If NAB’s sustainability commitment has a single guiding principle, it is that to remain successful in a changing world the bank itself must change. In this way, it is not simply trying to be a good corporate citizen – it believes its future growth and indeed relevance will be compromised if it does not act in a way that promotes sustainability.

Sasha Courville, head of social innovation at NAB in Melbourne, says this conclusion becomes ever-more apparent given the nature of challenges to society in the modern world. She explains: “There are changing expectations on all the key institutions in society – on business, government and civil society. This is all playing out in the context of a world that is volatile, uncertain, complex and ambiguous. The pace of change is quite phenomenal and will only accelerate.”

In this context, NAB is responding to clear expectations of businesses to take a leadership position in the economy and in society more broadly. The bank recognises that businesses are successful in the long term when they operate in a healthy environment and a healthy society. These things do not exist, and cannot be created or defended, in a vacuum. “It’s in a business’s interests to ensure it is playing an appropriate role in contributing to a healthy, prosperous society and to the environment in which it’s situated,” Courville adds.

How an institution like NAB plays its part is changing, too. Historically, social and environmental engagement was done via philanthropy. Companies generated profits, took a small or large proportion of these and gave it back to society. More recently, the concept of corporate social responsibility emerged. This concept asked how businesses could use their vast footprints, supply chains, workforces, and consumption of resources and energy to improve social and environmental outcomes.

Corporate social responsibility is still relevant at NAB, as the bank seeks to ensure it is doing the right thing and leading by example in society. For instance, Steve Lambert, NAB’s Sydney-based executive general manager, corporate finance, points out that in 2010 NAB was the first bank in Australia to become carbon neutral, and the first company of any stripe to have an Elevate Reconciliation Action Plan. This is a business plan documenting what an organisation commits to do to contribute to reconciliation in Australia through practical actions that build respectful relationships and create opportunities for Aboriginal and Torres Strait Islander peoples.

But this is not the end of the story at NAB. It is the bank’s deployment of the concept of shared value that it believes is its key differentiator. This is a recognition of sustainability as a genuine catalyst for corporate, as well as social and environmental, success. “We are backing the bold who move Australia forward,” says Courville. “What we are asking is how we can advance Australia and how we support our customers, our communities and our society to move forward.”

Achieving goals through shared value requires NAB to recognise there are big societal issues – like climate change, inequality and affordable housing – and no single government agency, civil-society organisation, philanthropic trust or business, no matter how big, can address these issues alone. The bank’s role is in working with others to help “connect the dots”, Courville explains.

The concept of shared value was first defined in an article published in the Harvard Business Review as recently as 2011, written by Mark Kramer and professor Michael Porter. The authors describe shared value as: “Policies and practices that enhance the competitiveness of companies while improving social and environmental conditions in the regions where they operate…to qualify as shared value, there must be an identifiable economic benefit to the company as well as measurable impact on a social or environmental issue.”

Courville explains: “Shared value really frames sustainability as a competitive strategy to deliver business value while also creating societal value. It is looking at how to deliver competitive advantage, create new business opportunities and generate revenue while also solving for social and environmental problems.”

By way of comparison, Courville explains that in philanthropic works the value lies with society. From a bank’s perspective, this could mean grants given for community benefit to address social or environmental challenges. There is no expectation of a commercial return – in fact the nature of philanthropy definitionally denies one.

In corporate responsibility, meanwhile, the value largely lies with the business. While it reduces environmental impact to be carbon-neutral, for instance, it is also good for a business. Offering employees a community-volunteering programme is also of value to a company, in part because it boosts employee engagement, productivity and loyalty.
“You don’t make money from corporate social responsibility initiatives, you do them because they are right thing to do and they are good for the business in indirect ways,” Courville explains to KangaNews.

The critical difference with shared value is that its benefits accrue both to the business and society. Courville says this means trying to find a business model that also solves for social and environmental challenges. The explicit intent is to generate revenue, however. The goal is to find new and untapped markets, redefine productivity in the value chain, and look at new ways of leveraging a corporate position to bring stakeholders together for both better business and social outcomes.

Successfully delivering shared value depends on three elements. There has to be a real business opportunity, a real societal need and the responsible entity has to leverage its own core assets and expertise. “What we have at NAB is leaders who have been able to identify the social need and the business opportunity and also put the weight of their expertise towards it,” Courville suggests.

One of the interesting things about shared value is that it does not necessarily need to be applied to areas that might naturally be considered as the basis for straightforward philanthropic or social-responsibility projects. This is particularly relevant in a banking context.

As an example, Lambert highlights the collections department at NAB. Its fundamental role is trying to get money back from customers – never a popular task. But the way NAB has developed its customer engagement has resulted in customers giving the bank’s collections department the highest relative ratings for service. “They have done a phenomenal job at getting money back faster and earlier, but in a way that’s not dehumanising and is actually supportive of clients,” Lambert comments.

NAB has saved A$70 million (US$55.6 million) in reduced loan defaults and operational efficiencies in the last financial year alone, Courville adds. The bank measures customer feedback using advocacy scores, specifically referring to the net promoter score as a check on how the bank is viewed by its customers. This score for NAB Assist is reliably at plus 60 and above.

The same general principle applies to unexpected financial hardship and the need for financial resilience to deal with adverse events if they occur. Lambert says NAB has extensive historic data about how customers have got into trouble. The bank is now using this wealth of data to see if it can pick the early warning signs before customers get into difficulty. Using this data, NAB can give customers an idea of their resilience score and offer them ways to build resilience.

By way of comparison, Courville explains that in philanthropic works the value lies with society. From a bank’s perspective, this could mean grants given for community benefit to address social or environmental challenges. There is no expectation of a commercial return – in fact the nature of philanthropy definitionally denies one.

In corporate responsibility, meanwhile, the value largely lies with the business. While it reduces environmental impact to be carbon-neutral, for instance, it is also good for a business. Offering employees a community-volunteering programme is also of value to a company, in part because it boosts employee engagement, productivity and loyalty.
“You don’t make money from corporate social responsibility initiatives, you do them because they are right thing to do and they are good for the business in indirect ways,” Courville explains to KangaNews.

The critical difference with shared value is that its benefits accrue both to the business and society. Courville says this means trying to find a business model that also solves for social and environmental challenges. The explicit intent is to generate revenue, however. The goal is to find new and untapped markets, redefine productivity in the value chain, and look at new ways of leveraging a corporate position to bring stakeholders together for both better business and social outcomes.

Successfully delivering shared value depends on three elements. There has to be a real business opportunity, a real societal need and the responsible entity has to leverage its own core assets and expertise. “What we have at NAB is leaders who have been able to identify the social need and the business opportunity and also put the weight of their expertise towards it,” Courville suggests.

Shared value has helped NAB kick a succession of goals in the institutional space, too. NAB understands that the growing global interest in impact investing is at the intersection of for-purpose organisations that require finance to grow and the rise of responsible investment. Stepping in to develop the impact-investment market in Australia, using philanthropy and corporate responsibility, has forged the path for business opportunities that enable innovative financial solutions to address a wide range of environmental and social issues.

“We have been doing a lot of work in the responsible-investment space, both with our own corporate footprint and the work we’re doing with customers – including investors and borrowers,” Lambert reveals.

The rubber has been hitting the road in a big way when it comes to the specific aspect of providing responsible-investment products. NAB has been a market leader as an arranger of socially themed bonds including for global corporate borrowers visiting the Australian capital market for the first time (see box below).

In the social space, shared value has led NAB to leverage funding outcomes from the banking business it already conducts. For instance, social projects often spring from pre-existing work around communities and social justice sparked by NAB’s historical role as a major banker to community organisations and through capacity-building support of the growing number of social enterprises developing new ways to tackle longstanding societal challenges.

Unlike the maturity of carbon accounting in the environmental space, the social-impact-measurement framework is complex and varied. This presents an opportunity to increase transparency through consistent measurement frameworks.

As this develops, NAB is adapting to provide investors with a range of socially responsible investment options from positive screening to the rigour of impact investment.

These options at the institutional level include arranging Australia’s first sustainability bond (see box below) and becoming the issuer and arranger of the country’s first social bond (see box below).

As far as shared value is concerned, Lambert explains: “This ties in and is congruent with us being Australia’s largest renewable-energy lender. Increasingly, the way we’re thinking about it is around adaptation finance instead of just mitigation. We are also on many external industry bodies – Australian, regional and global – so we are not just doing this ourselves but looking at changing the broader ecosystem.”

Lambert adds: “Our work in the environmental space has been built on the major balance sheet we have devoted to activities in renewable-energy lending, and project finance and bonds structured off the back of utilities. We have used this same skillset to focus on the individual and society – social issues such as housing and recidivism. We have worked on taking the power of the bond or specialised-finance business and channelling this thinking into areas where we can make a difference.”

If shared value works, it should be a virtuous circle for its agent. “I see it as a cycle of innovation,” Courville tells KangaNews. “You start off with an idea, then you prove you can simultaneously deliver business and social returns from this idea. By doing so you build your understanding, your capability and your expertise – then you keep expanding.”

Capital markets have provided one of the clearest examples of the principle of shared value in practice for NAB, starting with the bank’s leadership in the clean-energy and project-finance spaces, and off the back of this developing expertise in green bonds that subsequently progressed into social and sustainability bonds.

“These constant cycles of innovation feed each other because we learn every time we move them forward,” Courville adds. “We learn from our customers and from investors, we build our capability and, as we raise awareness of the power of shared-value thinking as a key vehicle to deliver on our organisational strategy within the bank, we find more opportunities to connect the dots across the business.”

The next step in capital markets could be widening the scope of client buy-in on sustainability goals. For instance, NAB has introduced a natural-value programme with its agribusiness customers, working on how the bank and its clients understand natural capital risks like water scarcity, soil health, energy and biodiversity loss.

Courville comments: “What we want to do is really think about these areas in the sense of being actual assets our customers have. This means looking at how we support them in managing the risks and demonstrating they are managing them well. This makes them more resilient businesses.”