To the Board of Directors, Wesfarmers Limited:

Wesfarmers Limited (Wesfarmers) commissioned Net Balance Management Group Pty Ltd (Net Balance) to provide independent assurance of this Sustainability Report (the Report). The Report presents Wesfarmers’ sustainability performance during the period 1 July 2009 to 30 June 2010. Wesfarmers Group and Wesfarmers’ business divisions were responsible for the preparation of the Report and this statement represents the assurance provider’s independent opinion. Net Balance’s responsibility in performing its assurance activities is to the Board of Directors and management of Wesfarmers alone and in accordance with the terms of reference agreed with them. Other stakeholders should perform their own due diligence before taking any action as a result of this statement.

Assurance Standard and Objectives

The assurance process was undertaken in accordance with the AA1000 2008 Assurance Standard (AA1000AS). The standard provides a comprehensive way of ensuring an organisation is responsible for the management, performance and reporting of its sustainability issues. This is achieved through evaluation of the organisation’s adherence to the AA1000 AccountAbility Principles (2008) and by reviewing the accuracy and quality of disclosed sustainability performance information.

The AA1000 AccountAbility Principles (2008) used to assess Wesfarmers’ processes include:

Inclusivity: An assessment is made as to whether the organisation has included stakeholders in developing and achieving an accountable and strategic response to sustainability.

Materiality: An assessment is made as to whether the organisation has included in its report the material information and data required by its stakeholders to make informed judgements, decisions and actions.

Responsiveness: An assessment is made as to whether the organisation has responded to stakeholder concerns, policies and relevant standards and adequately communicated these in its report.

Assurance Type and Scope

Net Balance provided Type 2 assurance in accordance with the AA1000AS (2008). This involved assessing the organisation’s adherence to the AA1000 AccountAbility Principles (2008) and assessing the accuracy and quality of the sustainability information contained within the Report.

The review of adherence to the principles was undertaken using the criteria outlined in the AA1000 Assurance Principles Standard (2008), while assessment of the accuracy and quality of sustainability performance information was undertaken using Wesfarmers’ indicator protocols and the Global Reporting Initiative’s (GRI) G3 Reporting Principles for Defining Quality.

Assurance Level and Limitations

The level of assurance provided is moderate, as defined by the scope and methodology described in this assurance statement. The assurance covered the whole of the Report and focussed on systems and activities of Wesfarmers during the reporting period, with the following exceptions:

• The scope of work did not involve verification of financial data, other than that relating to environmental, social or broader economic performance.
• Representatives of each of the wholly-owned business divisions were interviewed by members of the assurance team as part of site visits. Interviews were conducted with representatives of Bunnings, Coles, Coregas, CSBP, Curragh Coal, Industrial and Safety, Insurance, Kleenheat Gas, Kmart, Officeworks, Premier Coal, Target, and Wesfarmers LPG. In addition, interviews were also conducted with representatives of Wesfarmers Group.
• Verification of detailed community contributions data for all divisions except Home Improvement and Office Supplies was undertaken by London Benchmarking Group. Community contributions data by Home Improvement and Office Supplies was reviewed as part of Net Balance’s assurance process.

Assurance Methodology

The assurance engagement was undertaken between June and October 2010, and involved:

• Preparation of a materiality register (list of key sustainability issues) using the five-part materiality test. This included a comparison of Wesfarmers against its peers, a risk review, an industry review, a review of selected Australian media reports and a policy review.
• Interviews with senior managers to better understand how Wesfarmers Limited and each of the business divisions is addressing key sustainability challenges and how sustainability is integrated within the organisation.
• Independent engagement with stakeholders of Wesfarmers Limited at a corporate level and a review of stakeholder engagement activities undertaken by each of the business divisions. This included reviewing how stakeholder engagement informs the sustainability strategy and performance of the organisation.
• A review of the key sustainability strategies, policies, objectives, management systems, measurement and reporting procedures used by Wesfarmers Group and each of the business divisions.
• Interviews with key personnel responsible for the Report to ascertain their views, understanding and response to material sustainability issues faced by the business divisions.
• Interviews with key personnel responsible for collating and writing various parts of the Report to substantiate the reliability of selected claims.
• A review of the Report for any significant anomalies, particularly in relation to claims as well as trends in data.
• Verification of more than 220 data points and statements selected from the Report and examination of the systems and processes that support the claims.
• Collecting and evaluating evidence to support the assurance work undertaken.
• A Global Reporting Initiative (GRI) G3 Application Level Assessment.

Our Independence

Net Balance was not responsible for preparing any part of the Report. Net Balance confirms that we are not aware of any issue that could impair our objectivity in relation to this assurance engagement. Net Balance has assisted in the development of data management protocols for Wesfarmers to increase consistency in reporting between the business divisions. Net Balance provided assurance over Wesfarmers’ National Greenhouse and Energy Reporting (NGER) submission. Net Balance also works with Bunnings and Officeworks on on-ground implementation projects.

Both Wesfarmers and Net Balance have determined that these projects are not in conflict with Net Balance’s role as the independent assurance provider.

Our Competency

The Wesfarmers assurance engagement was carried out by an experienced team of professionals led by a Lead Sustainability Assurance Practitioner (Lead CSAP), accredited by the International Register of Certified Auditors UK (IRCA UK). The project included personnel with expertise in environmental, social and economic performance measurement across a range of industry sectors. Net Balance is a global leader in the use of AccountAbility’s AA1000AS, having undertaken more than 80 assurance engagements in Australia over the past three years.

Findings and Conclusions

Adherence to AA1000 Principles

Inclusivity: Wesfarmers has demonstrated a commitment to be accountable to its stakeholders through its Company Values and sustainability reporting process. Wesfarmers has formal processes in place both at the Group and business division levels for communicating with stakeholders on a range of issues and, for the first time this year, has also engaged specifically on sustainability issues with stakeholders of Wesfarmers Limited at a corporate level. Engagement with shareholders, government and regulators, and key community partners is carried out at the Group level, while individual business divisions are responsible for engaging with their own stakeholders including employees, industry bodies, regulators, customers and suppliers. In future, Wesfarmers should focus on using stakeholder feedback to inform its strategic planning.

Materiality: Wesfarmers has this year again reported in line with five key themes. These were developed in consultation with the business divisions and to reflect the range of impacts of Wesfarmers’ businesses. Reporting under these key themes has enabled Wesfarmers to appropriately address its key environmental, social and economic material issues. In addition, the Report was found to provide balanced information about Wesfarmers’ sustainability performance. Net Balance recommends that Wesfarmers’ business divisions continue the shift towards reporting that focuses on their specific material issues, and that these issues are identified through a formal process based on ranking the relevance and significance of each issue both to the division and its stakeholders.

Responsiveness: Wesfarmers was found to be responsive to stakeholders’ concerns and expectations. This was demonstrated through the increasing range of formal communication mechanisms established with various types of stakeholders. These systems ensure that Wesfarmers is able to provide timely and accessible responses to its stakeholders through a range of communication channels. Of particular note is Wesfarmers’ presentation of its sustainability approach to analysts and investors at the Morgan Stanley Environment Day.

Reliability of Performance Information

Based on the scope of the assurance process, the following was observed with regard to performance information:

• The findings of the assurance engagement provide confidence in the systems and processes used for managing and reporting sustainability performance information.
• The level of accuracy of sustainability performance information was found to be within acceptable limits.
• Data trails selected were generally identifiable and traceable, and the personnel responsible were able to reliably demonstrate the origin(s) and interpretation of data.
• The sustainability performance disclosures presented within the Report appropriately reflect environmental, social and economic performance achieved during the period.
• The GRI application level check classified the Report as Level B+.

Overall, it is Net Balance’s opinion that the information presented within the Report is fair and accurate. The Report was found to present a reliable account of Wesfarmers’ sustainability performance during the reporting period.

The Way Forward

Over the past 12 months, Wesfarmers has made significant progress in developing a consistent approach to sustainability reporting by its divisions through the Group Reporting Methodology. This has enabled reporting of a near complete core set of indicators for the range of Wesfarmers’ diverse business divisions, despite some of the larger businesses being newcomers to Wesfarmers Limited. Wesfarmers should continue to refine its approach to enable reporting of a complete and comparable data set of core indicators for every division next year. Net Balance recognises that reporting of this core set of indicators has been a significant milestone in presenting a consolidated view of Wesfarmers’ performance as a Group within the Sustainability Report. In the future, Net Balance recommends that Wesfarmers continues to expand upon the reporting of Group level issues and performance within the Report, providing detail on the organisation’s management and progress in addressing company-wide issues. Given Wesfarmers’ diverse operations, the challenge is to foster a Group-wide approach to the integration and importance of sustainability in strategy development and execution. This will require the evolution of a Wesfarmers’ sustainability policy that provides a consistent approach across all the company’s divisions. Such a policy should be informed by a well developed understanding of the material issues the Wesfarmers’ businesses face on sustainability and should be principles based, allowing each division to focus its sustainability strategy on material issues specific to its operations. The group-wide approach to key issues should then be described within the Sustainability Report.

For the first time this year, Wesfarmers has undertaken engagement specifically on sustainability issues with stakeholders of Wesfarmers Limited at a corporate level. In the future, the overall company-wide sections of the report should focus on material issues identified through this work such as health and safety, ethical sourcing and supply chain issues, and energy and greenhouse gas reporting. Wesfarmers should continue engagement on sustainability issues with stakeholders at a Group level, but should also consider involving key stakeholders in a dialogue on their view of what constitute material issues at a divisional level. Within the annual Wesfarmers Sustainability Report, each division should then focus on sustainability issues material to it. In identifying material issues, business divisions are encouraged to undertake the AA1000 five-part materiality test, the results of which will supplement the Group Reporting Methodology. Accordingly, it is recommended that a protocol be prepared as part of the Group Reporting Methodology suite for assessing materiality on an annual basis at a business division level.

Further, with an increased focus on materiality and stakeholder engagement at the business division level, it is recommended that Wesfarmers considers undertaking assurance at the business division level in addition to the Group level. Net Balance believes that this will assist business divisions to better focus on their key material and stakeholder considerations.

Finally, as part of the organisation’s extensive training suite, it is recommended that specific sustainability related training programs are developed to help raise awareness amongst staff as to the importance and benefits of conducting business in a sustainable manner. This would demonstrate to stakeholders that Wesfarmers is continuing to integrate sustainability as a core Group objective and that the organisation ranks this topic as highly as other measures of performance.

Net Balance has provided additional suggestions for reporting improvement in the Assurance Report presented to Wesfarmers’ management.

On behalf of the assurance team

7 October 2010

Melbourne, Australia

Terence Jeyaretnam, FIEAust
Director, Net Balance & Lead CSAP (IRCA UK)