To the Board of Directors, Management and Stakeholders of 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 over the period 1 July 2008 to 30 June 2009. Wesfarmers 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 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.

The assurance process was undertaken in accordance with the AA1000 Assurance Standard (AA1000AS (2008)). Assurance undertaken using this standard provides a comprehensive way of ensuring an organisation is responsible for its management, performance and reporting of 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) against which Wesfarmers’ processes are assessed 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 required by its stakeholders to be able to make informed judgements, decisions and actions.

Responsiveness: An assessment is made as to whether the organisation has responded to stakeholder concerns in its Report. An assessment is also made as to whether the organisation has in place policies and relevant standards to address material sustainability issues and concerns.

Net Balance provided Type 2 assurance in accordance with the AA1000AS (2008). This involved an assessment of the organisation’s adherence to the AA1000 AccountAbility Principles (2008) and an assessment of the accuracy and quality of the reported sustainability performance information.

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 principles of quality.

The level of assurance provided is moderate as defined by the scope and methodology described in this assurance statement. The assurance scope covered 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.
• The assurance provider’s involvement with stakeholder engagement was limited to reviewing external and internal stakeholder engagement processes and outcomes.
• 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, enGen, 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, and the 40 per cent-owned Air Liquide WA.
• 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.

The assurance engagement was undertaken between June and October 2009, and the process involved:

• Development of a materiality register using the five-part materiality test, including a comparison of Wesfarmers’ business divisions against their peers, a risk review, a review of selected Australian media, a policy review and review of stakeholder feedback.
• Senior management interviews to assess the effectiveness of the policies, procedures and frameworks in place to manage sustainability within Wesfarmers Group and each of the business divisions.
• A review of the processes used by Wesfarmers and each of the business divisions to engage with their stakeholders and the outcomes of external and internal stakeholder engagement undertaken during the reporting period in order to understand the nature of material issues raised by stakeholders.
• A review of Wesfarmers Group and each of the business divisions’ key sustainability strategies, policies, objectives, management systems, background documentation and data collection and reporting procedures.
• Interviews with key staff responsible for the Report to ascertain their views, understanding and response to material sustainability issues faced by the business divisions.
• A series of interviews with key personnel responsible for collating and writing various parts of the Report in order to substantiate the veracity of selected claims.
• A review of the Report for any significant anomalies, particularly in relation to significant claims as well as trends in data.
• Examination of the aggregation and/or derivation of, and underlying evidence for over 260 selected data points and statements made in the Report and evaluation of these against Wesfarmers’ indicator protocols and the GRI G3 principles of quality.
• Collecting and evaluating evidence to support the assurance work undertaken.

Net Balance was not responsible for preparation of 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 undertook a review of Wesfarmers’ National Greenhouse and Energy Reporting (NGER) submission. Net Balance also works with Bunnings on on-ground implementation projects. Both Wesfarmers and Net Balance have determined that these issues are not in conflict with Net Balance’s role as the independent assurance provider.

The Wesfarmers assurance engagement was carried out by an experienced team of professionals led by a Lead Certified Sustainability Assurance Practitioner (Lead CSAP), accredited by the International Register of Certified Auditors UK (IRCA UK). The project included a team 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 over 50 assurance engagements in Australia throughout 2007 and 2008.

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, but should actively seek to expand its informal engagement and incorporate feedback into business processes. 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 industry bodies, regulators, customers, suppliers and employees. Stakeholder engagement at Wesfarmers would benefit from the development of an overarching engagement strategy that maps key stakeholders and identifies appropriate engagement channels.

Materiality: Wesfarmers has this year identified five key themes for sustainability reporting. 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 stakeholder 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. One example of the way that Wesfarmers has effectively responding to its stakeholders is in responding to the issue of importation of rock phosphate from Western Sahara by CSBP Limited.

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 easily 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.

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

The structure and content of the Sustainability Report is now directed by the Group Reporting Methodology; this provides consistency for the reader as all business divisions are required to disclose comparable information in an identical format. Despite implementation of the Group Reporting Methodology, the assurance process uncovered several further opportunities for improvement. Prior to Wesfarmers beginning development of the 2010 Sustainability Report, the organisation should internally engage with Report preparers to ensure all business divisions understand the requirements of the Group Reporting Methodology, particularly in view of some of the newly acquired business divisions. Furthermore, Wesfarmers should ensure that greenhouse gas reporting as part of the sustainability report is consistent with reporting under the NGER Act. Business divisions are encouraged to undertake the AA1000 5 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. This will, in future, provide a framework for individual assurance processes for each of the business divisions.

The Report continues to be internally verified prior to external assurance. Net Balance encourages Wesfarmers to continue undertaking internal assurance of its Report. Further to our recommendation last year, improved internal controls have led to better performance in data and information management.

For several years, Net Balance has suggested Wesfarmers reduce the size of its Report to be meaningful and useful to its stakeholders. Wesfarmers has dedicated time this year to ensuring that the report is more concise, whilst also enhancing the content of the Report. The end product is a more user-friendly report that succinctly captures the sustainability performance of one of the most diversified companies in the world.

Further to our comment last year, the next step for Wesfarmers is to look beyond its own sustainability performance and seek to use its large market capitalisation and exposure to diverse industries to influence the operations and behaviours of its stakeholders (largely retail and wholesale customers, and to a degree its suppliers) to make positive sustainable impacts. Business divisions such as Bunnings and Target have made significant progress in areas of sustainable procurement and plastic bags. However, there are further opportunities. Two immediately available options for the organisation are to increase the focus on supply chain management and to develop innovative products to tackle climate change. The organisation is also encouraged to develop a Sustainable Procurement Policy (either at the Group level or tailored policies at the business division level). This will serve as guidance for all procurement decisions and will encourage suppliers to offer more sustainable goods and services.

As raised in last year’s assurance findings, stakeholder engagement needs to continue, and in particular engagement with employees and highly interested and influential external stakeholders should be a focus. Net Balance again recommends conducting a comprehensive stakeholder mapping exercise to determine the key stakeholders at the divisional level. In addition, focussed engagement on the report should be undertaken early in the reporting period in order to gauge stakeholder opinion on reporting performance and to determine what stakeholders may want from the Report. The information gathered from the stakeholder engagement processes and Wesfarmers’ responses could also be reported in future years.

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, such as health and safety.

Finally, with an increased focus on materiality and stakeholder engagement at the business division level, and with reporting responsibility continuing to shift to business divisions, 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.

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

On behalf of the assurance team

23 October 2009
Melbourne, Australia