Independent Assurance Statement

To the Management and Stakeholders of
City Developments Limited

For the second year, City Developments Limited (CDL) commissioned Ere-S to carry out an independent third-party assurance on their Sustainability Report.

Scope and objectives

In accordance with the AA1000 Assurance Standard (AA1000AS 2008), the assurance engagement provided a Type 2 assurance, which evaluates the adherence to the AA1000 AccountAbility Principles (AA1000APS 2008) and the reliability of the sustainability performance information found in the Sustainability Report.

A moderate level of assurance was provided with a scope covering the operations of CDL in Singapore. For the adherence to AA1000AS, information at corporate and management level was collected and analysed to obtain sufficient confidence in the organisation’s disclosure on the approaches and procedures related to sustainability. Criteria outlined in the AA1000APS (2008) principles of Inclusivity, Materiality and Responsiveness was used for the evaluation.

For the evaluation of sustainability performance, management-level data verification and evidence gathered from various sources was used and assessed using GRI G3 quality principles. This covered the reported information related to CDL’s strategy and operations in the context of sustainability, including figures and statements on CSR initiatives, strategy, policies, procedures, management systems and associated processes. Figures and statements not related to sustainability and already supported by existing documents, such as the Annual Report, were not covered in the audit. These include all or part of
the organisation profile (GRI disclosures 2.1 to 2.10), corporate structure and corporate financial and economic performance, technical descriptions and figures of buildings, equipment and production processes. Ere-S did not assure the Sustainability Report for GRI application level check.

The assurance engagement was conducted through April and May 2010 at the headquarters and did not include any subsidiaries.

Responsibility and independence

Ere-S’s responsibility was to execute the assurance engagement, prepare the assurance report and this assurance statement for the management of CDL alone and for no other purpose. All information including statements and figures contained within the Sustainability Report are the responsibility of CDL.

Ere-S was not responsible for any prior work on the report. The activity of Ere-S is independent to CDL and contains no other financial interest in their business operation.

Methodology

The methodology for the assurance consisted of reviewing the sustainability framework, procedures and policies of CDL as well as the Sustainability Report content and identifying relevant elements to be audited. Management processes, reported statements and data sets were classified according to the relevant data owners and the type of evidence to be audited.

Two separate audit processes covering the evaluation of adherence to AA1000APS and the evaluation of the sustainability performance were done through interviews conducted with over 15 key persons from senior management, relevant departments (Environment, Health & Safety, Projects, Property & Facilities Management, Human Resource, Corporate Communication, Corporate Secretarial Services, Internal Audit, Customer Relations Management and Administration) and the CSR Committee and subcommittees.

Evidence of data, collection and calculation methods as well as information on the underlying processes including policies, reports and internal publications were compiled and assessed by our auditor. External documents, such as press releases and web sites, were also reviewed. Recommendations were shared during the audit phase to allow immediate amendment by the sustainability reporting team.

Findings

In line with the recommendations shared during last year’s assurance engagement, CDL has implemented or initiated new initiatives during the reporting period. For example, the CSR Committee has started studying the possible drafting of company-wide policies covering human rights and climate change issues.

We particularly commend CDL’s initiative to anticipate the ISO 26000 official launch due at the end of 2010 and integrate the standard into the CSR strategy. Started in 2009 with a series of workshops delivered by external consultants, the CSR framework remodelling is expected to lead to sustainability approaches, objectives and KPIs more aligned with stakeholders’ needs.

Evaluation of the adherence to AA1000 AccountAbility Principles

Inclusivity - How the organisation engages with stakeholders and enables their participation in identifying issues and finding solutions.

CDL has several mechanisms to engage with its key stakeholders, such as regular surveys, seminars, meetings, sharing sessions and specific feedback channels. We have also found evidence of formal processes through which stakeholders are given the opportunity to influence company decisions related to sustainability issues. For example, government agencies and suppliers are consulted in the first planning stages of new projects to discuss issues related to environment and health and safety. In 2009, the company reinforced the internal and external communication channels aimed to provide more information on the sustainability profile of the company as well as a mechanism for feedback.

Although formalised participation processes exist for stakeholder groups such as shareholders, employees (headquarters), suppliers, customers and government bodies, engagement with small community partners and NGOs is often limited to project-based discussion and one to one meetings. An expansion of the existing formal engagement processes to these groups will improve CDL’s overall inclusivity. However, we also recognise that finding adequate local partners able to represent the diverse needs and voices of these community groups is a challenging task.

Materiality - How the organisation recognises issues that are relevant and significant to it and its stakeholders.

Processes to identify material issues and re-evaluate their significance and priority exist within the company’s management system. These can be seen through the ongoing work of the CSR Committee and the regular revisions of policies and procedures such as the CDL 5-Star EHS assessment system, environmental management system, code of business conduct and ethics, employee handbook and whistle-blowing policy.

There are still several material issues that are not comprehensively covered, such as the economic and social implications related to different stakeholders impacted through the supply chain. Although no related procedures have been formalised or reported, we are pleased to have found progress made in this area. The plan to draft a new policy on human rights and climate change is one of the most significant signs of CDL’s effort in broadening its CSR scope.

Responsiveness - How the organisation responds to stakeholder issues and feedback through decisions, actions, performance and communication.

CDL uses diverse approaches to develop appropriate responses to its stakeholders. We have found evidence of multiple cases where an action taken in response to a stakeholder concern was appropriate and effective. For example, through the customer relationship management system, construction projects in progress or already concluded can be adapted to cater for unforeseen requests from customers. Another example is the addition into the company’s philanthropic portfolio of projects aimed at the social and economic development of overseas communities (Indonesia and Cambodia), a strategy developed in response to stakeholders requests.

The company applies appropriate reporting mechanisms such as an enhanced CSR section on the company’s web site, which includes detailed information on environmental performance. CDL’s annual Sustainability Report is fairly detailed, framed according to the GRI standard and externally assured. However, the report can be improved by the disclosure of additional GRI indicators as well as less successful aspects of the company’s sustainability performance and the actions taken to mitigate these issues. This will provide readers with a more balanced view and a better assessment of the company efforts in sustainability.

Evaluation of reported sustainability performance

Evidence for the identified elements of the report and a detailed description of the underlying processes was found during the audit. Base information was correctly reflected in the Sustainability Report with a small number of minor inaccuracies, which were promptly corrected by the sustainability reporting team.

Overall, the report content satisfies the requirements of GRI G3 quality principles. The reported data is comprehensible, covers the whole reporting period and beyond and shows a satisfying level of accuracy and reliability (on the basis of a moderate level of assurance). Most of the changes in the organisation performance over time are comparable within the report and with its previous versions and other benchmarks or reports in the same industry. As mentioned above, room for improvement lies in a more comprehensive and balanced disclosure of sustainability performance.

Assurance conclusion

In our opinion, the findings of the assurance engagement provide confidence, within satisfactory limits, that the statements and figures provided in the Sustainability Report are supported by comprehensive and verifiable data and underlying management processes and are aligned with the sustainability strategy and policies of the company during the reporting period. On the basis of our review, nothing has come to our attention that causes us to believe that CDL sustainability profile does not adhere to the AA1000APS (2008) principles.

Moving forward, additional observations and suggestions for improvement include:
The scope for assessing material issues should be expanded to areas not currently covered within the company sphere of influence. These include all actors of the supply chain and the direct or indirect stakeholders impacted by it. CDL should also consider strengthening the inclusion of its local and overseas subsidiaries in its CSR framework and disclosures where materiality estimation, measurement and comparability are possible (as it has been done with ISO 14001).
Although there has been improvement since the last reporting period, more intentional inclusivity of stakeholders in internal decision making will benefit CDL sustainability approaches. For this, building the capacity to engage less structured stakeholders such as communitybased groups will be a key component.
It will also be essential to accompany the extension and fine-tuning of the scope with the inclusion in the Sustainability Report of additional information covering the relevant domains, such as economic, society and labour practices. This will provide the report with more completeness and comparability.

We are confident that the work being undertaken for ISO 26000 integration and the new policies resulting from it will provide the stepping stone for improvement in line with these recommendations.

The above findings and additional suggestions for improvement have been presented to the management of CDL, the CSR Committee and the sustainability reporting team in a more detailed assurance report.

Poh Shuxian, Director   Jean-Pierre Dalla Palma, Director and Lead Auditor
Ere-S
Singapore
May 31, 2010
Ère-S is a consulting company specialised in business sustainability and provides services in the domains of CSR strategy design and implementation, stakeholder engagement, sustainability reporting and training.