2009 Corporate Responsibility Review

ERM Independent Assurance Report to National Australia Bank Limited

Environmental Resources Management Australia Pty Limited (ERM) was engaged by National Australia Bank Limited (NAB) to provide independent assurance of its 2009 Corporate Responsibility Review (2009 CR Review), to the scope of work outlined below.

Scope of Work

This assurance statement is intended for NAB. The 2009 CR Review covers NAB's operations for the 12 months to 30 September 2009, unless stated otherwise in the text. This work was performed using ERM's assurance methodology, which is in accordance with the AA1000 Assurance Standard (2008). The criteria used were the AA1000AS (2008) Principles of Inclusivity, Materiality and Responsiveness, against which ERM reviewed NAB's performance reporting to provide Type 2, moderate assurance. To do this, we interviewed a number of personnel and reviewed relevant documentation at NAB's operations in Australia, New Zealand (NZ) and the United Kingdom (UK).

The subject matter for this assurance process consisted of adherence to the AA1000AS (2008) Principles, adherence to the Global Reporting Initiative (GRI) G3 Application Level A+ requirements and review of the following material data streams: being good at banking: a. lending responsibly; b. fairness and transparency in fees and charges, including customer complaints data; being a good employer: c. building skills and capability, including The Academy and training data; d. leadership development, including training data; e. people data, including diversity statistics and employee numbers; broader engagement with society: f. good education for all children, including Schools First; g. managing impact on the environment and climate change, including energy use and greenhouse gas (GHG) emissions data and the Climate Neutral Strategy; h. Corporate Community Investment (CCI), including the Bushfire Response and progress towards the 1% of cash earnings goal; i. supply chain management. The scope excluded data and statements relating to financial information and previous financial years, as well as energy and GHG emission data for Australia¹.

ERM's Independence

NAB was responsible for preparing the 2009 CR Review. The ERM team of experienced assurance auditors, led by Jo Cain, Line of Business Leader, Sustainability, Energy & Climate Change, Australia & New Zealand, was responsible for expressing assurance conclusions in line with the scope of work agreed with NAB. During 2008-09, ERM did not work with NAB on other consulting engagements.

Key Findings

Based on the scope of work, and without affecting our assurance conclusion, ERM identified the following key findings against the Principles of AA1000AS (2008):

Inclusivity

Stakeholder views are taken into account for balanced business decision-making, through their involvement in open dialogue. For example, in Australia, overdrawn fees on personal transaction accounts were abolished as part of the commitment to treat customers fairly. Stakeholder research was also undertaken, along with the establishment of a Customer Council, facilitation of the Community and Indigenous Advisory Councils and the CEO meeting with consumer advocates. In NZ, Culture Jam and the Leadership Program demonstrate the inclusion of stakeholders. The UK undertook stakeholder feedback sessions on the 2008 CR Review.

Materiality

The 2009 CR Review addresses the material issues of importance to its stakeholders. This year's Executive interview program demonstrated consistency at the strategic level within NAB, with the three key themes of being good at banking, being a good employer and broader engagement with society featuring strongly. The existing process could, however, be better documented.

Responsiveness

A commitment to providing timely and balanced responses to stakeholder enquiries was demonstrated. For example, challenging targets have been set in Australia for the provision of feedback to customers, specifically requiring the close-out of customer complaints within 5 business days, ninety per cent of the time. These targets were not always achieved, however NAB continues to work towards them. In NZ, communication with the government on climate change was a good example of responsiveness.

In addition, the following observations were made regarding the reliability of performance information for the material data streams specified in our scope of work:

Good Practice

• Definition of key supply chain metrics improved the consistency of supply chain reporting across all regions this year.
• People data for Australia were extracted directly from a database this year, reducing the potential for data manipulation errors.
• The NZ CR Team invested time before the assurance process to help data owners with their preparation and were responsive to additional data and interview needs that arose during our work.
• Internal CR Updates were published regularly in the UK and circulated to Corporate Affairs, CR Champions and the CR Steering Group, demonstrating the inclusion of internal stakeholders.

Areas for Improvement

• Data collation and reporting processes: from regional systems through to the Group level could be improved. A comprehensive documented procedure and a web-based reporting system or database would assist.
• Implications of organisational restructure on data: following the restructure of NAB and NabCapital, responsibility for Wholesale banking data for CCI and people was unclear, for example, UK people data did not include UK wholesale bank employees. This demonstrates the need to consider the implications for CR reporting when such restructures occur.
• Supply chain database for NZ: generated via SAP, whilst improved since last year, still demonstrates some inconsistency, highlighting the need for continued improvement for this region.

NAB's continued commitment to CR reporting represents good practice.

Environmental Resources Management Australia Pty Limited (ERM), 9 November 2009, Melbourne, Australia

1. Australian energy and GHG emissions data was excluded from ERM's scope of work, because this Scope 1 and 2 emissions data reported under the National Greenhouse & Energy Reporting Act, has been subject to a reasonable assurance engagement by KPMG. KPMG was also engaged to perform certain procedures over selected Scope 3 emissions data for the Australian operations of the National Australia Bank for the period ended 30 June 2009. The procedures performed were limited to comparing source data to reported amounts and did not include verification back to source documentation.

Environmental Resources Management Australia Pty Limited (ERM) is an independent global provider of environmental, social and corporate responsibility consulting and assurance services. ERM has prepared this statement for the National Australia Bank Limited in accordance with ERM's standard terms and the standard practised by members of the environmental consulting profession performing this type of service at the same time. No other warranty, express or implied, is given by ERM as a result of the provision of this statement. To the extent permitted by law, this statement is provided for informational purposes only, without the right to rely, and ERM will not be liable for any reliance which may be placed on this statement by a third party. This statement may not be used by any third party without ERM's express written permission.