governance practices. It is a systematic and dynamic process of analysing challenges, seizing opportunities and managing risks at both operational and strategic levels. They are discussed below.

Our corporate sustainability strategies hinge on innovation and technology, collaboration and networking, continuous process improvement and stakeholder engagement. This is our third Report on sustainability, and like in the previous year, it is a part of our Annual Report.

As an organisation enjoying a position of business leadership, our commitment to sustainable banking remains strong as ever. The Bank’s governance and management systems are designed to assist in conducting business transparently and with accountability, particularly with regard to economic, environmental and social aspects. Sustainability principles are very much an integral part of our core business philosophy, and translated into action through our strategy.

The end of the near 3-decade war has presented Sri Lanka with an ideal opportunity to boost her investments and propel the country to achieve higher economic growth rates. Indeed the country achieved a GDP growth rate of 8% in 2010 and is expected to have achieved a similarly high growth rate for 2011. The Government will have to ensure that the dividends of these high GDP growth rates percolate to all sections of our society.

Equitable and inclusive development is a challenge that drives our social agenda. It is the Bank’s policy to generate measurable and sustainable social dividends, particularly for those who are marginalised or less privileged. Our CSR Trust, which supports community-aligned projects, continues to be an effective vehicle for expanding reach and financial inclusion, developing small-scale enterprises and promoting sustainable livelihoods.

As a banking institution, we are mindful of taking precautions against any negative social and environmental impacts that may be caused by the projects that we finance. We manage this through an in-house Social and Environmental Management System, which inter alia lays down policies that provide guidance to our customers to ensure that their products, processes and business practices are based on sound sustainability principles. Further, as a signatory to the United Nations Global Compact’s ten principles encompassing human rights, labour, environment and ethics as well as by adhering to the GRI G3.1 Reporting Framework, we continuously strive to develop our capabilities while embracing best practices.


D.S. Weerakkody
Chairman
Colombo
February 09, 2012

Introduction: About This Report

This Sustainability Report, which is published for the third consecutive year covers the operations and activities of Commercial Bank of Ceylon PLC for the year ended December 31, 2011. Our previous report, published in the 2010 Annual Report, covered the year ended December 31, 2010. It is the intention of the Board of Directors of the Bank to publish such reports annually. The Bank commenced publishing its sustainability performance based on the Global Reporting Initiative (GRI) Guidelines in its 2009 Annual Report.

This Report has been compiled and presented in compliance with Version G3.1 of the Sustainability Reporting Guidelines published by the GRI. A Compliance Index appears at the end of the Report for easy reference.

In terms of GRI Guidelines, our disclosures have been drawn up to Application Level B+. Application level criteria are published in the Guidelines and are available online at www.globalreporting.org.

Report Outline

This Report largely conforms to its predecessor in terms of its scope, boundary and measurement methods. The aim has been to make possible a year-on-year assessment of the Bank’s activities from the point of view of sustainability. Also facilitating comparison and general transparency is our decision to include reporting on the broad categories proposed by the GRI Guidelines. These categories are:

• Strategy and Analysis
• Organisation Profile and Report Parameters
• Governance, Commitments and Engagement
• Management Approaches
• Economic Performance
• Environmental Performance
• Social Performance in terms of Labour Practices and Decent Work, Human Rights, Society and Product Responsibility

Information for compiling the Report is thus drawn from a number of different sources. Financial data presented are extracted from the Audited Financial Statements and the accompanying Notes, where applicable. Additional information was obtained from the various business units of the Bank, based on records on actual data maintained by them. In particular, information on sustainability-related activities and achievements was obtained from the Bank’s Human Resources, Marketing and other core business units.

Man-hours in respect of training provided for employees of the Bank were computed on the basis of the scheduled duration of training sessions.

Bank’s Approach to Sustainability

The principles of sustainability are increasingly getting integrated with the business practices of the Bank. We maintain close dialogue with all our stakeholders and target our social and environmental performance accordingly, while fulfilling our aspirations on the economic front. The purpose of this Sustainability Report, published annually as a supplement to the Annual Report, is to communicate the benefits that accrue to both the Bank and all its stakeholders through such an integrated business approach. The relationships established with our stakeholders and the feedback we receive on issues that are important to them will undoubtedly further improve our business practices and performance over the coming years, leading to a win-win situation for all.

The diagram below portrays the key challenges are opportunities to the Bank in its march towards doing sustainable business. These are addressed through our corporate planning process.

Bank’s Social and Environmental Management System

One of the most important developments of sustainability at Commercial Bank is our ‘Social and Environmental Management System’ (SEMS), which spells out the social and environmental policy and procedures to be followed by the Bank. A senior officer designated as the ‘Social and Environmental Coordinator’ manages the implementation of the system. The SEMS is largely based on the Performance Standards of the International Finance Corporation (IFC) - the private sector arm of the World Bank Group and an important shareholder of the Bank. The SEMS is currently being upgraded in consultation with the IFC to ensure full compliance.

The SEMS ensures that effective sustainability practices and safeguards are implemented not only in respect of our own activities, products and services but also with respect to the indirect impacts arising from the projects of our customers that we finance. The underlying principles of SEMS ensure that:

• Project lending by the Bank is consistent with IFC Performance Standards, the IFC Exclusion List and other applicable national laws on environment, health, safety and social issues;
• All projects are reviewed against the applicable requirements at the time a loan is granted and on an ongoing basis thereafter for the period of the Bank’s association with that project;
• Only projects which we believe will be designated, operated and maintained according to these applicable requirements are financed;
• The Bank is transparent with respect to all its activities; and
• Customers and Bank staff understand the policy commitments made by the Bank in this area.