Independent Assurance Statement on Non-Financial Reporting

Introduction

Det Norske Veritas AS ('DNV') has been commissioned by the management of Commercial Bank of Ceylon PLC ('Commercial Bank' or 'the Company') to carry out an independent assurance engagement (Type 2, Moderate level) on the sustainability performance reported in Company's Annual report - 2012 ('the Report') in its printed format. This engagement focused on underlying management and reporting processes for the qualitative and quantitative information provided in the Report. The engagement was carried out against AccountAbility's AA 1000 Assurance Standard 2008 (AA 1000AS), the DNV Protocol for Verification of Sustainability Reporting (VeriSustain) and adherence to principles of the Global Reporting Initiative (GRI) 2011, Sustainability Reporting Guidelines Version 3.1 (G3.1).

The intended users of this assurance statement are the readers of Commercial Bank's 2012 Sustainability Report. The Management of Commercial Bank is responsible for all information provided in the Report as well as the processes for collecting, analyzing and reporting that information. DNV's responsibility in performing this work is regarding the verification of the Report only, in accordance with the agreed scope of work. The assurance engagement is based on the assumption that the data and information provided to us is complete, sufficient and authentic. Our assurance engagement was planned and carried out in February - March 2013.

Scope of Assurance and limitation

The scope of the assurance as agreed upon with Commercial Bank included the verification of the content of the Report. In particular the assurance engagement included:

• The external verification of the non-financial data prepared using the GRI G3.1 guidelines, covering economic, environmental and social performance for the activities undertaken by Commercial Bank over the reporting period 1st January 2012 to 31st December 2012 and reported in this Report;
• Review of the policies, initiatives, practices and performance described in the Report pertaining to sustainability performance;
• Evaluation of the disclosed information in the Report, the systems and the processes Commercial Bank has in place for adherence to the three Accountability Principles (Inclusivity, Materiality and Responsiveness) as required for a Type 2, moderate level of assurance, in accordance with AA1000AS (2008) detailed below:
• Information relating to company's sustainability issues, responses, performance data and underlying systems for the management of such information and data;
• Information relating to company's materiality assessment and stakeholder engagement processes;
• Evaluation of the adherence to the principles set out in the Global Reporting Initiative Sustainability Reporting Guidelines 2011 (GRI G3.1) and the additional principles of Completeness and Neutrality, as set out in DNV's Protocol for Verification of Sustainability Reporting; and
• Confirmation of the Commercial Bank's declared Application level i.e. B+.

The reporting boundary is as set out in the report and during the assurance process; we did not come across limitations to the scope of the agreed assurance engagement. No external stakeholders were interviewed as part of this assurance engagement.

Verification Methodology

This assurance engagement was planned and carried out in accordance with the AA1000AS (2008) and the DNV Protocol for Verification of Sustainability Reporting. The Report has been evaluated against the following criteria:

• Adherence to the principles of Inclusivity, Materiality and Responsiveness as set out in the AA1000AS (2008);the Reliability of specified sustainability performance information, as required for a Type 2, moderate level assurance engagement,
• Adherence to the additional principles of Completeness and Neutrality as set out in DNV's Protocol, and
• The principles and requirements of the GRI G3.1 for an application level B+.

As part of the engagement, DNV has verified the statements and claims made in the Report and assessed the robustness of the underlying data management system, information flow and controls. In doing so, we have:

• Reviewed the company's approach to stakeholder engagement and its materiality determination process;
• Verified the sustainability-related statements and claims made in the Report and assessed the robustness of the data management system, information flow and controls;
• Examined and reviewed documents, data and other information made available by the Commercial Bank;
• Visited the head office and two branches in Colombo, Sri Lanka;
• Conducted interviews with key representatives including data owners and decision-makers from different functions of the Company;
• Performed sample-based reviews of the mechanisms for implementing the company's sustainability related policies, as described in the Report;
• Performed sample-based checks of the processes for generating, gathering and managing the quantitative data and qualitative information included in the Report.

Opportunities for Improvement

The following is an excerpt from the observations and further opportunities for improvement reported to the management of Commercial Bank and are not considered for drawing our conclusion on the report; however, they are generally consistent with the Management's objectives:

• Implement a continuous and systematic quality assurance procedure for data management system to further improve the quality of reported sustainability performance data;
• To include the supply chain sustainability performance and develop a management process to identify and mitigate risks (if any) due to labor, human rights issues especially in supply chain activities and outsourced processes;
• Further Strengthen the Governance process to monitor Environmental and Social performance.

Conclusions

In DNV's opinion, based on the scope of this assurance engagement the Report provides a fair representation of the Company's sustainability-related strategies, management system and performance and we confirm that the Report generally meets the requirements for GRI application level B+. We have evaluated the Report's adherence to the following principles on a scale of 'Good', 'Acceptable' and 'Needs Improvement':

AA1000AS (2008) principles

Inclusiveness: The Company demonstrates engagement with stakeholders through different channels. The material issues emerging from the stakeholder engagement were collected and prioritized, and the results are reflected in the Report. In our view, the level at which the Report adheres to the principle of inclusivity is "Good".

Materiality: The Company has reported its material issues of significance at the macro level and has not missed out any know material issues, but the process needs to be strengthened to bring out all material aspects related to financial sector with respect to national and international guidelines, so as to further evolve suitable sustainability strategy to effectively address the short, medium and long term impacts. In our view, the level at which the Report adheres to the principles of Materiality is "Acceptable".

Responsiveness: We consider that the Company's response to key stakeholder concerns, through its policies and management systems are fairly reflected in the Report. In our view, the level at which the Report adheres to the principle of Responsiveness is "Good".

Reliability: The majority of data and information verified at head office and site were found to be accurate. Some of the data inaccuracies identified during the verification process were found to be attributable to transcription, interpretation and aggregation errors and the errors have been corrected; Hence in accordance with the AA1000AS (2008) requirements for a Type 2, moderate level assurance engagement, we conclude that the specified sustainability data and information presented in the Report is generally reliable and acceptable.

Specific evaluation of the information on sustainability performances

We consider the methodology and process for gathering information developed by the Commercial Bank for its sustainability performance reporting is appropriate and the qualitative and quantitative data included in the Report, was found to be identifiable and traceable; the personnel responsible was able to demonstrate the origin and interpretation of the data reliably. We also assessed the reported progress against the company's commitments as disclosed in its previous Report and observed that the Report presents a faithful description of the sustainability activities and the goals achieved.

Additional principles as per GRI and DNV's protocol

Completeness: The Report has fairly attempted to report the sustainability strategy, management approach and sustainability performances against the GRI G3.1 core indicators and financial sector supplement that are material within the Company's reporting boundary for application level B; In our view, the level at which the Report adheres to the Principle of Completeness is "Good".

Neutrality: The Company has reported its sustainability issues and performance in a neutral tone, in terms of content and presentation. In our view, the level at which the Report adheres to the principle of Completeness is "Good".

DNV's Competence and Independence

DNV is a global provider of sustainability services, with qualified environmental and social assurance specialists working in over 100 countries. DNV was not involved in the preparation of any statements or data included in the Report except for this Assurance Statement on Non-financial reporting. DNV maintains complete impartiality towards any people interviewed. DNV expressly disclaims any liability or co-responsibility for any decision a person or entity would make based on this Assurance Statement.

For Det Norske Veritas AS

 

Ramesh Rajamani
Project Manager,
Det Norske Veritas AS, India.

 

Vadakepatth Nandkumar
Assurance Reviewer,
National Head - Sustainability & Business Excellence Services,
Det Norske Veritas AS, India.

4th March' 2013,

New Delhi, India