The Van City Difference:A Case for the Triple Bottom Line Approach to Business

by Dave Mowat

The world is facing a host of problems today. Millions of people – children and families – are living in poverty. Air, water and land pollution are causing serious health problems and environmental problems. Violence and anger continue to threaten the security of men, women and children all over the world, as recent global events have tragically demonstrated.

As corporate citizens, these issues serve to underline the role each of us has to play in improving quality of life – not just in the communities we serve, but around the world. At Vancouver City Savings Credit Union (VanCity), we see ourselves as part of the community, working to create positive social change by providing responsible financial products and investment choices.

A Canadian leader in corporate social responsibility, VanCity is active in the global movement toward triple bottom line reporting and accountability. Last year, we put our values into writing. Our statement of Values and Commitments is a declaration of who we are, and what we stand for as a company.

The statement represents the culmination of extensive consultation with our stakeholders, employees and members (customers), and sets out our purpose as a company – to work with people and communities to help them thrive and prosper. It also puts in writing the three core values VanCity has built its business on since we were founded in 1946 – integrity, innovation and responsibility.

VanCity’s growth and profitability over the past 55 years is proof that being socially responsible and a multi-billion dollar company are not a contradiction in terms. For us, corporate social responsibility is about being a leader. We seek to achieve something more than financial success alone – we want to help build a stronger community and a better world.

Being a leader is also about integrity – being worthy of people’s trust and always treating our members with fairness. Leadership also represents innovation for VanCity – having enough conventional expertise to do the job, while also having the courage to go against the current, or jump out in front of the pack. This is also, I believe, the essence of triple bottom line budgeting and reporting.

Our goal is to establish and strengthen relationships with our customers that will last a lifetime. There are several steps to achieve that goal. The first step is to recognize that values are good for business. Values help to define so-called “ethical” or “socially responsible” companies from their competitors. In today’s marketplace, socially responsible corporate behaviour is crucial to the long-term success of a company. In our experience, values provide VanCity with reputation, profile and brand recognition that money cannot buy.

A 1999 Environics Millenium poll [1] found that one of the greatest influences on public perceptions of companies is their level of commitment to social responsibility. The poll also found the majority of citizens in all countries think companies must go beyond “making
a profit,” and focus on building a better society.

The VanCity Difference
Can values-based business truly thrive in the demanding and sophisticated arena of financial services? The answer is yes. VanCity is Canada’s largest credit union, with: $7.3 billion in assets; $300 million in equity; an operating profit of $40 million a year; 275,000 members; 39 branches; and 1500 employees.

VanCity enjoys a market share in its service area of just under 10 percent, putting it neck-and-neck with three of Canada’s major chartered banks. Not bad for a company that began at a Vancouver kitchen table in 1946 with only 12 members and $22 in assets.

Our values and commitment to innovation got us where we are today. Our “firsts” in the market include:

* the first financial institution in Canada to provide mortgages to women;
* the first to grant mortgages to homeowners on the “wrong side of town” in Vancouver, where Canada’s major banks refused to grant loans;
* the first financial institution in Canada to offer daily interest savings accounts
* the first centralized banking -by-phone service in Canada;
* creating Canada’s first ethically screened mutual fund – the Ethical Growth Fund – in 1986. Today, the fund is distributed across Canada, with assets of over $2 billion.

The results have been constant growth in our customer base, and profit margins comparable to Canadian banks and corporations many times our size.

Values do not slow VanCity down. Rather they define our company clearly in the financial services market in British Columbia, and give us a national and international profile few other regionally based companies anywhere in the world enjoy.

To put this is perspective, it is important to note that we compete in a market where our competitors, the major banks, are 30 times our size. While we have $7.3 billion in assets, our competitor, the Royal Bank of Canada, has assets of over $294 billion. Scale will never be a solution for our company, and our operating costs will never be as low as the banks.

The way we compete against the giants is to focus on what we do best – our service and our people. The company’s values are critical for both groups. Our strategy is to provide outstanding service and to develop a fiercely proud workforce where motivated, well-trained employees make a difference in the work they do.

This year, 81 percent of our members reported a high level of satisfaction with our service. Our goal is to create a new paradigm in customer service, and see how close we can get to 100 percent. This means satisfaction not only with our financial services, but with the relationship we have with our employees, the environment and communities. Research shows there is a direct correlation between an organization’s financial success, and its measure of customer satisfaction. In short, we make more money when we make our customers happy.

The same is true of our employees. They are more productive when they are engaged in our company, and they provide better service. For the past two years, the national Globe and Mail newspaper has recognized VanCity as one of the 35 Best Companies to Work For in Canada, based on an independent survey of employees. VanCity was also named one of the “10 most respected businesses” in British Columbia in a recent public poll.

While we are encouraged by this success, we know we have a long way to go. Ultimately, we want to increase our market share, membership and asset base. We also want to enhance our public image as a national leader in corporate social responsibility.

The Financial Benefits of the Triple Bottom Line Approach
Why should companies care about financial, social and environmental performance and accountability? We need to start by recognizing that today’s consumer is very educated, and very cynical about the motivations of business. The brand loyalty that once existed – where customers would purchase a product because they had always purchased that product – is being put to the test. T
he 1999 Environics poll found that:

* 90 percent of those surveyed wanted companies to focus on more than just profitability
* 60 percent said they formed an impression of a company based on its social responsibility
* 40 percent said they respond negatively to companies that are not perceived to be socially responsible
* 17 percent said they avoid products of companies that are not perceived to be socially responsible.

A negative perception erodes brand loyalty and consumer confidence. This trend is likely to gather momentum in the years ahead.

Companies that don’t put social and environmental responsibility at the centre of business strategy risk being left behind – or worse, to have governments perceive inaction and impose new regulations on business.

While there are many risks to not choosing the triple bottom line approach, the motivation and business case is more readily found in its benefits. The number one benefit is improved financial performance. More customers will want to do business with you, and more top-notch employees will want to work for you.

Another highly tangible benefit is market differentiation. Vancouver -based Ipsos-Reid – one of Canada’s most experienced and respected public opinion and market research firms – undertook a poll in British Columbia in 2000 [2] measuring the impact of a company’s social responsibility. The results were significant:

* 84 percent said they would be more likely to purchase a product or service from a socially responsible company
* 89 percent said they would feel “more positive” about a socially responsible company
* 91 percent said they would be more likely to want to work for a company that had socially and environmentally responsible values.

Most financial service providers offer the same core services – basic banking and lending services, investment management and advice, and in some cases, insurance services. We are competitive in all these areas. What sets us apart is exceptional service, values, and doing business differently. A 1998 MarkTrend Research study [3] found that, among all financial institutions in British Columbia, VanCity is the most recognized for “supporting positive social change in the community,.” well ahead of our competitors.

Social Reporting
VanCity undertakes a social audit and publishes a report on it every two years. In 1996, the company made a commitment to social reporting, including the decision to adopt a stakeholder approach and to have the process both internally and externally verified. We released our first report in 1997, a transparent and balanced account of the company’s social and environmental performance and the views of our stakeholders. Our third report is slated for the summer of 2002.

We used the UK’s Institute for Social and Ethical Accountability’s process standards, called AccountAbility 1000, as the basis for the social audit. In the report, the company’s financial, social and environmental performance is measured against the expectations of stakeholders, the company’s values and commitments, and the expectations of the community.

An external social auditor provides our stakeholders with assurances that the reports are reliable and reasonable. The vital importance of external verification cannot be overstated. The corporate world is replete with “vision statements” and “corporate values declarations”, but without external verification to back them up, these claims lack credibility and are extremely vulnerable to criticism by stakeholders.

Social reporting provides the tools we need to improve performance in a way that is transparent and accountable to stakeholders. And it helps us strengthen relationships with our members, so that we increase their engagement and overall satisfaction with the company as a financial services provider.

Also fundamental to social auditing is the notion of “continuous improvement.” The social report is not an end in itself, but an evaluation and assessment of performance and progress on commitments, and a vehicle for improving performance in the future.

The fact of the matter is, change is coming. Consumers have set the bar higher for private sector corporations, and it is up to us to take their cue and make the changes they want to see. If we fail to take responsibility now to do what’s right – both to increase our competitive edge and to support our communities and environment – our customers, who are also voters, will turn to governments to make those changes.

I doubt there are many business people who would prefer that government regulators force companies to change the way we do business. We want choice. We want to chart our own course, and determine our own destiny. However, along with choice comes responsibility. Responsibility for the decisions we make and the results of those decisions.

If companies take a chance, and take their corporate strategy in a new direction – one that respects people, the environment, and the bottom line – they will profit in ways they have never dreamed of. They will not just deliver good operating results. They will also make a meaningful difference in the world.

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FROM International Journal of Corporate Sustainability: Corporate Environmental Strategy, Volume 9, No.1, 2002, a SustainableBusiness.com Content Partner.


Endnotes
1. 1999 Millenium Poll. Environics, Conference Board, PWBLF, 1999. Source: Business for Social Responsibility Powerpoint presentation, 2001.
2. Corporate Social Responsibility and the BC Public. Angus Reid Group (Ipsos-Reid), Canada, April 2000.
3. Financial Institution Image Tracking Study, Mark Trend Research, 1998.