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Assurance

The Reassurance Network has been commissioned by Camelot Group plc (Camelot) to provide external assurance of its 2005/06 web–based Corporate Responsibility Report (the Report), and the hard copy Corporate Responsibility Review, covering the accuracy, completeness and relevance of content, according to the AccountAbility AA1000 Assurance Standard.

We have formed the opinion that the Report is an accurate and complete account of Camelot's performance in the main areas of social, economic and environmental impact, as defined by the needs of the business and the interests of key stakeholders. There is a detailed understanding of impacts across all areas of Camelot's operations and a very strong commitment to responsible business and the principle of inclusivity with Camelot managing its issues through dialogue with its stakeholders, including a high quality of response to areas of stakeholder interest or concern.

We feel that the Report reflects a highly impressive year in which 49 of the 56 next step commitments have been either achieved or partly achieved and where significant progress has been made across all areas of responsible business practice. During 2005/06 the business has moved forward considerably in its mission to ‘maximise returns to Good Causes in a socially responsible way’ despite the intense pressure of managing business as usual whilst compiling the bid for the third lottery operating licence. This commendable performance is understated in the trends of the 60 core performance indicators covered in section 10 of this Report.

The Report contains 98% of the Global Reporting Initiative (GRI) G3 disclosure items and 85% of the relevant economic, environmental and social indicators. As such we consider that it is ‘in accordance’ with the G3 guidelines.

During 2005/06 there has been:

• A noticeable increase in senior management awareness and commitment to managing business responsibly across most areas and issues
• A broadened and more complete approach to player protection and continued commitment to responsible sales growth
• Strengthening and refinement of the governance structures and management panels that ensure responsible business
• Notable development of consultation and dialogue as a key contributor to business success
• The establishment of a new and highly effective Players’ Forum to engage with a cross section of players on a wide range of issues.

Future recommendations include:

• Continued progress in employee engagement, communication and the integration of corporate responsibility
• Developments in environmental management, including the recycling of Point–of–Sale materials
• Better use of informal channels for dialogue with external stakeholders
• A broadening of the management of responsible practices within Camelot's supply chain.

This is our second year of providing assurance to Camelot. At the beginning of the year, we conducted a detailed review of Camelot's Responsible Play interventions, benchmarking against industry and international standards and practices. During this period, and subsequently as part of the management review and assurance process, our understanding of the business has broadened and deepened. This has enabled us to be both more robust in our level of assurance and more critical in our feedback. Our aim has been to provide readers with confidence in the content of the Report and to raise opportunities for Camelot to further develop its responsible business strategy and performance.

The Report has been prepared by, and is the responsibility of, Camelot. Our role, in terms of content, has been to recommend amendments where we felt information was insufficiently accurate, may have been misleading or was incomplete.

Under our agreement with Camelot, any subsequent changes to the web–based Report will be notified to The Reassurance Network and will be subject to verification and assurance before publication.

A separate summary assurance statement has been prepared to accompany Camelot's 2005/06 Corporate Responsibility Review. We have also provided detailed feedback and our opinions on further improvements in a confidential management review. Some of the points from this review are included in this assurance statement.

Scope & methodology

The scope of assurance covered Camelot Group plc. We have assured all sections of the Report, including developments that post–date the reporting period up to the time of this statement. Our remit has been to provide a high level of challenge and assurance relating to the Report and also to carry out a broader review of the culture, systems, processes and activities that contribute to responsible business practice.

During discussions we have been made aware of commercially sensitive information which we accept is not prudent to disclose in the period leading up to the third license bid. We are satisfied that any omission of future commitments in this Report is based on sound commercial reasons and that such omissions do not alter the materiality or completeness of Camelot's account of its 2005/06 performance.

Evidence was supplied and reviewed to verify 179 descriptive elements of the Report along with a further 60 performance indicators. We also assessed the overall content and tone of the Report against our understanding of material issues and business performance. We requested a number of changes to the report content covering inaccuracies, potential misrepresentations or omissions that we deemed to be significant and also made minor recommendations for improvements to the copy. All points raised have been incorporated into the Report to our satisfaction.

Financial information was cross–referenced to the separately audited Annual Report and Accounts.

The assurance assignment was carried out between November 2005 and July 2006 and consisted of a number of validation and review activities, including:

• Attendance at the Corporate Responsibility Board, Staff Consultative Forum, Responsible Play Group and other management meetings in order to observe and report on their effectiveness
• Attendance at the external Advisory Panel for Social Responsibility (APSR)
• Review of the design of consultation with external stakeholders, attendance at dialogue forums with Retailers, Players and Public interest groups and the review of stakeholder surveys
• Reviews of minutes and agendas of current and previous management meetings and dialogue sessions
• Confidential interviews and focus groups with a broad cross–section of staff and management, and a Non–Executive Director
• Review of policies
• Extracts from the register of business risks
• Validation of data and information contained in the Report
• Review of performance against commitments and recommendations in last year's assurance statement.

This year we have structured the assurance programme to review how responsibly Camelot is managing its business at all levels within the organisation (compared with a higher level review last year). We have interviewed 12 functional managers and 10 employees (via two focus groups) as well as 10 Executive and Senior Managers and 1 Non–Executive Director. This year we held focus groups with contact centre staff at Watford and Aintree in addition to interviews with staff and management at the Watford and London offices.

We have carried out the assurance assignment to the Accountability AA1000AS Assurance Standard which requires us to assess the completeness and materiality of information contained in the Report as well as the overall responsiveness to the issues, concerns and interests of stakeholders. We have also worked with Camelot to pilot the new Stakeholder Engagement Standard AA1000SES.

Camelot has reported against the draft G3 revision of the Global Reporting Initiative (GRI). We have verified that where references are contained in the report, they fulfil the majority of the corresponding G3 requirement and also that there is sufficient justification for any indicators shown as "not applicable".

Report content

We are satisfied that the data and statements made in the Report are accurate, up–to–date and enable readers to form a balanced opinion of Camelot's activities and performance in relation to corporate responsibility. All issues that we regard as material have been adequately covered and Camelot has demonstrated a high level of responsiveness to issues raised by stakeholders across all areas of the business.

AA1000AS Assurance Standard

With reference to the Accountability Assurance Standard AA1000AS, Camelot has achieved a high level of completeness with disclosure of performance across all areas of the business and major social and environmental issues. We are satisfied that the content is representative of Camelot's performance throughout the reporting period and that there are no misrepresentations of data or performance.

Camelot has consistently invested in processes to highlight and manage impacts that are material to the business and to its stakeholders. We are not aware of any such issues that have been omitted.

Camelot has continued to demonstrate responsiveness in this Report, throughout the assurance process and in the way they have managed and fielded the outputs from stakeholder dialogue. 49 of the 56 commitments made in the 2005 Report have been achieved or partly achieved, including all the points raised in last year's assurance statement. During our observations of dialogue we witnessed a high quality of engagement that included opportunities for stakeholders to place their own issues on agendas. We also witnessed a number of occasions where Camelot presented comprehensive responses to these issues, although these responses were not always structured, systemised or monitored.

Core indicators

Camelot has reported its performance this year against a smaller set of 60 indicators, 45 of which are comparable with previous years. Of these comparable indicators, 21 showed positive movement, 13 were neutral and 11 showed a negative trend.

Five of these negative trends are in the area of environmental performance but only two relate to absolute figures showing an overall rise in energy consumption. The remaining three relate to indicators expressed "per employee" and are affected by a fall in employee numbers during the year. Absolute figures for waste produced and waste recycled showed improvements over the year. The paper consumption for Scratchcards is included for the first time and shows that they contribute 58% to Camelot's total paper consumption.

Relationship indicators covering players, MPs, suppliers and retailers showed either positive trends or were neutral compared to last year with high scores achieved throughout.

Global Reporting Initiative – G3 Guidelines

The Report contains 98% of the disclosure items and 85% of the relevant indicators specified in the Global Reporting Initiative’s (GRI) G3 draft guidelines The inclusion of applicable indicators is broken down as follows: Economic (67%); Environmental (82%); Labour Practice (93%); Human Rights (67%); Society (100%); Product (100%). Indicators that are shown in the Report as ‘not applicable’ are excluded from these figures. We consider that the report is ‘in accordance’ with the G3 guidelines.

In interpreting the above indicator summary, we emphasise that a low or high figure simply reflects the inclusion of a prescribed indicator in the Report and is not always an indication of performance. We continue to express concerns that there are conflicting objectives between disclosing indicators to achieve alignment with the GRI and other standards such as the Business in the Community Corporate Responsibility Index, and developing specific indicators that are meaningful to Camelot's operations and that can be used to drive and monitor performance.

Opinion

We believe that the 2006 Report benefits from being more concise and has improved significantly in terms of informing readers of Camelot's responsible business performance. There is clearer signposting, better accessibility, improved clarity in statements and better explanation of how Camelot has arrived at its positions and policies, including connections to dialogue with its stakeholders.

Throughout the assignment, we have found Camelot's management to be committed to the principle of open and accurate disclosure and highly responsive to challenge, from dialogue with stakeholders as well as the assurance process. As such, the report and the processes that underpin it are well–aligned to the principles contained within the AA1000 Assurance and Stakeholder Engagement Standards.

Camelot should be commended for further developing and integrating its responsible business strategies in a year where its management have been under extreme operational pressure to manage business as usual whilst compiling the bid for the third national lottery license.

We have structured our opinions around the following headings :

1. Strengths and noted improvements
2. Ongoing Expectations – initiatives that are already underway and where we expect to see progress next year
3. Recommendations – new initiatives that we have raised for consideration.

We have not attempted to portray the significance of the points made in the following sections, nor do we expect Camelot to respond to all of them. They are included to give the reader an overview of the type of feedback we have provided separately in our confidential management review.

1. Strengths and noted improvements

1. There is a noticeable increase in senior management awareness and commitment to managing business responsibly across most areas and issues. Most functions now recognise their contribution to responsible business and are incorporating corresponding measures into operational management. This has been reflected in further improvements in the opinions of Camelot from the majority of its stakeholders.
2. There has been a broadened and more complete approach to player protection with the formation of a strengthened management group (the Player Protection Panel) to oversee this area and the introduction of controls around interactive play.
3. We have gathered ample evidence through the assurance process to endorse Camelot's responsible sales growth position, foregoing several ‘quick–win strategies’ in favour of longer–term, sustainable game and channel developments that limit excessive individual spend.
4. Following minor restructuring, there are closer and more effective links between the various bodies that contribute to responsible business i.e. the Corporate Responsibility Board, Advisory Panel for Social Responsibility, the Audit Risk and Security Committee and the main Board. In addition, there is better communication into these bodies from the various dialogue forums and the new Player Protection Panel. The CR Manager continues to report to the CEO.
5. Based on our observations we agree with the comments that Camelot has made in this Report relating to improved stakeholder dialogue. Overall engagement with stakeholders has been more focused and has contributed more to Camelot’s business strategy and operations. At the same time, we have witnessed Camelot demonstrating its understanding and responsiveness to stakeholders’ own agendas. The establishment of the Players’ Forum to enable Camelot to engage with a cross section of players on a wide range of issues has been observed during the year and has been a significant success.
6. Interviews have offered the opportunity to recognise and substantiate the positive open culture that pervades Camelot with many employees at all levels mentioning unprompted that Camelot is a great place to work.

2. Ongoing Expectations (initiatives that are already underway and where we expect to see progress next year)

1. There has been marked improvement in communication of both responsible business and general operations internally, via the introduction of a staff magazine, improvement of the intranet, and management cascade briefings. This remains an area of relative weakness compared with Camelot's external stakeholder dialogue. We hope to see further development of a more complete, two–way engagement with employees that extends beyond the Staff Consultative Forum and that offers employees greater opportunity to voice opinions and contribute to business improvement.
2. There has been some intensive work to raise internal awareness of the complex and intricate range of regulations and other requirements within which Camelot runs The National Lottery. This work is ongoing and is anticipated to deliver improvements in the levels of compliance and alignment throughout the business. We also expect to see ongoing progress with the integration of the Code of Conduct.
3. We hope to see the introduction of a formal Environmental Management System at the Northampton Distribution Centre and the further development of environmental management at all Camelot locations.
4. Following the introduction of recycled paper in lottery tickets we hope Camelot will widen this to all Point–of–Sale materials.
5. There is opportunity to further develop and broaden the identification and management of social and environmental risks associated with Camelot's supply chain.
6. Following the restructuring of the Staff Consultative Forum we hope to see further clarity of its role, increased levels of consultation and improved communication with employees.
7. We expect Camelot to continually seek feedback on its Corporate Responsibility Report and to develop it to meet the needs of internal and external readers.

3. Recommendations (new initiatives that we have raised for consideration)

1. We believe that Camelot has not yet optimised cost savings from sound environmental management and recommend that proper environmental cost accounting be introduced to predict and manage this area.
2. Camelot's main environmental impacts relate to the lifecycle of materials used at the Point–of–Sale such as playslips, till rolls and scratchcards. To date there has been little achieved in terms of reducing the volume of such materials or attempting to reclaim or recycle them from retailers. It is acknowledged that the use of recycled and sustainably sourced paper has mitigated the upstream footprint.
3. Where there is tension between maximising returns to Good Causes and achieving this in a socially responsible way e.g. by strategically limiting individual spend, there is ample evidence that Camelot's principles and values prevail, even when the restrictions are not regulated. Whilst we support the ‘profit with principles’ approach, we also encourage Camelot to carry out comprehensive social impact studies, where needed, to better quantify the scale of certain social benefits.
4. Although we have noted a significant positive trend in the awareness and engagement of senior management in the responsible business agenda, there remains a general lack of understanding amongst other employees of what it means for them in their job role and how they can contribute. We recommend a review of the skills needed within key functions and at all levels to identify and deliver responsible business practices, accompanied by training and development where needed.
5. Camelot would benefit from engaging line management more in the identification and communication of social and environmental risks. The business currently relies too heavily on inputs from the Corporate Responsibility Manager.
6. Camelot has invested in developing a sophisticated and effective programme to formally engage with external stakeholders. During the assurance assignment we have identified several opportunities to better utilise informal and routine channels of communication to capture and share information. We recommend that Camelot carries out a review to identify opportunities to identify and optimise the use of these informal channels.
7. We feel that too much knowledge relating to responsible business is retained informally within key functions or by key individuals. We recommend that the major backbone of CR management (e.g. compilation of the Corporate Responsibility Report, planning, management and recording/reporting of stakeholder dialogues, identification of social risks, management of core indicators) is documented and integrated into Camelot's internal procedures.
8. We would like to see greater connectivity between the Camelot Foundation and Camelot plc in terms of developing common objectives and sharing experience of stakeholder consultation and dialogue.
9. We would like to see a clearer definition of the term ‘community’ with a definition of who Camelot's communities are and a description of how it is going to engage with them, to facilitate broader consultation in future.