Management Discussion and Analysis

and Social and Environmental Capital Formation

The Bank adopts a three-pronged approach to corporate responsibility

As a responsible corporate citizen the Bank is ever mindful of the impact it makes on local communities and the environment, and its symbiotic relationship. It is a win-win approach that recognizes that the ability of the Bank to create sustainable value for itself is related to the value it creates for others. Thus, our approach to corporate social responsibility (CSR) is structured along three strategic lines - operational, strategic and philanthropic initiatives.

Operational CSR

Operational CSR initiatives are based on the Bank’s day-to-day business operations. They are an integral part of the business and serve to create value for the Bank as well as its multiple stakeholders over time. For brevity, only material aspects that have identifiable impacts on local communities and the environment are discussed here.

Market Presence

A broad geographical coverage is important for business segments such as SME financing and retail fund mobilization. The benefits are mutual: local hires improve the diversity within the management team; they provide fresh insights on local needs that help us to tailor our products and services more effectively, while the local community too enhances its human capital. The Bank has progressively expanded its market position through organic growth in the past and is represented in every province and 22 districts of the country.

*Defined as one's permanent residence lying within the defined geographic location/region

Employees in executive grade and above are considered as Senior Management in order to present the employee percentage from locality.

MSME Development

Since its founding, the Bank has been active in the development of micro, small & medium enterprises (MSME) sector, through the provision of finance and much more.

Our strategic approach to micro financing is two-pronged: (i) Target underserved communities of the economy through empowerment and capacity building (the ‘Jeevana’ or ‘Life’ programme), and (ii) Promote livelihood development through financial inclusion (the ‘Divi Aruna’ or ‘Awakening of Lives’ programme). Both programmes inculcate a business orientation that instils a strong credit culture to wean the beneficiaries away from a dependency mindset.

Our five dedicated SME Centres in the provinces are equipped with state-of-the-art facilities to support entrepreneurs in many ways. The Centres provide access to a wide range of information and online training modules, while also organizing seminars and workshops targeting the rural entrepreneur.

An account of the financial and non-financial impacts of our MSME development work, is given under Profitable Growth and Lasting Relationships respectively.

Indirect Economic Impacts

In addition to direct value creation and distribution through our own operations, the Bank’s investments and market presence impact on local communities in many ways. They include jobs created or jobs supported in the supply chain, development of local skills and knowledge, attracting investment and so on. The Bank’s strategic planning and management of its economic performance thus support a sustainable business that also makes a positive impact on the society and environment in which it operates. In short, they encapsulate the dual aspects of sustainable value creation.

Environmental and Social Strategy

Our eight-pronged ‘8 R’ strategy aims to inculcate sound environmental and social practices across the Bank, our customers and suppliers. Some of these aspects were discussed previously, such as our ESMS, supplier/procurement policy, use of digital technology and borrower capacity building. The table that follows encapsulates these and more.

Our Carbon Footprint

We are reporting our greenhouse gas (GHG) emissions for the second successive year, using the most recent version of WBCSD/WRI Greenhouse Gas Protocol Corporate Accounting and Reporting Standard (2004) and Calculation Tools (2015).

To be consistent with the aspects discussed in this section of the Annual Report the boundary is limited to the Bank and its core business. Hence, we have restated the figure for Scope 2 electricity for 2014 to enable comparison. Our reporting of GHG emissions under Scope 3, which is optional, is limited to sources that are material and measurable.

GHG Emissions of the Bank

Note: Totals may not tally exactly due to rounding

The Bank’s total carbon footprint amounted to 3,012 tonnes carbon dioxide equivalent (tCO2e) in 2015, an increase of 7.7% over the previous year. The increase is largely due to the 22.3% increase in purchased electricity consumed in branches occupying rented premises, a Scope 3 item. The branch network expanded during the year to support business growth.

On the other hand, Scopes 1 and 2 together accounted for 1,459 tCO2e, a decrease of 3.8%, largely due to a decline in fuel usage of the Bank owned generator, a Scope 1 item.

Purchased electricity was by far the largest source of GHG emissions, with 43% coming from our own premises (banking business only) and another 48% from premises rented by branches. Taken together, purchased electricity accounted for 91% of the total carbon footprint of the Bank. This high proportion is to be expected considering the nature of our business and reliance on air conditioning in the climatic conditions under which we operate.

GHG Emissions Intensity

When related to an activity level, our overall GHG emissions intensity in 2015 was 247 kg tCO2e per LKR million of the Bank’s total operating income (2014: 240 kg tCO2e per LKR million). Considering only Scopes 1 and 2, which is complete and hence a more meaningful figure for benchmarking, the Bank’s GHG emissions intensity in 2015 was 119 kg tCO2e per LKR million (2014: 130 kg tCO2e per LKR million).

Going forward, we see the importance of closely managing electricity consumption through measures such as improved energy efficiency in plant, equipment and buildings as well as augmentation with solar PV based self-generation. These steps will not only make the Bank more environmentally responsible, but also result in cost savings through the effective and efficient use of resources.

Consumption of Paper in 2015

The Bank in collaboration with an accredited recycler makes every effort to collect the waste paper generated in its day-to-day operations for recycling. A waste reduction and recycling drive is done by the Bank where waste paper amounting to 8,103 kgs was recycled during the year, resulting in an estimated reduction in GHG emissions of 8,103 kgs of carbon equivalent and saved:

• 138 trees
• 14,216 litres of oil
• 32,400 kWh of electricity
• 257,418 litres of water
• 24 cubic metres of land fill

Our material usage is not significant hence, recycled input material are not used.

Strategic CSR

Education, particularly competency in a global language such as English, is an important factor that contributes to the nation's economic growth in the long-term. As this is well aligned with the Bank's own business focus and strategy, 'education' is an important facet of our strategic CSR initiatives.

Philanthropic CSR

Philanthropic CSR initiatives are based on the identified needs at national level. The Bank has selected Cancer Aid and Prevention of Child Abuse as areas for support, with assistance channelled through two Trusts set up for this purpose.