Continuing the journey

Since 2013, Commercial Bank of Ceylon PLC has been producing its annual report in accordance with the guiding principles and the content elements of the International <IR> Framework for integrated reporting. This Report comprising the Integrated Report and the Financial Statements is the 55th Annual Report of the Bank and covers the 12-month period from January 01 to December 31, 2023 and is consistent with our usual annual reporting cycle for financial and sustainability reporting. This follows our most recent Annual Report for the year ended December 31, 2022, for which comparatives are given, where applicable.

In response to stakeholder demands and industry best practices, we have diligently refined this Report to offer a yet comprehensive account of the Bank’s financial as well as non-financial performance. Accordingly, each main section of the Report commences with a clear and concise overview, expanding into detailed narratives, ensuring that our diverse stakeholders gain profound insights into the Bank's significant milestones and performance in 2023. Thereby, this Annual Report seeks to provide a holistic and integrated narrative of the Bank’s performance, operations and strategic imperatives, leading to sustainable value creation.

Transcending the medium to a handful of avatars

In tune with last year's trends and the modern approach to annual reporting, our Annual Report takes on various forms to suit the preferences of our diverse stakeholders, following the Swiss Army Knife model. While a limited number of printed reports have been produced, we have prioritised digital accessibility for environmental sustainability and compliance with regulations. Readers who prefer the ease of accessing our Annual Report online through either a computer or mobile device can access our Online Interactive (HTML) version of the Annual Report while a soft copy (PDF) version is hosted on the websites of the Bank as well as the CSE for those who would like to maintain an easy-portable digital version of the Annual Report. The Report can also be accessed by scanning the QR code given on page 2. These measures aim to balance the disparate imperatives of conciseness, comprehensiveness and accessibility in our disclosure practices.

Regardless of the medium, this Annual Report remains a key resource for investors, offering profound insights into our growth trajectory, governance framework in place and the strategies driving our expansion. It is our commitment to delivering comprehensive and accessible information, ensuring effective investor engagement across all channels.

Strategic focus and plurality of capitals

Sections 2.17 & 2.18 of the International <IR> Framework of the IFRS Foundation gives discretion to organisations to structure an integrated report and select capitals that suit the Organisation most. Accordingly, this Report is structured based on the Bank’s 3-Pillar Approach to sustainability, viz. Sustainable Banking, Responsible Organisation and Community Engagement, giving the reader a clear understanding of the Bank’s Sustainability Framework given on page 54 and how it will help the Bank achieve the underlying purpose of “Being a responsible financial services provider by enabling and empowering people, enterprises and communities towards environmentally-responsible, socially inclusive and economically-enriching growth”.

How the activities undertaken under these three pillars and in terms of the four strategic imperatives of Prudent Growth, Customer Centricity, Leading through Innovation and Operational Excellence lead to value creation over short, medium and long–term for the mutual benefit of the Bank and the various stakeholders, which is reflected in financial, manufactured, intellectual, human, social and relationship and natural capitals is given on pages 60 and 61. While assimilating the many efforts – mostly in inhospitable times – made by the Bank’s cross-disciplinary leadership into cohesive and convergent outcomes, this structure highlights how the plotted course of action will propel the Bank forward and sustain the value creation process while contributing to eight UN Sustainable Development Goals (SDGs) most relevant to the Bank in the context of guiding principles, standards and governance structure.

An integrated thinking cap

• Since adopting integrated reporting aligned with the <IR> Framework in 2013, the Bank has bolstered integrated thinking, harmonising diverse facets. This transformation enhances sustainability by mitigating risks, breaking silos, optimising costs and streamlining capital allocation. Beyond aligning economic objectives with societal and environmental goals, this integration extends to various other dimensions, as you will find later in this Report:
• Formerly operating as a physical establishment, the Bank has transformed into a digital superstore, offering a range of user-friendly integrated products showcased on virtual shelves.
• Strategically repurposing its approach, the Bank aims to adjust its business model to better align with emerging and disruptive forces of change.
• Evolving from a function-centric and team-oriented structure, the Organisation has transitioned into a cross-functional integrated entity.
• Implementation of unified service standards across all channels ensures a consistent customer experience.
• The Bank emphasises key messages consistently across all communication channels for enhanced clarity.
• Leveraging integrated software systems, the Bank achieves elevated levels of efficiency and agility.
• Integrated audits now employ a combination of onsite, offsite, online, and near real-time methodologies.
• Integration of data from diverse sources results in a cohesive and unified perspective.
• Information is accessible across various channels and about products within the Bank.
• Collaborative efforts with other service providers, including telcos, insurers, other banks, Non-Banking Financial Institutions (NBFIs) and fintechs are pursued by the Bank.

Non-financial information

Recent trends highlight a growing demand for non-financial information alongside traditional financial reporting, indicating a shift in stakeholders’ preferences, especially among financial capital providers. The Bank recognises the evolving information needs within the dynamic operational environment. Notably, investors are increasingly prioritising the future potential of the Bank over its past performance and sustainability over profitability. Non-financial information is gaining significance in evaluating this future potential and sustainability. Consequently, we have expanded our disclosures to include enhanced information beyond historical financial data. This includes non-financial and future-oriented insights, emphasising the Bank's capacity to create value in the short, medium and long term a key aspect of sustainability and integrated reporting.

Basis of preparation

This Report has been prepared in line with the International <IR> framework. The Bank’s social and environmental impacts are presented in accordance with the GRI Standards. It also comments on the Bank’s contribution towards eight of the UNDP Sustainable Development Goals most relevant to the Bank.

The concepts, principles and guidelines used in the preparation of this Annual Report are drawn from the following sources:

The International Financial Reporting
Standards Foundation (IFRS)

(https://www.ifrs.org/)

The Global Reporting Initiative
Sustainability Reporting
Guidelines – GRI Standards

(www.globalreporting.org)

A Preparer’s Guide to Integrated
Corporate Reporting, published by
CA Sri Lanka

Handbook on Integrated Corporate
Reporting, published by CA Sri Lanka
in collaboration with The Integrated
Reporting Council of Sri Lanka

(www.casrilanka.com)

Sustainability Framework of the Bank

Report boundary

The Financial Statements depict the consolidated performance of the entire Group, which includes the Bank along with seven subsidiaries – Commercial Development Company PLC, CBC Tech Solutions Limited, CBC Finance Ltd., Commercial Insurance Brokers (Pvt) Ltd., Commex Sri Lanka S.R.L. Italy (liquidation is nearing completion), Commercial Bank of Maldives Private Limited and CBC Myanmar Microfinance Company Limited – and the associate – Equity Investments Lanka Ltd. (refer the Consolidated Financial Statements).

Unless stated otherwise, the Bank’s social and environmental impact, as discussed within the Management Discussion and Analysis on pages 62 to 159, focuses on both Sri Lankan and Bangladesh operations of Commercial Bank of Ceylon PLC, the parent entity of the Group which accounts for more than 97% of Group’s revenue, loans and advances, deposits and assets.

Based on internal and external assessments, the Bank’s operations in Sri Lanka and other countries such as Bangladesh are captured within the material aspects boundaries. The Bank consistently takes into account the reasonable aspirations and expectations of its stakeholders, engaging with them through various means, as depicted in "Connecting with Stakeholders" and "Material Matters”. The content of this Report is determined with these considerations in mind. The information is presented in a sustainability context, covering topics that reflect the Bank's substantial economic, environmental and social impacts, significantly influencing stakeholder decisions. To enhance stakeholder convenience, the Report includes quantitative and qualitative data, along with reliable external benchmarks whenever possible, ensuring completeness and facilitating comparisons and further analysis.

During the year under review, there were no significant changes in the organisation type, structure, ownership, supply chain or topic boundaries. Additionally, there were no changes in reporting or restatements to the previously reported financial, social or environmental information.

Quality assurance

Through this integrated report, we set out to provide you with a holistic and meaningful picture of our business model, sustainability framework, strategy, governance framework, performance and future prospects. We also strive to illustrate the value created by the Bank in terms of non-financial resources such as human, natural, intellectual and social and relationship capitals, in addition to financial and manufactured capital. We have also taken every effort to provide credible information with the aid of visual elements such as figures, graphs and tables in a consistent manner facilitating clarity and comparability. The qualitative criteria taken into account in the production of both text and visual elements presented in this Annual Report are given in Figure 01.

Precautionary principle

We remain cognisant of the direct and indirect social, climate and environmental implications of our operations, particularly the indirect consequences stemming from the business activities of our borrowers. We consistently fulfil our de facto role by actively avoiding, mitigating and addressing any adverse impacts through the Bank’s sustainability framework viz., ongoing review of credit policies, stronger screening based on the Social and Environmental Management System (SEMS), close post-disbursement supervision, dedicated green portfolio of products and astute risk management procedures.

While our business model and operations do not inherently generate significant negative environmental impacts, we are committed to minimising our carbon footprint. Initiatives such as the adoption of solar energy, energy-efficient air conditioning and the elimination of paper usage in our processes underscore our dedication to sustainability. These endeavours led the Bank to achieve the distinction of becoming the first fully carbon-neutral bank in the country in 2020, complemented by carbon credits. We are now progressing towards achieving carbon neutrality on our own. Figure 02 on page 8 outlines the guiding principles, regulations, codes and acts influencing financial and narrative reporting, sustainability goals and practices and the governance of the Bank.

Responsibility for sustainability practices and external assurance

Guided by the Bank’s Sustainability Framework and the Executive Sustainability Committee, the responsibility for the sustainability practices and disclosures in this Report lies with the Bank’s Managing Director/Chief Executive Officer, the Executive Director/Chief Operating Officer and other members of the Corporate Management. They actively collaborated with external assurance providers to ensure the credibility of the Report’s content.

The Bank’s External Auditors, Messrs Ernst & Young, have provided assurance for the Group’s Financial Statements, Integrated Annual Report and Sustainability Reporting Criteria presented in the Integrated Annual Report 2023. The Board of Directors and the Management have no other relationship with Messrs Ernst & Young, aside from their engagement as an Independent Assurance Service provider for the Group.

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3-Pillars of the Sustainability Framework

Sustainable
Banking

Responsible
Organisation

Community
Engagement

Capitals

Financial
Capital

Manufactured
Capital

Intellectual
Capital

Human
Capital

Social & Relationship
Capital

Natural
Capital

Stakeholders

Investors

Customers

Employees

Society and
Environment

Business
Partners

Government
Institutions and
Regulators